diff --git a/src/cli.test.ts b/src/cli.test.ts
new file mode 100644
index 0000000..b88fa6e
--- /dev/null
+++ b/src/cli.test.ts
@@ -0,0 +1,136 @@
+import { expect, test } from "bun:test";
+
+// Export the parsing function from cli.ts for testing
+function tryParseHookEvent(
+  line: string,
+): { type: string; [key: string]: unknown } | null {
+  // Look for lines that are valid JSON objects
+  const trimmed = line.trim();
+  if (!trimmed.startsWith("{") || !trimmed.endsWith("}")) {
+    return null;
+  }
+
+  try {
+    const parsed = JSON.parse(trimmed);
+    // Check if it has a type field
+    if (typeof parsed === "object" && parsed !== null && "type" in parsed) {
+      return parsed as { type: string; [key: string]: unknown };
+    }
+    return null;
+  } catch {
+    return null;
+  }
+}
+
+test("tryParseHookEvent - parses valid state event", () => {
+  const line = '{"type":"state","state":"thinking","timestamp":1706472000000}';
+  const result = tryParseHookEvent(line);
+
+  expect(result).not.toBeNull();
+  expect(result?.type).toBe("state");
+  expect(result?.state).toBe("thinking");
+  expect(result?.timestamp).toBe(1706472000000);
+});
+
+test("tryParseHookEvent - parses valid stats event", () => {
+  const line =
+    '{"type":"stats","prompts":5,"completions":3,"tools":12,"compressions":1,"thinking_seconds":45,"work_seconds":180,"mode":"normal","model":"claude-opus-4-5-20251101","prompts_changed_at":1706472000.0,"completions_changed_at":1706471980.0,"tool_timestamps":[1706471900.0,1706471920.0],"session_start":1706471800.0,"idle_since":1706472100.0}';
+  const result = tryParseHookEvent(line);
+
+  expect(result).not.toBeNull();
+  expect(result?.type).toBe("stats");
+  expect(result?.prompts).toBe(5);
+  expect(result?.completions).toBe(3);
+  expect(result?.tools).toBe(12);
+  expect(result?.mode).toBe("normal");
+  expect(result?.model).toBe("claude-opus-4-5-20251101");
+});
+
+test("tryParseHookEvent - handles whitespace around JSON", () => {
+  const line =
+    '  {"type":"state","state":"ready","timestamp":1706472000000}  \n';
+  const result = tryParseHookEvent(line);
+
+  expect(result).not.toBeNull();
+  expect(result?.type).toBe("state");
+  expect(result?.state).toBe("ready");
+});
+
+test("tryParseHookEvent - returns null for non-JSON lines", () => {
+  const line = "This is just regular output text";
+  const result = tryParseHookEvent(line);
+
+  expect(result).toBeNull();
+});
+
+test("tryParseHookEvent - returns null for partial JSON", () => {
+  const line = '{"type":"state","state":"thinking"';
+  const result = tryParseHookEvent(line);
+
+  expect(result).toBeNull();
+});
+
+test("tryParseHookEvent - returns null for JSON without type field", () => {
+  const line = '{"something":"else","value":123}';
+  const result = tryParseHookEvent(line);
+
+  expect(result).toBeNull();
+});
+
+test("tryParseHookEvent - returns null for JSON arrays", () => {
+  const line = '[{"type":"state"}]';
+  const result = tryParseHookEvent(line);
+
+  expect(result).toBeNull();
+});
+
+test("tryParseHookEvent - handles invalid JSON gracefully", () => {
+  const line = '{type:"state",state:"thinking"}';
+  const result = tryParseHookEvent(line);
+
+  expect(result).toBeNull();
+});
+
+test("tryParseHookEvent - parses state with different states", () => {
+  const states = [
+    "ready",
+    "thinking",
+    "permission",
+    "question",
+    "complete",
+    "interrupted",
+  ];
+
+  for (const state of states) {
+    const line = `{"type":"state","state":"${state}","timestamp":1706472000000}`;
+    const result = tryParseHookEvent(line);
+
+    expect(result).not.toBeNull();
+    expect(result?.type).toBe("state");
+    expect(result?.state).toBe(state);
+  }
+});
+
+test("tryParseHookEvent - parses stats with different modes", () => {
+  const modes = ["normal", "auto_accept", "plan"];
+
+  for (const mode of modes) {
+    const line = `{"type":"stats","prompts":1,"completions":1,"tools":1,"compressions":0,"thinking_seconds":10,"work_seconds":20,"mode":"${mode}","model":"claude-opus-4-5","prompts_changed_at":1706472000.0,"completions_changed_at":1706471980.0,"tool_timestamps":[],"session_start":1706471800.0,"idle_since":null}`;
+    const result = tryParseHookEvent(line);
+
+    expect(result).not.toBeNull();
+    expect(result?.type).toBe("stats");
+    expect(result?.mode).toBe(mode);
+  }
+});
+
+test("tryParseHookEvent - preserves null values in stats", () => {
+  const line =
+    '{"type":"stats","prompts":1,"completions":1,"tools":1,"compressions":0,"thinking_seconds":10,"work_seconds":20,"mode":"normal","model":null,"prompts_changed_at":1706472000.0,"completions_changed_at":1706471980.0,"tool_timestamps":[],"session_start":1706471800.0,"idle_since":null}';
+  const result = tryParseHookEvent(line);
+
+  expect(result).not.toBeNull();
+  expect(result?.type).toBe("stats");
+  expect(result?.model).toBeNull();
+  expect(result?.idle_since).toBeNull();
+});
diff --git a/src/cli.ts b/src/cli.ts
index 3b403e0..ac85c05 100755
--- a/src/cli.ts
+++ b/src/cli.ts
@@ -53,6 +53,27 @@ function getTerminalSize(): { cols: number; rows: number } {
   return { cols: 80, rows: 24 };
 }
 
+function tryParseHookEvent(
+  line: string,
+): { type: string; [key: string]: unknown } | null {
+  // Look for lines that are valid JSON objects
+  const trimmed = line.trim();
+  if (!trimmed.startsWith("{") || !trimmed.endsWith("}")) {
+    return null;
+  }
+
+  try {
+    const parsed = JSON.parse(trimmed);
+    // Check if it has a type field
+    if (typeof parsed === "object" && parsed !== null && "type" in parsed) {
+      return parsed as { type: string; [key: string]: unknown };
+    }
+    return null;
+  } catch {
+    return null;
+  }
+}
+
 async function main() {
   const args = parseArgs();
   const { cols, rows } = getTerminalSize();
@@ -63,6 +84,7 @@ async function main() {
   let isAuthenticated = false;
   let reconnectTimer: Timer | null = null;
   const disposables: Array<{ dispose: () => void }> = [];
+  let lineBuffer = "";
 
   const cleanup = () => {
     if (isExiting) return;
@@ -116,8 +138,55 @@ async function main() {
       process.stdout.write(data);
 
       if (ws && ws.readyState === WebSocket.OPEN && isAuthenticated) {
-        const msg: ClientMessage = { type: "output", data };
-        ws.send(JSON.stringify(msg));
+        // Send output to server
+        const outputMsg: ClientMessage = { type: "output", data };
+        ws.send(JSON.stringify(outputMsg));
+
+        // Buffer data and process complete lines for hook events
+        lineBuffer += data;
+        const lines = lineBuffer.split("\n");
+        // Keep the last incomplete line in the buffer
+        lineBuffer = lines.pop() || "";
+
+        // Process each complete line for hook events
+        for (const line of lines) {
+          const event = tryParseHookEvent(line);
+          if (event && (event.type === "state" || event.type === "stats")) {
+            // Send state or stats event to server
+            if (event.type === "state") {
+              const stateMsg: ClientMessage = {
+                type: "state",
+                state: event.state as
+                  | "ready"
+                  | "thinking"
+                  | "permission"
+                  | "question"
+                  | "complete"
+                  | "interrupted",
+                timestamp: event.timestamp as number,
+              };
+              ws.send(JSON.stringify(stateMsg));
+            } else if (event.type === "stats") {
+              const statsMsg: ClientMessage = {
+                type: "stats",
+                prompts: event.prompts as number,
+                completions: event.completions as number,
+                tools: event.tools as number,
+                compressions: event.compressions as number,
+                thinking_seconds: event.thinking_seconds as number,
+                work_seconds: event.work_seconds as number,
+                mode: event.mode as "normal" | "auto_accept" | "plan",
+                model: (event.model as string) || null,
+                prompts_changed_at: event.prompts_changed_at as number,
+                completions_changed_at: event.completions_changed_at as number,
+                tool_timestamps: event.tool_timestamps as number[],
+                session_start: event.session_start as number,
+                idle_since: (event.idle_since as number) || null,
+              };
+              ws.send(JSON.stringify(statsMsg));
+            }
+          }
+        }
       }
     }),
   );
diff --git a/src/types.ts b/src/types.ts
index eb3511d..226cce1 100644
--- a/src/types.ts
+++ b/src/types.ts
@@ -17,6 +17,20 @@ export interface Session {
   ended_at: number | null;
   cwd: string | null;
   command: string | null;
+  // Phase 2.3: Session state and stats
+  state: string;
+  prompts: number;
+  completions: number;
+  tools: number;
+  compressions: number;
+  thinking_seconds: number;
+  work_seconds: number;
+  mode: string;
+  model: string | null;
+  idle_since: number | null;
+  // Git state (for later phase)
+  git_branch: string | null;
+  git_files_json: string | null;
 }
 
 export interface Prompt {
@@ -89,7 +103,34 @@ export type ClientMessage =
   | { type: "output"; data: string }
   | { type: "resize"; cols: number; rows: number }
   | { type: "exit"; code: number }
-  | { type: "prompt"; session_id: number; prompt_text: string };
+  | { type: "prompt"; session_id: number; prompt_text: string }
+  | {
+      type: "state";
+      state:
+        | "ready"
+        | "thinking"
+        | "permission"
+        | "question"
+        | "complete"
+        | "interrupted";
+      timestamp: number;
+    }
+  | {
+      type: "stats";
+      prompts: number;
+      completions: number;
+      tools: number;
+      compressions: number;
+      thinking_seconds: number;
+      work_seconds: number;
+      mode: "normal" | "auto_accept" | "plan";
+      model: string | null;
+      prompts_changed_at: number;
+      completions_changed_at: number;
+      tool_timestamps: number[];
+      session_start: number;
+      idle_since: number | null;
+    };
 
 export type ServerMessage =
   | { type: "authenticated"; session_id: number }
@@ -119,4 +160,51 @@ export type SSEEvent =
       type: "prompt_response";
       prompt_id: number;
       response: string;
+    }
+  | {
+      type: "state";
+      session_id: number;
+      state:
+        | "ready"
+        | "thinking"
+        | "permission"
+        | "question"
+        | "complete"
+        | "interrupted";
+      timestamp: number;
+    }
+  | {
+      type: "stats";
+      session_id: number;
+      prompts: number;
+      completions: number;
+      tools: number;
+      compressions: number;
+      thinking_seconds: number;
+      work_seconds: number;
+      mode: "normal" | "auto_accept" | "plan";
+      model: string | null;
+      idle_since: number | null;
     };
+
+// Session state tracking (in-memory)
+
+export interface SessionState {
+  state:
+    | "ready"
+    | "thinking"
+    | "permission"
+    | "question"
+    | "complete"
+    | "interrupted";
+  prompts: number;
+  completions: number;
+  tools: number;
+  compressions: number;
+  thinking_seconds: number;
+  work_seconds: number;
+  mode: "normal" | "auto_accept" | "plan";
+  model: string | null;
+  idle_since: number | null;
+  dirty: boolean;
+}