diff --git a/src/config/mod.rs b/src/config/mod.rs
index d7310c5..dc6b315 100644
--- a/src/config/mod.rs
+++ b/src/config/mod.rs
@@ -122,7 +122,7 @@ pub struct LLMProviderConfig {
 
 fn get_default_config_path() -> PathBuf {
     let home = dirs::home_dir().unwrap_or_else(|| PathBuf::from("."));
-    home.join(".config").join("picobot").join("config.json")
+    home.join(".picobot").join("config.json")
 }
 
 impl Config {
@@ -192,7 +192,7 @@ pub enum ConfigError {
 impl std::fmt::Display for ConfigError {
     fn fmt(&self, f: &mut std::fmt::Formatter<'_>) -> std::fmt::Result {
         match self {
-            ConfigError::ConfigNotFound(path) => write!(f, "Config file not found: {}. Use CONFIG_PATH env var or place config in ~/.config/picobot/config.json", path),
+            ConfigError::ConfigNotFound(path) => write!(f, "Config file not found: {}. Use CONFIG_PATH env var or place config in ~/.picobot/config.json", path),
             ConfigError::AgentNotFound(name) => write!(f, "Agent not found: {}", name),
             ConfigError::ProviderNotFound(name) => write!(f, "Provider not found: {}", name),
             ConfigError::ModelNotFound(name) => write!(f, "Model not found: {}", name),
diff --git a/src/gateway/mod.rs b/src/gateway/mod.rs
index c3ddded..e75b9ba 100644
--- a/src/gateway/mod.rs
+++ b/src/gateway/mod.rs
@@ -8,6 +8,7 @@ use tokio::net::TcpListener;
 
 use crate::channels::{ChannelManager, manager::GatewayMessageHandler};
 use crate::config::Config;
+use crate::logging;
 use session::SessionManager;
 
 pub struct GatewayState {
@@ -39,6 +40,10 @@ impl GatewayState {
 }
 
 pub async fn run(host: Option<String>, port: Option<u16>) -> Result<(), Box<dyn std::error::Error>> {
+    // Initialize logging
+    logging::init_logging();
+    tracing::info!("Starting PicoBot Gateway");
+
     let state = Arc::new(GatewayState::new()?);
 
     // Get provider config for channels
diff --git a/src/lib.rs b/src/lib.rs
index 305f795..5e8f880 100644
--- a/src/lib.rs
+++ b/src/lib.rs
@@ -7,3 +7,4 @@ pub mod gateway;
 pub mod client;
 pub mod protocol;
 pub mod channels;
+pub mod logging;
diff --git a/src/logging.rs b/src/logging.rs
new file mode 100644
index 0000000..0973fe6
--- /dev/null
+++ b/src/logging.rs
@@ -0,0 +1,80 @@
+use std::path::PathBuf;
+use tracing_appender::rolling::{RollingFileAppender, Rotation};
+use tracing_subscriber::{
+    fmt,
+    layer::SubscriberExt,
+    util::SubscriberInitExt,
+    EnvFilter,
+};
+
+/// Get the default log directory path: ~/.picobot/logs
+pub fn get_default_log_dir() -> PathBuf {
+    let home = dirs::home_dir().unwrap_or_else(|| PathBuf::from("."));
+    home.join(".picobot").join("logs")
+}
+
+/// Get the default config file path: ~/.picobot/config.json
+pub fn get_default_config_path() -> PathBuf {
+    let home = dirs::home_dir().unwrap_or_else(|| PathBuf::from("."));
+    home.join(".picobot").join("config.json")
+}
+
+/// Initialize logging with file appender
+/// Logs are written to ~/.picobot/logs/ with daily rotation
+pub fn init_logging() {
+    let log_dir = get_default_log_dir();
+
+    // Create log directory if it doesn't exist
+    if !log_dir.exists() {
+        if let Err(e) = std::fs::create_dir_all(&log_dir) {
+            eprintln!("Warning: Failed to create log directory {}: {}", log_dir.display(), e);
+        }
+    }
+
+    // Create file appender with daily rotation
+    let file_appender = RollingFileAppender::new(
+        Rotation::DAILY,
+        &log_dir,
+        "picobot.log",
+    );
+
+    // Build subscriber with both console and file output
+    let env_filter = EnvFilter::try_from_default_env()
+        .unwrap_or_else(|_| EnvFilter::new("info"));
+
+    let file_layer = fmt::layer()
+        .with_writer(file_appender)
+        .with_ansi(false)
+        .with_target(true)
+        .with_level(true)
+        .with_thread_ids(true);
+
+    let console_layer = fmt::layer()
+        .with_target(true)
+        .with_level(true);
+
+    tracing_subscriber::registry()
+        .with(env_filter)
+        .with(console_layer)
+        .with(file_layer)
+        .init();
+
+    tracing::info!("Logging initialized. Log directory: {}", log_dir.display());
+}
+
+/// Initialize logging without file output (console only)
+pub fn init_logging_console_only() {
+    let env_filter = EnvFilter::try_from_default_env()
+        .unwrap_or_else(|_| EnvFilter::new("info"));
+
+    let console_layer = fmt::layer()
+        .with_target(true)
+        .with_level(true);
+
+    tracing_subscriber::registry()
+        .with(env_filter)
+        .with(console_layer)
+        .init();
+
+    tracing::info!("Logging initialized (console only)");
+}