diff --git a/components/canvas/canvas-with-tools.tsx b/components/canvas/canvas-with-tools.tsx
index c7fc75e..6dc909d 100644
--- a/components/canvas/canvas-with-tools.tsx
+++ b/components/canvas/canvas-with-tools.tsx
@@ -20,6 +20,7 @@ import {
   MoveTool,
   FreeTransformTool,
   ShapeTool,
+  TextTool,
   type BaseTool,
 } from '@/tools';
 import type { PointerState } from '@/types';
@@ -40,6 +41,7 @@ const tools: Record<string, BaseTool> = {
   move: new MoveTool(),
   transform: new FreeTransformTool(),
   shape: new ShapeTool(),
+  text: new TextTool(),
 };
 
 export function CanvasWithTools() {
diff --git a/components/editor/editor-layout.tsx b/components/editor/editor-layout.tsx
index 8cf5803..565bebc 100644
--- a/components/editor/editor-layout.tsx
+++ b/components/editor/editor-layout.tsx
@@ -9,6 +9,7 @@ import { ToolOptions } from './tool-options';
 import { PanelDock } from './panel-dock';
 import { ThemeToggle } from './theme-toggle';
 import { ToolPalette } from '@/components/tools';
+import { TextDialog } from '@/components/modals/text-dialog';
 import { useKeyboardShortcuts } from '@/hooks/use-keyboard-shortcuts';
 import { useFileOperations } from '@/hooks/use-file-operations';
 import { useDragDrop } from '@/hooks/use-drag-drop';
@@ -190,6 +191,9 @@ export function EditorLayout() {
         {/* Right: Panel Dock */}
         <PanelDock />
       </div>
+
+      {/* Text Dialog */}
+      <TextDialog />
     </div>
   );
 }
diff --git a/components/modals/text-dialog.tsx b/components/modals/text-dialog.tsx
new file mode 100644
index 0000000..5c1d3c5
--- /dev/null
+++ b/components/modals/text-dialog.tsx
@@ -0,0 +1,288 @@
+'use client';
+
+import { useState, useEffect } from 'react';
+import { X, Type } from 'lucide-react';
+import { useTextStore } from '@/store/text-store';
+import { TextTool } from '@/tools/text-tool';
+import { WEB_SAFE_FONTS, GOOGLE_FONTS, loadGoogleFont } from '@/lib/text-utils';
+import type { FontStyle, FontWeight, TextAlign } from '@/types/text';
+
+export function TextDialog() {
+  const {
+    settings,
+    isDialogOpen,
+    clickPosition,
+    setText,
+    setFontFamily,
+    setFontSize,
+    setFontStyle,
+    setFontWeight,
+    setColor,
+    setAlign,
+    setLineHeight,
+    setLetterSpacing,
+    closeDialog,
+  } = useTextStore();
+
+  const [text, setTextLocal] = useState(settings.text);
+  const [isLoadingFont, setIsLoadingFont] = useState(false);
+
+  useEffect(() => {
+    if (isDialogOpen) {
+      setTextLocal(settings.text);
+    }
+  }, [isDialogOpen, settings.text]);
+
+  if (!isDialogOpen || !clickPosition) return null;
+
+  const handleInsert = async () => {
+    if (!text.trim()) {
+      closeDialog();
+      return;
+    }
+
+    // Update text in store
+    setText(text);
+
+    // Load Google Font if needed
+    if (GOOGLE_FONTS.includes(settings.fontFamily as any)) {
+      try {
+        setIsLoadingFont(true);
+        await loadGoogleFont(settings.fontFamily);
+      } catch (error) {
+        console.error('Failed to load font:', error);
+      } finally {
+        setIsLoadingFont(false);
+      }
+    }
+
+    // Render text on canvas
+    TextTool.renderTextOnCanvas(clickPosition.x, clickPosition.y);
+
+    // Close dialog
+    closeDialog();
+    setTextLocal('');
+  };
+
+  const handleCancel = () => {
+    closeDialog();
+    setTextLocal('');
+  };
+
+  const allFonts = [...WEB_SAFE_FONTS, ...GOOGLE_FONTS];
+
+  return (
+    <div
+      className="fixed inset-0 z-50 flex items-center justify-center bg-black/50"
+      onClick={handleCancel}
+    >
+      <div
+        className="bg-card border border-border rounded-lg shadow-lg w-full max-w-2xl max-h-[90vh] overflow-y-auto"
+        onClick={(e) => e.stopPropagation()}
+      >
+        {/* Header */}
+        <div className="flex items-center justify-between p-4 border-b border-border sticky top-0 bg-card z-10">
+          <div className="flex items-center gap-2">
+            <Type className="h-5 w-5 text-primary" />
+            <h2 className="text-lg font-semibold text-card-foreground">Add Text</h2>
+          </div>
+          <button
+            onClick={handleCancel}
+            className="p-1 hover:bg-accent rounded transition-colors"
+          >
+            <X className="h-5 w-5" />
+          </button>
+        </div>
+
+        {/* Content */}
+        <div className="p-4 space-y-4">
+          {/* Text Input */}
+          <div className="space-y-2">
+            <label className="text-sm font-medium text-card-foreground">Text</label>
+            <textarea
+              value={text}
+              onChange={(e) => setTextLocal(e.target.value)}
+              placeholder="Enter your text here..."
+              className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground min-h-[120px] resize-y"
+              autoFocus
+            />
+          </div>
+
+          {/* Font Family */}
+          <div className="space-y-2">
+            <label className="text-sm font-medium text-card-foreground">Font Family</label>
+            <select
+              value={settings.fontFamily}
+              onChange={(e) => setFontFamily(e.target.value)}
+              className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground"
+            >
+              <optgroup label="Web Safe Fonts">
+                {WEB_SAFE_FONTS.map((font) => (
+                  <option key={font} value={font} style={{ fontFamily: font }}>
+                    {font}
+                  </option>
+                ))}
+              </optgroup>
+              <optgroup label="Google Fonts">
+                {GOOGLE_FONTS.map((font) => (
+                  <option key={font} value={font}>
+                    {font}
+                  </option>
+                ))}
+              </optgroup>
+            </select>
+          </div>
+
+          {/* Font Size, Style, Weight */}
+          <div className="grid grid-cols-3 gap-4">
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">Size</label>
+              <input
+                type="number"
+                min="8"
+                max="500"
+                value={settings.fontSize}
+                onChange={(e) => setFontSize(Number(e.target.value))}
+                className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground"
+              />
+            </div>
+
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">Style</label>
+              <select
+                value={settings.fontStyle}
+                onChange={(e) => setFontStyle(e.target.value as FontStyle)}
+                className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground"
+              >
+                <option value="normal">Normal</option>
+                <option value="italic">Italic</option>
+              </select>
+            </div>
+
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">Weight</label>
+              <select
+                value={settings.fontWeight}
+                onChange={(e) => setFontWeight(e.target.value as FontWeight)}
+                className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground"
+              >
+                <option value="normal">Normal</option>
+                <option value="bold">Bold</option>
+                <option value="100">100 - Thin</option>
+                <option value="300">300 - Light</option>
+                <option value="500">500 - Medium</option>
+                <option value="600">600 - Semi Bold</option>
+                <option value="700">700 - Bold</option>
+                <option value="900">900 - Black</option>
+              </select>
+            </div>
+          </div>
+
+          {/* Color and Alignment */}
+          <div className="grid grid-cols-2 gap-4">
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">Color</label>
+              <div className="flex gap-2">
+                <input
+                  type="color"
+                  value={settings.color}
+                  onChange={(e) => setColor(e.target.value)}
+                  className="h-10 w-16 rounded border border-border cursor-pointer"
+                />
+                <input
+                  type="text"
+                  value={settings.color}
+                  onChange={(e) => setColor(e.target.value)}
+                  className="flex-1 px-3 py-2 rounded-md border border-border bg-background text-foreground"
+                />
+              </div>
+            </div>
+
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">Alignment</label>
+              <select
+                value={settings.align}
+                onChange={(e) => setAlign(e.target.value as TextAlign)}
+                className="w-full px-3 py-2 rounded-md border border-border bg-background text-foreground"
+              >
+                <option value="left">Left</option>
+                <option value="center">Center</option>
+                <option value="right">Right</option>
+              </select>
+            </div>
+          </div>
+
+          {/* Line Height and Letter Spacing */}
+          <div className="grid grid-cols-2 gap-4">
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">
+                Line Height ({settings.lineHeight.toFixed(2)})
+              </label>
+              <input
+                type="range"
+                min="0.5"
+                max="3"
+                step="0.1"
+                value={settings.lineHeight}
+                onChange={(e) => setLineHeight(Number(e.target.value))}
+                className="w-full"
+              />
+            </div>
+
+            <div className="space-y-2">
+              <label className="text-sm font-medium text-card-foreground">
+                Letter Spacing ({settings.letterSpacing}px)
+              </label>
+              <input
+                type="range"
+                min="-10"
+                max="50"
+                step="1"
+                value={settings.letterSpacing}
+                onChange={(e) => setLetterSpacing(Number(e.target.value))}
+                className="w-full"
+              />
+            </div>
+          </div>
+
+          {/* Preview */}
+          <div className="space-y-2">
+            <label className="text-sm font-medium text-card-foreground">Preview</label>
+            <div
+              className="w-full px-4 py-8 rounded-md border border-border bg-background flex items-center justify-center min-h-[100px]"
+              style={{
+                color: settings.color,
+                fontFamily: settings.fontFamily,
+                fontSize: `${Math.min(settings.fontSize, 48)}px`,
+                fontStyle: settings.fontStyle,
+                fontWeight: settings.fontWeight,
+                textAlign: settings.align,
+                lineHeight: settings.lineHeight,
+                letterSpacing: `${settings.letterSpacing}px`,
+              }}
+            >
+              {text || 'Your text will appear here'}
+            </div>
+          </div>
+        </div>
+
+        {/* Footer */}
+        <div className="flex items-center justify-end gap-2 p-4 border-t border-border sticky bottom-0 bg-card">
+          <button
+            onClick={handleCancel}
+            className="px-4 py-2 rounded-md border border-border hover:bg-accent transition-colors"
+          >
+            Cancel
+          </button>
+          <button
+            onClick={handleInsert}
+            disabled={!text.trim() || isLoadingFont}
+            className="px-4 py-2 rounded-md bg-primary text-primary-foreground hover:bg-primary/90 transition-colors disabled:opacity-50 disabled:cursor-not-allowed"
+          >
+            {isLoadingFont ? 'Loading Font...' : 'Insert Text'}
+          </button>
+        </div>
+      </div>
+    </div>
+  );
+}
diff --git a/components/tools/tool-palette.tsx b/components/tools/tool-palette.tsx
index 91f9c62..e3cbe4a 100644
--- a/components/tools/tool-palette.tsx
+++ b/components/tools/tool-palette.tsx
@@ -9,6 +9,7 @@ import {
   PaintBucket,
   MousePointer,
   Pipette,
+  Type,
 } from 'lucide-react';
 import { cn } from '@/lib/utils';
 
@@ -18,6 +19,7 @@ const tools: { type: ToolType; icon: React.ReactNode; label: string }[] = [
   { type: 'eraser', icon: <Eraser className="h-5 w-5" />, label: 'Eraser' },
   { type: 'fill', icon: <PaintBucket className="h-5 w-5" />, label: 'Fill' },
   { type: 'eyedropper', icon: <Pipette className="h-5 w-5" />, label: 'Eyedropper' },
+  { type: 'text', icon: <Type className="h-5 w-5" />, label: 'Text' },
   { type: 'select', icon: <MousePointer className="h-5 w-5" />, label: 'Select' },
 ];
 
diff --git a/lib/text-utils.ts b/lib/text-utils.ts
new file mode 100644
index 0000000..bf89951
--- /dev/null
+++ b/lib/text-utils.ts
@@ -0,0 +1,156 @@
+import type { TextSettings } from '@/types/text';
+
+/**
+ * Render text on canvas with specified settings
+ */
+export function renderText(
+  ctx: CanvasRenderingContext2D,
+  x: number,
+  y: number,
+  settings: TextSettings
+): void {
+  if (!settings.text) return;
+
+  ctx.save();
+
+  // Build font string
+  const font = `${settings.fontStyle} ${settings.fontWeight} ${settings.fontSize}px ${settings.fontFamily}`;
+  ctx.font = font;
+  ctx.fillStyle = settings.color;
+  ctx.textAlign = settings.align;
+  ctx.textBaseline = settings.baseline;
+
+  // Handle multi-line text
+  const lines = settings.text.split('\n');
+  const lineHeightPx = settings.fontSize * settings.lineHeight;
+
+  lines.forEach((line, index) => {
+    const lineY = y + index * lineHeightPx;
+
+    // Apply letter spacing if needed
+    if (settings.letterSpacing !== 0) {
+      renderTextWithLetterSpacing(ctx, line, x, lineY, settings.letterSpacing);
+    } else {
+      ctx.fillText(line, x, lineY);
+    }
+  });
+
+  ctx.restore();
+}
+
+/**
+ * Render text with custom letter spacing
+ */
+function renderTextWithLetterSpacing(
+  ctx: CanvasRenderingContext2D,
+  text: string,
+  x: number,
+  y: number,
+  letterSpacing: number
+): void {
+  const chars = text.split('');
+  let currentX = x;
+
+  // Adjust starting position based on text align
+  if (ctx.textAlign === 'center') {
+    const totalWidth = measureTextWidth(ctx, text, letterSpacing);
+    currentX = x - totalWidth / 2;
+  } else if (ctx.textAlign === 'right') {
+    const totalWidth = measureTextWidth(ctx, text, letterSpacing);
+    currentX = x - totalWidth;
+  }
+
+  // Draw each character with spacing
+  chars.forEach((char) => {
+    ctx.fillText(char, currentX, y);
+    currentX += ctx.measureText(char).width + letterSpacing;
+  });
+}
+
+/**
+ * Measure text width including letter spacing
+ */
+function measureTextWidth(
+  ctx: CanvasRenderingContext2D,
+  text: string,
+  letterSpacing: number
+): number {
+  const chars = text.split('');
+  let width = 0;
+
+  chars.forEach((char) => {
+    width += ctx.measureText(char).width + letterSpacing;
+  });
+
+  return width - letterSpacing; // Remove last letter spacing
+}
+
+/**
+ * Common web-safe fonts
+ */
+export const WEB_SAFE_FONTS = [
+  'Arial',
+  'Arial Black',
+  'Comic Sans MS',
+  'Courier New',
+  'Georgia',
+  'Impact',
+  'Lucida Console',
+  'Lucida Sans Unicode',
+  'Palatino Linotype',
+  'Tahoma',
+  'Times New Roman',
+  'Trebuchet MS',
+  'Verdana',
+] as const;
+
+/**
+ * Popular Google Fonts (will be loaded dynamically)
+ */
+export const GOOGLE_FONTS = [
+  'Roboto',
+  'Open Sans',
+  'Lato',
+  'Montserrat',
+  'Oswald',
+  'Source Sans Pro',
+  'Raleway',
+  'PT Sans',
+  'Merriweather',
+  'Playfair Display',
+  'Ubuntu',
+  'Noto Sans',
+  'Poppins',
+  'Inter',
+] as const;
+
+/**
+ * Load a Google Font dynamically
+ */
+export function loadGoogleFont(fontFamily: string): Promise<void> {
+  return new Promise((resolve, reject) => {
+    // Check if font is already loaded
+    if (document.fonts.check(`16px "${fontFamily}"`)) {
+      resolve();
+      return;
+    }
+
+    // Create link element to load font
+    const link = document.createElement('link');
+    link.rel = 'stylesheet';
+    link.href = `https://fonts.googleapis.com/css2?family=${fontFamily.replace(/ /g, '+')}:wght@100;300;400;500;700;900&display=swap`;
+
+    link.onload = () => {
+      // Wait for font to be ready
+      document.fonts.load(`16px "${fontFamily}"`).then(() => {
+        resolve();
+      }).catch(reject);
+    };
+
+    link.onerror = () => {
+      reject(new Error(`Failed to load font: ${fontFamily}`));
+    };
+
+    document.head.appendChild(link);
+  });
+}
diff --git a/store/index.ts b/store/index.ts
index b6ec410..0d8d70d 100644
--- a/store/index.ts
+++ b/store/index.ts
@@ -7,4 +7,5 @@ export * from './color-store';
 export * from './selection-store';
 export * from './transform-store';
 export * from './shape-store';
+export * from './text-store';
 export * from './ui-store';
diff --git a/store/text-store.ts b/store/text-store.ts
new file mode 100644
index 0000000..75be037
--- /dev/null
+++ b/store/text-store.ts
@@ -0,0 +1,97 @@
+import { create } from 'zustand';
+import { persist } from 'zustand/middleware';
+import type { TextSettings, TextStore as ITextStore } from '@/types/text';
+
+const DEFAULT_SETTINGS: TextSettings = {
+  text: '',
+  fontFamily: 'Arial',
+  fontSize: 48,
+  fontStyle: 'normal',
+  fontWeight: 'normal',
+  color: '#000000',
+  align: 'left',
+  baseline: 'alphabetic',
+  lineHeight: 1.2,
+  letterSpacing: 0,
+};
+
+export const useTextStore = create<ITextStore>()(
+  persist(
+    (set) => ({
+      settings: { ...DEFAULT_SETTINGS },
+      isDialogOpen: false,
+      clickPosition: null,
+
+      setText: (text) =>
+        set((state) => ({
+          settings: { ...state.settings, text },
+        })),
+
+      setFontFamily: (fontFamily) =>
+        set((state) => ({
+          settings: { ...state.settings, fontFamily },
+        })),
+
+      setFontSize: (fontSize) =>
+        set((state) => ({
+          settings: { ...state.settings, fontSize: Math.max(8, Math.min(500, fontSize)) },
+        })),
+
+      setFontStyle: (fontStyle) =>
+        set((state) => ({
+          settings: { ...state.settings, fontStyle },
+        })),
+
+      setFontWeight: (fontWeight) =>
+        set((state) => ({
+          settings: { ...state.settings, fontWeight },
+        })),
+
+      setColor: (color) =>
+        set((state) => ({
+          settings: { ...state.settings, color },
+        })),
+
+      setAlign: (align) =>
+        set((state) => ({
+          settings: { ...state.settings, align },
+        })),
+
+      setBaseline: (baseline) =>
+        set((state) => ({
+          settings: { ...state.settings, baseline },
+        })),
+
+      setLineHeight: (lineHeight) =>
+        set((state) => ({
+          settings: { ...state.settings, lineHeight: Math.max(0.5, Math.min(3, lineHeight)) },
+        })),
+
+      setLetterSpacing: (letterSpacing) =>
+        set((state) => ({
+          settings: { ...state.settings, letterSpacing: Math.max(-10, Math.min(50, letterSpacing)) },
+        })),
+
+      updateSettings: (settings) =>
+        set((state) => ({
+          settings: { ...state.settings, ...settings },
+        })),
+
+      openDialog: (x, y) =>
+        set({
+          isDialogOpen: true,
+          clickPosition: { x, y },
+        }),
+
+      closeDialog: () =>
+        set({
+          isDialogOpen: false,
+          clickPosition: null,
+        }),
+    }),
+    {
+      name: 'text-storage',
+      partialize: (state) => ({ settings: state.settings }), // Only persist settings, not dialog state
+    }
+  )
+);
diff --git a/tools/index.ts b/tools/index.ts
index 2a6aeda..9485c31 100644
--- a/tools/index.ts
+++ b/tools/index.ts
@@ -11,3 +11,4 @@ export * from './magic-wand-tool';
 export * from './move-tool';
 export * from './free-transform-tool';
 export * from './shape-tool';
+export * from './text-tool';
diff --git a/tools/text-tool.ts b/tools/text-tool.ts
new file mode 100644
index 0000000..a179d30
--- /dev/null
+++ b/tools/text-tool.ts
@@ -0,0 +1,75 @@
+import { BaseTool } from './base-tool';
+import type { PointerState } from '@/types';
+import { useTextStore } from '@/store/text-store';
+import { useLayerStore } from '@/store/layer-store';
+import { useHistoryStore } from '@/store/history-store';
+import { DrawCommand } from '@/core/commands/draw-command';
+import { renderText } from '@/lib/text-utils';
+
+/**
+ * Text tool - Click to place text on canvas
+ */
+export class TextTool extends BaseTool {
+  constructor() {
+    super('Text');
+  }
+
+  onPointerDown(pointer: PointerState): void {
+    const layer = this.getActiveLayer();
+    if (!layer) return;
+
+    // Open text dialog at click position
+    const { openDialog } = useTextStore.getState();
+    openDialog(pointer.x, pointer.y);
+  }
+
+  onPointerMove(): void {
+    // No-op for text tool
+  }
+
+  onPointerUp(): void {
+    // No-op for text tool
+  }
+
+  getCursor(): string {
+    return 'text';
+  }
+
+  /**
+   * Render text on canvas (called from dialog)
+   */
+  static renderTextOnCanvas(x: number, y: number): void {
+    const layer = TextTool.getActiveLayerStatic();
+    if (!layer?.canvas) return;
+
+    const ctx = layer.canvas.getContext('2d');
+    if (!ctx) return;
+
+    const { settings } = useTextStore.getState();
+
+    // Create draw command for history
+    const drawCommand = new DrawCommand(layer.id, 'Add Text');
+
+    // Render text
+    renderText(ctx, x, y, settings);
+
+    // Add to history
+    drawCommand.captureAfterState();
+    const { executeCommand } = useHistoryStore.getState();
+    executeCommand(drawCommand);
+
+    // Update layer to trigger re-render
+    const { updateLayer } = useLayerStore.getState();
+    updateLayer(layer.id, { updatedAt: Date.now() });
+  }
+
+  private getActiveLayer() {
+    const { activeLayerId, layers } = useLayerStore.getState();
+    return layers.find((l) => l.id === activeLayerId);
+  }
+
+  private static getActiveLayerStatic() {
+    const { activeLayerId, layers } = useLayerStore.getState();
+    return layers.find((l) => l.id === activeLayerId);
+  }
+}
diff --git a/types/index.ts b/types/index.ts
index f0e5456..5133122 100644
--- a/types/index.ts
+++ b/types/index.ts
@@ -6,3 +6,4 @@ export * from './filter';
 export * from './selection';
 export * from './transform';
 export * from './shape';
+export * from './text';
diff --git a/types/text.ts b/types/text.ts
new file mode 100644
index 0000000..b0d9756
--- /dev/null
+++ b/types/text.ts
@@ -0,0 +1,40 @@
+export type TextAlign = 'left' | 'center' | 'right';
+export type TextBaseline = 'top' | 'middle' | 'bottom' | 'alphabetic';
+export type FontStyle = 'normal' | 'italic';
+export type FontWeight = 'normal' | 'bold' | '100' | '200' | '300' | '400' | '500' | '600' | '700' | '800' | '900';
+
+export interface TextSettings {
+  text: string;
+  fontFamily: string;
+  fontSize: number;
+  fontStyle: FontStyle;
+  fontWeight: FontWeight;
+  color: string;
+  align: TextAlign;
+  baseline: TextBaseline;
+  lineHeight: number;
+  letterSpacing: number;
+}
+
+export interface TextStore {
+  settings: TextSettings;
+  isDialogOpen: boolean;
+  clickPosition: { x: number; y: number } | null;
+
+  // Setters
+  setText: (text: string) => void;
+  setFontFamily: (fontFamily: string) => void;
+  setFontSize: (fontSize: number) => void;
+  setFontStyle: (fontStyle: FontStyle) => void;
+  setFontWeight: (fontWeight: FontWeight) => void;
+  setColor: (color: string) => void;
+  setAlign: (align: TextAlign) => void;
+  setBaseline: (baseline: TextBaseline) => void;
+  setLineHeight: (lineHeight: number) => void;
+  setLetterSpacing: (letterSpacing: number) => void;
+  updateSettings: (settings: Partial<TextSettings>) => void;
+
+  // Dialog control
+  openDialog: (x: number, y: number) => void;
+  closeDialog: () => void;
+}