diff --git a/__tests__/lib/tasks-status-update.test.ts b/__tests__/lib/tasks-status-update.test.ts
new file mode 100644
index 0000000..418caa7
--- /dev/null
+++ b/__tests__/lib/tasks-status-update.test.ts
@@ -0,0 +1,153 @@
+import { describe, it, expect, vi, beforeEach } from 'vitest'
+
+vi.mock('@/lib/prisma', () => ({
+  prisma: {
+    task: {
+      update: vi.fn(),
+      findMany: vi.fn(),
+    },
+    story: {
+      findUniqueOrThrow: vi.fn(),
+      update: vi.fn(),
+    },
+    $transaction: vi.fn(),
+  },
+}))
+
+import { prisma } from '@/lib/prisma'
+import { updateTaskStatusWithStoryPromotion } from '@/lib/tasks-status-update'
+
+const mockPrisma = prisma as unknown as {
+  task: {
+    update: ReturnType<typeof vi.fn>
+    findMany: ReturnType<typeof vi.fn>
+  }
+  story: {
+    findUniqueOrThrow: ReturnType<typeof vi.fn>
+    update: ReturnType<typeof vi.fn>
+  }
+  $transaction: ReturnType<typeof vi.fn>
+}
+
+beforeEach(() => {
+  vi.clearAllMocks()
+  // Pass-through: $transaction(run) just calls run with the mocked prisma client.
+  mockPrisma.$transaction.mockImplementation(async (run: (tx: typeof prisma) => Promise<unknown>) => {
+    return run(prisma)
+  })
+})
+
+const TASK_BASE = {
+  id: 'task-1',
+  title: 'Task',
+  story_id: 'story-1',
+  implementation_plan: null,
+}
+
+describe('updateTaskStatusWithStoryPromotion', () => {
+  it('promotes story to DONE when last sibling task transitions to DONE', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'DONE' })
+    mockPrisma.task.findMany.mockResolvedValue([
+      { status: 'DONE' },
+      { status: 'DONE' },
+    ])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'IN_SPRINT' })
+
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'DONE')
+
+    expect(result.storyStatusChange).toBe('promoted')
+    expect(result.storyId).toBe('story-1')
+    expect(mockPrisma.story.update).toHaveBeenCalledWith({
+      where: { id: 'story-1' },
+      data: { status: 'DONE' },
+    })
+  })
+
+  it('does not promote when story is already DONE (idempotent)', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'DONE' })
+    mockPrisma.task.findMany.mockResolvedValue([{ status: 'DONE' }])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'DONE' })
+
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'DONE')
+
+    expect(result.storyStatusChange).toBe(null)
+    expect(mockPrisma.story.update).not.toHaveBeenCalled()
+  })
+
+  it('does not promote when not all siblings are DONE', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'DONE' })
+    mockPrisma.task.findMany.mockResolvedValue([
+      { status: 'DONE' },
+      { status: 'IN_PROGRESS' },
+    ])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'IN_SPRINT' })
+
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'DONE')
+
+    expect(result.storyStatusChange).toBe(null)
+    expect(mockPrisma.story.update).not.toHaveBeenCalled()
+  })
+
+  it('demotes story to IN_SPRINT when a task moves out of DONE on a DONE story', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'IN_PROGRESS' })
+    mockPrisma.task.findMany.mockResolvedValue([
+      { status: 'IN_PROGRESS' },
+      { status: 'DONE' },
+    ])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'DONE' })
+
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'IN_PROGRESS')
+
+    expect(result.storyStatusChange).toBe('demoted')
+    expect(mockPrisma.story.update).toHaveBeenCalledWith({
+      where: { id: 'story-1' },
+      data: { status: 'IN_SPRINT' },
+    })
+  })
+
+  it('does not demote when story is not DONE', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'IN_PROGRESS' })
+    mockPrisma.task.findMany.mockResolvedValue([{ status: 'IN_PROGRESS' }])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'IN_SPRINT' })
+
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'IN_PROGRESS')
+
+    expect(result.storyStatusChange).toBe(null)
+    expect(mockPrisma.story.update).not.toHaveBeenCalled()
+  })
+
+  it('updates the task regardless of story-status change', async () => {
+    mockPrisma.task.update.mockResolvedValue({ ...TASK_BASE, status: 'IN_PROGRESS' })
+    mockPrisma.task.findMany.mockResolvedValue([{ status: 'IN_PROGRESS' }])
+    mockPrisma.story.findUniqueOrThrow.mockResolvedValue({ status: 'IN_SPRINT' })
+
+    await updateTaskStatusWithStoryPromotion('task-1', 'IN_PROGRESS')
+
+    expect(mockPrisma.task.update).toHaveBeenCalledWith({
+      where: { id: 'task-1' },
+      data: { status: 'IN_PROGRESS' },
+      select: expect.any(Object),
+    })
+  })
+
+  it('uses the provided transaction client when passed', async () => {
+    const tx = {
+      task: { update: vi.fn(), findMany: vi.fn() },
+      story: { findUniqueOrThrow: vi.fn(), update: vi.fn() },
+    }
+    tx.task.update.mockResolvedValue({ ...TASK_BASE, status: 'DONE' })
+    tx.task.findMany.mockResolvedValue([{ status: 'DONE' }])
+    tx.story.findUniqueOrThrow.mockResolvedValue({ status: 'IN_SPRINT' })
+
+    // eslint-disable-next-line @typescript-eslint/no-explicit-any
+    const result = await updateTaskStatusWithStoryPromotion('task-1', 'DONE', tx as any)
+
+    expect(result.storyStatusChange).toBe('promoted')
+    // $transaction should NOT be called when caller already provides a tx.
+    expect(mockPrisma.$transaction).not.toHaveBeenCalled()
+    expect(tx.story.update).toHaveBeenCalledWith({
+      where: { id: 'story-1' },
+      data: { status: 'DONE' },
+    })
+  })
+})
diff --git a/lib/tasks-status-update.ts b/lib/tasks-status-update.ts
new file mode 100644
index 0000000..ca273ca
--- /dev/null
+++ b/lib/tasks-status-update.ts
@@ -0,0 +1,72 @@
+import type { Prisma, TaskStatus } from '@prisma/client'
+import { prisma } from '@/lib/prisma'
+
+export type StoryStatusChange = 'promoted' | 'demoted' | null
+
+export interface UpdateTaskStatusResult {
+  task: {
+    id: string
+    title: string
+    status: TaskStatus
+    story_id: string
+    implementation_plan: string | null
+  }
+  storyStatusChange: StoryStatusChange
+  storyId: string
+}
+
+// Update task.status atomically and auto-promote/demote the parent story:
+//   - All sibling tasks DONE → story.status = DONE
+//   - Story was DONE and a task moves out of DONE → story.status = IN_SPRINT
+// Demote target is IN_SPRINT (not OPEN): OPEN means "back in product backlog",
+// which is a sprint-management action, not a status side-effect.
+export async function updateTaskStatusWithStoryPromotion(
+  taskId: string,
+  newStatus: TaskStatus,
+  client?: Prisma.TransactionClient,
+): Promise<UpdateTaskStatusResult> {
+  const run = async (tx: Prisma.TransactionClient): Promise<UpdateTaskStatusResult> => {
+    const task = await tx.task.update({
+      where: { id: taskId },
+      data: { status: newStatus },
+      select: {
+        id: true,
+        title: true,
+        status: true,
+        story_id: true,
+        implementation_plan: true,
+      },
+    })
+
+    const siblings = await tx.task.findMany({
+      where: { story_id: task.story_id },
+      select: { status: true },
+    })
+    const allDone = siblings.every((s) => s.status === 'DONE')
+
+    const story = await tx.story.findUniqueOrThrow({
+      where: { id: task.story_id },
+      select: { status: true },
+    })
+
+    let storyStatusChange: StoryStatusChange = null
+    if (newStatus === 'DONE' && allDone && story.status !== 'DONE') {
+      await tx.story.update({
+        where: { id: task.story_id },
+        data: { status: 'DONE' },
+      })
+      storyStatusChange = 'promoted'
+    } else if (newStatus !== 'DONE' && story.status === 'DONE') {
+      await tx.story.update({
+        where: { id: task.story_id },
+        data: { status: 'IN_SPRINT' },
+      })
+      storyStatusChange = 'demoted'
+    }
+
+    return { task, storyStatusChange, storyId: task.story_id }
+  }
+
+  if (client) return run(client)
+  return prisma.$transaction(run)
+}