diff --git a/server/src/systems/__tests__/statModifierSystem.test.ts b/server/src/systems/__tests__/statModifierSystem.test.ts
new file mode 100644
index 0000000..dffef62
--- /dev/null
+++ b/server/src/systems/__tests__/statModifierSystem.test.ts
@@ -0,0 +1,108 @@
+import { describe, it, expect } from 'vitest';
+import { World } from '../../ecs/World.js';
+import { statModifierSystem } from '../statModifierSystem.js';
+import type { Stats, StatModifiers, Needs } from '@dflike/shared';
+
+function setupEntity(
+  world: World,
+  statsOverrides: Partial<Stats> = {},
+  needs?: Partial<Needs>,
+  modifiers: StatModifiers['modifiers'] = [],
+): number {
+  const e = world.createEntity();
+  const base: Stats = {
+    strength: 10, dexterity: 10, constitution: 10, intelligence: 10, perception: 10,
+    sociability: 10, courage: 10, curiosity: 10, empathy: 10, temperament: 10,
+    ...statsOverrides,
+  };
+  world.addComponent<Stats>(e, 'stats', base);
+  world.addComponent<StatModifiers>(e, 'statModifiers', { modifiers: [...modifiers] });
+  if (needs) {
+    world.addComponent<Needs>(e, 'needs', { hunger: 80, energy: 80, ...needs });
+  }
+  return e;
+}
+
+describe('statModifierSystem', () => {
+  describe('modifier decay', () => {
+    it('decrements remaining on each modifier', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, undefined, [
+        { stat: 'strength', value: 2, remaining: 10 },
+      ]);
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      expect(mods.modifiers[0].remaining).toBe(9);
+    });
+
+    it('removes expired modifiers (remaining reaches 0)', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, undefined, [
+        { stat: 'strength', value: 2, remaining: 1 },
+        { stat: 'dexterity', value: -1, remaining: 5 },
+      ]);
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      expect(mods.modifiers).toHaveLength(1);
+      expect(mods.modifiers[0].stat).toBe('dexterity');
+    });
+
+    it('does not decrement permanent modifiers (remaining = -1)', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, undefined, [
+        { stat: 'intelligence', value: -2, remaining: -1 },
+      ]);
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      expect(mods.modifiers[0].remaining).toBe(-1);
+    });
+  });
+
+  describe('needs-based modifiers', () => {
+    it('applies intelligence -2 and sociability -1 when hunger < 30', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, { hunger: 20, energy: 80 });
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      const intMod = mods.modifiers.find(m => m.stat === 'intelligence' && m.remaining === -1);
+      const socMod = mods.modifiers.find(m => m.stat === 'sociability' && m.remaining === -1);
+      expect(intMod?.value).toBe(-2);
+      expect(socMod?.value).toBe(-1);
+    });
+
+    it('applies dexterity -2 and temperament -2 when energy < 20', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, { hunger: 80, energy: 10 });
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      const dexMod = mods.modifiers.find(m => m.stat === 'dexterity' && m.remaining === -1);
+      const tempMod = mods.modifiers.find(m => m.stat === 'temperament' && m.remaining === -1);
+      expect(dexMod?.value).toBe(-2);
+      expect(tempMod?.value).toBe(-2);
+    });
+
+    it('removes needs-based modifiers when needs recover', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, { hunger: 20, energy: 80 });
+      statModifierSystem(world);
+      // Now hunger recovers
+      const needs = world.getComponent<Needs>(e, 'needs')!;
+      needs.hunger = 80;
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      const needsMods = mods.modifiers.filter(m => m.remaining === -1);
+      expect(needsMods).toHaveLength(0);
+    });
+
+    it('does not stack needs-based modifiers across ticks', () => {
+      const world = new World();
+      const e = setupEntity(world, {}, { hunger: 20, energy: 80 });
+      statModifierSystem(world);
+      statModifierSystem(world);
+      statModifierSystem(world);
+      const mods = world.getComponent<StatModifiers>(e, 'statModifiers')!;
+      const intMods = mods.modifiers.filter(m => m.stat === 'intelligence' && m.remaining === -1);
+      expect(intMods).toHaveLength(1);
+    });
+  });
+});
diff --git a/server/src/systems/statModifierSystem.ts b/server/src/systems/statModifierSystem.ts
new file mode 100644
index 0000000..5df4b14
--- /dev/null
+++ b/server/src/systems/statModifierSystem.ts
@@ -0,0 +1,39 @@
+import type { StatModifiers, Needs, StatModifier } from '@dflike/shared';
+import type { World } from '../ecs/World.js';
+import { HUNGER_THRESHOLD, ENERGY_THRESHOLD } from '@dflike/shared';
+
+function applyNeedsModifiers(needs: Needs, modifiers: StatModifier[]): StatModifier[] {
+  // Remove all existing permanent (needs-based) modifiers
+  const filtered = modifiers.filter(m => m.remaining !== -1);
+
+  // Apply new needs-based modifiers
+  if (needs.hunger < HUNGER_THRESHOLD) {
+    filtered.push({ stat: 'intelligence', value: -2, remaining: -1 });
+    filtered.push({ stat: 'sociability', value: -1, remaining: -1 });
+  }
+  if (needs.energy < ENERGY_THRESHOLD) {
+    filtered.push({ stat: 'dexterity', value: -2, remaining: -1 });
+    filtered.push({ stat: 'temperament', value: -2, remaining: -1 });
+  }
+
+  return filtered;
+}
+
+export function statModifierSystem(world: World): void {
+  for (const entity of world.query('stats', 'statModifiers')) {
+    const mods = world.getComponent<StatModifiers>(entity, 'statModifiers')!;
+
+    // Decay timed modifiers and remove expired
+    mods.modifiers = mods.modifiers.filter(m => {
+      if (m.remaining === -1) return true; // permanent, handled below
+      m.remaining--;
+      return m.remaining > 0;
+    });
+
+    // Apply needs-based modifiers if entity has needs
+    const needs = world.getComponent<Needs>(entity, 'needs');
+    if (needs) {
+      mods.modifiers = applyNeedsModifiers(needs, mods.modifiers);
+    }
+  }
+}