diff --git a/product-sdk/packages/terminal/src/entropy.ts b/product-sdk/packages/terminal/src/entropy.ts
new file mode 100644
index 00000000..950952af
--- /dev/null
+++ b/product-sdk/packages/terminal/src/entropy.ts
@@ -0,0 +1,123 @@
+// Copyright 2026 Parity Technologies (UK) Ltd.
+// SPDX-License-Identifier: Apache-2.0
+/**
+ * Client-side RFC-0007 product-entropy derivation for terminal (QR/SSO) sessions.
+ *
+ * Byte-for-byte identical to the host's `host_derive_entropy` handler — i.e.
+ * `@novasamatech/host-container`'s `deriveProductEntropyFromSource` — so entropy
+ * derived here matches what an in-container app gets from
+ * `@parity/product-sdk-host`'s `deriveEntropy` for the same wallet + product +
+ * key. Derived keys therefore interoperate across web (in-container) and
+ * terminal (QR/SSO) clients.
+ *
+ * The paired {@link UserSession} carries `rootEntropySource` (RFC-0007 layer 1,
+ * `blake2b256_keyed(rootAccountSecret, "product-entropy-derivation")`), so
+ * layers 2 and 3 are computed locally with no host round-trip:
+ *
+ *   perProduct = blake2b256(rootEntropySource, key = blake2b256(utf8(productId)))
+ *   entropy    = blake2b256(perProduct,        key = key)
+ *
+ * NOTE: this re-derives the RFC-0007 scheme locally and MUST stay byte-identical
+ * to `host-container`'s `deriveProductEntropyFromSource`. The golden-vector test
+ * below guards against drift, but the derivation ideally belongs in a shared
+ * crypto package that both host-container and terminal import (see PR #260).
+ *
+ * @module
+ */
+
+import { blake2b } from "@noble/hashes/blake2.js";
+import type { UserSession } from "@novasamatech/host-papp";
+
+const ROOT_ENTROPY_LEN = 32;
+const textEncoder = new TextEncoder();
+
+/** BLAKE2b-256, optionally keyed — the RFC-0007 primitive. */
+const b2 = (message: Uint8Array, key?: Uint8Array): Uint8Array =>
+    key ? blake2b(message, { dkLen: 32, key }) : blake2b(message, { dkLen: 32 });
+
+/**
+ * Derive 32 bytes of deterministic entropy for a terminal session, scoped to the
+ * calling product and a caller key (RFC-0007 layers 2 + 3).
+ *
+ * Same wallet + product + key ⇒ same bytes; any difference ⇒ uncorrelated
+ * entropy. Because it derives from the wallet (not the device), the entropy is
+ * recreatable after device loss as long as the wallet is recoverable.
+ *
+ * @param session   - A QR-paired {@link UserSession}. Must carry
+ *   `rootEntropySource` (present since host-papp 0.8.6 / RFC-0007).
+ * @param productId - The calling product's dotNS identifier, e.g. `"my-app.dot"`.
+ *   The host scopes entropy per product; pass the same identifier the host would.
+ * @param key       - Caller key, 1..32 bytes (the layer-3 BLAKE2b key).
+ * @returns 32 bytes of derived entropy.
+ * @throws if the session lacks `rootEntropySource`, or `key` is not 1..32 bytes.
+ */
+export function deriveEntropy(
+    session: UserSession,
+    productId: string,
+    key: Uint8Array,
+): Uint8Array {
+    const rootEntropySource: Uint8Array | undefined = session.rootEntropySource;
+    if (!rootEntropySource || rootEntropySource.length !== ROOT_ENTROPY_LEN) {
+        throw new Error(
+            "deriveEntropy: session is missing rootEntropySource; re-pair with an RFC-0007 host",
+        );
+    }
+    if (key.length === 0 || key.length > 32) {
+        throw new Error(`deriveEntropy: key must be 1..32 bytes, got ${key.length}`);
+    }
+    const perProduct = b2(rootEntropySource, b2(textEncoder.encode(productId)));
+    return b2(perProduct, key);
+}
+
+if (import.meta.vitest) {
+    const { test, expect, describe } = import.meta.vitest;
+
+    describe("deriveEntropy", () => {
+        const rootEntropySource = new Uint8Array(32).fill(1);
+        const session = { rootEntropySource } as unknown as UserSession;
+        const toHex = (b: Uint8Array) =>
+            Array.from(b, (x) => x.toString(16).padStart(2, "0")).join("");
+
+        test("matches host-container deriveProductEntropyFromSource (golden vector)", () => {
+            // Computed with @novasamatech/host-container@0.8.9's
+            // deriveProductEntropyFromSource(fill(1), "my-app.dot", [1,2,3,4]).
+            expect(toHex(deriveEntropy(session, "my-app.dot", new Uint8Array([1, 2, 3, 4])))).toBe(
+                "993750d5f3f4b941cef5a8084fdd0bcd6a6946fdc0e1fe87c0c575fe65e7dc03",
+            );
+        });
+
+        test("is 32 bytes, deterministic, and product- and key-scoped", () => {
+            const key = new Uint8Array([1, 2, 3, 4]);
+            const a = deriveEntropy(session, "my-app.dot", key);
+            expect(a).toHaveLength(32);
+            expect(deriveEntropy(session, "my-app.dot", key)).toStrictEqual(a);
+            expect(deriveEntropy(session, "other.dot", key)).not.toStrictEqual(a);
+            expect(deriveEntropy(session, "my-app.dot", new Uint8Array([9]))).not.toStrictEqual(a);
+        });
+
+        test("different root entropy yields uncorrelated entropy", () => {
+            const other = {
+                rootEntropySource: new Uint8Array(32).fill(2),
+            } as unknown as UserSession;
+            const key = new Uint8Array([1, 2, 3, 4]);
+            expect(deriveEntropy(other, "my-app.dot", key)).not.toStrictEqual(
+                deriveEntropy(session, "my-app.dot", key),
+            );
+        });
+
+        test("rejects a key outside 1..32 bytes", () => {
+            expect(() => deriveEntropy(session, "my-app.dot", new Uint8Array(0))).toThrow(
+                /1\.\.32/,
+            );
+            expect(() => deriveEntropy(session, "my-app.dot", new Uint8Array(33))).toThrow(
+                /1\.\.32/,
+            );
+        });
+
+        test("throws when the session has no rootEntropySource", () => {
+            expect(() =>
+                deriveEntropy({} as UserSession, "my-app.dot", new Uint8Array([1])),
+            ).toThrow(/rootEntropySource/);
+        });
+    });
+}
diff --git a/product-sdk/packages/terminal/src/index.ts b/product-sdk/packages/terminal/src/index.ts
index 3e0bd7a3..2e654863 100644
--- a/product-sdk/packages/terminal/src/index.ts
+++ b/product-sdk/packages/terminal/src/index.ts
@@ -51,6 +51,12 @@ export type {
 // Session helpers
 export { waitForSessions } from "./sessions.js";
 
+// Entropy derivation (RFC-0007). Client-side product-entropy derivation from a
+// paired session, at parity with `@parity/product-sdk-host`'s `deriveEntropy`
+// (same bytes for the same wallet + context) but computed locally — no host
+// round-trip — since the session already carries `rootEntropySource`.
+export { deriveEntropy } from "./entropy.js";
+
 // QR Encoding
 export { renderQrCode } from "./qr-encode.js";
 export type { QrRenderOptions } from "./qr-encode.js";
diff --git a/product-sdk/pending-changesets/terminal-derive-entropy.md b/product-sdk/pending-changesets/terminal-derive-entropy.md
new file mode 100644
index 00000000..be747008
--- /dev/null
+++ b/product-sdk/pending-changesets/terminal-derive-entropy.md
@@ -0,0 +1,14 @@
+---
+"@parity/product-sdk-terminal": minor
+---
+
+Add `deriveEntropy(session, productId, key)` — client-side RFC-0007 product-entropy derivation for terminal (QR/SSO) sessions, byte-for-byte identical to the host's `host_derive_entropy` (i.e. `@novasamatech/host-container`'s `deriveProductEntropyFromSource`).
+
+The paired `UserSession` carries `rootEntropySource` (RFC-0007 layer 1), so layers 2 and 3 are computed locally with no host round-trip:
+
+```
+perProduct = blake2b256(rootEntropySource, key = blake2b256(utf8(productId)))
+entropy    = blake2b256(perProduct,        key = key)
+```
+
+Entropy derived here matches what an in-container app gets from `@parity/product-sdk-host`'s `deriveEntropy` for the same wallet + product + key, so entropy-derived keys interoperate across web and terminal clients. A golden-vector test pins the construction against `host-container`. (issue #254)