diff --git a/src/index.ts b/src/index.ts
index 6a03dc2..81c80bc 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -22,6 +22,7 @@ import { execSync } from "child_process";
 import { compressRead } from "./compressors/read.js";
 import { compressGrep } from "./compressors/grep.js";
 import { compressGlob } from "./compressors/glob.js";
+import { logTelemetry, calculateCompressionRatio } from "./telemetry.js";
 
 // Configuration from environment
 const COMPRESSION_LEVEL = process.env.COMPRESSION_LEVEL || "medium";
@@ -177,6 +178,16 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
 
         const result = compressRead(content, path, options);
 
+        // Log telemetry
+        logTelemetry({
+          tool: "compressed_read",
+          inputSize: result.originalLines,
+          outputSize: result.compressedLines,
+          compressionRatio: calculateCompressionRatio(result.originalLines, result.compressedLines),
+          path,
+          success: true,
+        });
+
         return {
           content: [
             {
@@ -219,6 +230,17 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
 
         const result = compressGrep(output, options);
 
+        // Log telemetry
+        logTelemetry({
+          tool: "compressed_grep",
+          inputSize: result.originalMatches,
+          outputSize: result.compressedMatches,
+          compressionRatio: calculateCompressionRatio(result.originalMatches, result.compressedMatches),
+          path: searchPath,
+          pattern,
+          success: true,
+        });
+
         return {
           content: [
             {
@@ -266,6 +288,17 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
 
         const result = compressGlob(paths, options);
 
+        // Log telemetry
+        logTelemetry({
+          tool: "compressed_glob",
+          inputSize: paths.length,
+          outputSize: result.compressedCount,
+          compressionRatio: calculateCompressionRatio(paths.length, result.compressedCount),
+          path: basePath,
+          pattern,
+          success: true,
+        });
+
         return {
           content: [
             {
diff --git a/src/telemetry.ts b/src/telemetry.ts
new file mode 100644
index 0000000..364d2ca
--- /dev/null
+++ b/src/telemetry.ts
@@ -0,0 +1,46 @@
+/**
+ * Telemetry for compressed tools usage tracking
+ * Logs to ~/.local/share/mcp/compressed-tools.jsonl
+ */
+
+import { appendFileSync, mkdirSync, existsSync } from "fs";
+import { homedir } from "os";
+import { join } from "path";
+
+const LOG_DIR = join(homedir(), ".local", "share", "mcp");
+const LOG_FILE = join(LOG_DIR, "compressed-tools.jsonl");
+
+// Ensure log directory exists
+if (!existsSync(LOG_DIR)) {
+  mkdirSync(LOG_DIR, { recursive: true });
+}
+
+export interface TelemetryEvent {
+  timestamp: string;
+  tool: "compressed_read" | "compressed_grep" | "compressed_glob";
+  inputSize: number;
+  outputSize: number;
+  compressionRatio: number;
+  path?: string;
+  pattern?: string;
+  success: boolean;
+  error?: string;
+}
+
+export function logTelemetry(event: Omit<TelemetryEvent, "timestamp">): void {
+  const entry: TelemetryEvent = {
+    timestamp: new Date().toISOString(),
+    ...event,
+  };
+
+  try {
+    appendFileSync(LOG_FILE, JSON.stringify(entry) + "\n");
+  } catch {
+    // Silently fail - telemetry should never break the tool
+  }
+}
+
+export function calculateCompressionRatio(original: number, compressed: number): number {
+  if (original === 0) return 0;
+  return Math.round((1 - compressed / original) * 100 * 10) / 10;
+}