diff --git a/dspy/predict/__init__.py b/dspy/predict/__init__.py
index 906ef90ae9..e3ad562a6a 100644
--- a/dspy/predict/__init__.py
+++ b/dspy/predict/__init__.py
@@ -8,6 +8,7 @@
 from dspy.predict.predict import Predict
 from dspy.predict.program_of_thought import ProgramOfThought
 from dspy.predict.react import ReAct, Tool
+from dspy.predict.reactv2 import ReActV2
 from dspy.predict.refine import Refine
 from dspy.predict.rlm import RLM
 
@@ -21,6 +22,7 @@
     "Predict",
     "ProgramOfThought",
     "ReAct",
+    "ReActV2",
     "Refine",
     "RLM",
     "Tool",
diff --git a/dspy/predict/reactv2.py b/dspy/predict/reactv2.py
new file mode 100644
index 0000000000..d12299e1c2
--- /dev/null
+++ b/dspy/predict/reactv2.py
@@ -0,0 +1,164 @@
+import logging
+import traceback
+from dataclasses import dataclass
+from typing import TYPE_CHECKING, Callable
+
+import dspy
+from dspy.adapters.types.history import History, Observation
+from dspy.adapters.types.tool import Tool, ToolCalls
+from dspy.primitives.module import Module
+from dspy.signatures.signature import ensure_signature
+from dspy.utils.exceptions import AdapterParseError, ContextWindowExceededError
+
+logger = logging.getLogger(__name__)
+
+if TYPE_CHECKING:
+    from dspy.signatures.signature import Signature
+
+_ANNOTATION_TO_JSON_TYPE = {
+    str: "string",
+    int: "integer",
+    float: "number",
+    bool: "boolean",
+    list: "array",
+}
+
+
+@dataclass(frozen=True)
+class ToolObservation:
+    value: object
+    is_error: bool = False
+
+
+def _build_submit_tool(signature: type["Signature"]) -> Tool:
+    outputs = ", ".join([f"`{k}`" for k in signature.output_fields])
+    output_args = {}
+    output_arg_types = {}
+    for name, field in signature.output_fields.items():
+        annotation = getattr(field, "annotation", str)
+        output_args[name] = {"type": _ANNOTATION_TO_JSON_TYPE.get(annotation, "string")}
+        output_arg_types[name] = annotation
+
+    return Tool(
+        func=lambda **kwargs: kwargs,
+        name="submit",
+        desc=f"Call this tool to end the task and return your final answer. Takes: {outputs}.",
+        args=output_args,
+        arg_types=output_arg_types,
+    )
+
+
+class ReActV2(Module):
+    def __init__(self, signature: type["Signature"] | str, tools: list[Callable], max_iters: int = 20):
+        super().__init__()
+        self.signature = signature = ensure_signature(signature)
+        self.max_iters = max_iters
+
+        tools = [tool if isinstance(tool, Tool) else Tool(tool) for tool in tools]
+        self.tools = {tool.name: tool for tool in tools}
+        self.tools["submit"] = _build_submit_tool(signature)
+
+        react_signature = (
+            dspy.Signature({**signature.input_fields}, self._build_instructions())
+            .append("history", dspy.InputField(), type_=dspy.History)
+            .append("tools", dspy.InputField(), type_=list[dspy.Tool])
+            .append("next_thought", dspy.OutputField(), type_=dspy.Reasoning)
+            .append("tool_calls", dspy.OutputField(), type_=dspy.ToolCalls)
+        )
+        self.react = dspy.Predict(react_signature)
+
+    def _build_instructions(self) -> str:
+        inputs = ", ".join([f"`{k}`" for k in self.signature.input_fields])
+        outputs = ", ".join([f"`{k}`" for k in self.signature.output_fields])
+        instructions = [f"{self.signature.instructions}\n"] if self.signature.instructions else []
+        instructions.extend(
+            [
+                f"You are an Agent. Given {inputs}, use tools to produce {outputs}.",
+                "Each turn: think, then call one or more tools. After each tool call you receive an observation.",
+                "When you have enough information to answer, call `submit` to finish.",
+                "\nAvailable tools:\n",
+            ]
+        )
+        instructions.extend(f"({idx + 1}) {tool}" for idx, tool in enumerate(self.tools.values()))
+        return "\n".join(instructions)
+
+    def forward(self, **input_args):
+        history = input_args.pop("history", dspy.History(frames=[]))
+        max_iters = input_args.pop("max_iters", self.max_iters)
+        tool_list = list(self.tools.values())
+
+        if not history.has_open_episode():
+            history.append_input(input_args)
+
+        break_reason = None
+        for idx in range(max_iters):
+            try:
+                pred = self.react(history=history, tools=tool_list, **input_args)
+            except ContextWindowExceededError:
+                history.compact_if_needed()
+                try:
+                    pred = self.react(history=history, tools=tool_list, **input_args)
+                except ContextWindowExceededError:
+                    logger.warning("Context window exceeded after compaction, ending loop.")
+                    break_reason = "context_overflow"
+                    break
+            except (AdapterParseError, ValueError) as err:
+                logger.warning(f"Agent iteration {idx} failed: {_fmt_exc(err)}")
+                break_reason = "parse_error"
+                break
+
+            if pred.tool_calls is None or not pred.tool_calls.tool_calls:
+                logger.warning("Agent returned no tool calls, ending loop.")
+                break_reason = "no_tool_calls"
+                break
+
+            tool_calls = pred.tool_calls.with_call_ids(f"call_{len(history.frames)}")
+            observations = [self._execute_tool_call(tool_call) for tool_call in tool_calls.tool_calls]
+            self._append_tool_turn(
+                history,
+                next_thought=pred.next_thought,
+                tool_calls=tool_calls,
+                observations=observations,
+            )
+
+            for tool_call, obs in zip(tool_calls.tool_calls, observations, strict=True):
+                if tool_call.name == "submit" and not obs.is_error:
+                    history.append_output(obs.value)
+                    return dspy.Prediction(history=history, termination_reason="submit", **obs.value)
+
+        return dspy.Prediction(history=history, termination_reason=break_reason or "max_iters")
+
+    def _execute_tool_call(self, tool_call: ToolCalls.ToolCall) -> ToolObservation:
+        tool = self.tools.get(tool_call.name)
+        if tool is None:
+            return ToolObservation(value=f"Unknown tool: {tool_call.name}", is_error=True)
+        try:
+            return ToolObservation(value=tool(**tool_call.args), is_error=False)
+        except Exception as err:
+            return ToolObservation(value=f"Execution error in {tool_call.name}: {_fmt_exc(err)}", is_error=True)
+
+    @staticmethod
+    def _append_tool_turn(
+        history: History,
+        *,
+        next_thought,
+        tool_calls: ToolCalls,
+        observations: list[ToolObservation],
+    ) -> None:
+        history.append_outputs(
+            {"next_thought": next_thought, "tool_calls": tool_calls},
+            observations=[
+                Observation(
+                    value=observation.value,
+                    source="tool",
+                    call_id=tool_call.id,
+                    name=tool_call.name,
+                    is_error=observation.is_error,
+                )
+                for tool_call, observation in zip(tool_calls.tool_calls, observations, strict=True)
+            ],
+        )
+
+
+def _fmt_exc(err: BaseException, *, limit: int = 5) -> str:
+    return "\n" + "".join(traceback.format_exception(type(err), err, err.__traceback__, limit=limit)).strip()
diff --git a/tests/predict/test_reactv2.py b/tests/predict/test_reactv2.py
new file mode 100644
index 0000000000..2c57e12ed0
--- /dev/null
+++ b/tests/predict/test_reactv2.py
@@ -0,0 +1,69 @@
+import dspy
+from dspy.adapters.types.history import HistoryFrame
+from dspy.predict.reactv2 import ReActV2, ToolObservation, _build_submit_tool
+from dspy.utils.dummies import DummyLM
+
+
+def add(a: int, b: int) -> int:
+    """Add two numbers."""
+    return a + b
+
+
+def test_submit_tool_returns_dict():
+    signature = dspy.Signature("question -> answer")
+    submit = _build_submit_tool(signature)
+
+    assert submit(answer="42") == {"answer": "42"}
+
+
+def test_basic_forward_with_submit_records_history_frames():
+    lm = DummyLM(
+        [
+            {"next_thought": "I should add.", "tool_calls": [{"name": "add", "args": {"a": 1, "b": 2}}]},
+            {"next_thought": "I have the answer.", "tool_calls": [{"name": "submit", "args": {"answer": "3"}}]},
+        ]
+    )
+    dspy.configure(lm=lm)
+    react = ReActV2("question -> answer", tools=[add])
+
+    result = react(question="What is 1+2?")
+
+    assert result.answer == "3"
+    assert len(result.history.frames) == 4
+    assert result.history.frames[0].inputs == {"question": "What is 1+2?"}
+    assert result.history.frames[1].outputs["next_thought"] == "I should add."
+    assert result.history.frames[1].observations[0].value == 3
+    assert result.history.frames[-1].outputs == {"answer": "3"}
+    assert result.history.frames[-1].complete
+
+
+def test_unknown_tool_returns_error_observation():
+    lm = DummyLM(
+        [
+            {"next_thought": "Call fake.", "tool_calls": [{"name": "nonexistent", "args": {}}]},
+            {"next_thought": "Now submit.", "tool_calls": [{"name": "submit", "args": {"answer": "ok"}}]},
+        ]
+    )
+    dspy.configure(lm=lm)
+    react = ReActV2("question -> answer", tools=[add])
+
+    result = react(question="test")
+
+    assert result.answer == "ok"
+    observations = [obs for frame in result.history.frames if isinstance(frame, HistoryFrame) for obs in frame.observations]
+    assert any(obs.is_error and "Unknown tool" in str(obs.value) for obs in observations)
+
+
+def test_append_tool_turn_records_observation_ids():
+    history = dspy.History(frames=[])
+    tool_calls = dspy.ToolCalls.from_dict_list([{"name": "add", "args": {"a": 1, "b": 2}, "id": "call_add"}])
+
+    ReActV2._append_tool_turn(
+        history,
+        next_thought="add",
+        tool_calls=tool_calls,
+        observations=[ToolObservation(value=3)],
+    )
+
+    assert history.frames[0].observations[0].call_id == "call_add"
+    assert history.frames[0].observations[0].name == "add"