diff --git a/src/Config/Converters/EntityCacheOptionsConverterFactory.cs b/src/Config/Converters/EntityCacheOptionsConverterFactory.cs
index 641efd062f..1f4c8ff2dd 100644
--- a/src/Config/Converters/EntityCacheOptionsConverterFactory.cs
+++ b/src/Config/Converters/EntityCacheOptionsConverterFactory.cs
@@ -55,7 +55,9 @@ public EntityCacheOptionsConverter(DeserializationVariableReplacementSettings? r
         {
             if (reader.TokenType is JsonTokenType.StartObject)
             {
-                bool? enabled = false;
+                // Default to null (unset) so that an empty cache object ("cache": {})
+                // is treated as "not explicitly configured" and inherits from the runtime setting.
+                bool? enabled = null;
 
                 // Defer to EntityCacheOptions record definition to define default ttl value.
                 int? ttlSeconds = null;
diff --git a/src/Config/ObjectModel/EntityCacheLevel.cs b/src/Config/ObjectModel/EntityCacheLevel.cs
index cb4aa58c95..bcf227bd1c 100644
--- a/src/Config/ObjectModel/EntityCacheLevel.cs
+++ b/src/Config/ObjectModel/EntityCacheLevel.cs
@@ -1,10 +1,14 @@
 // Copyright (c) Microsoft Corporation.
 // Licensed under the MIT License.
 
+using System.Runtime.Serialization;
+
 namespace Azure.DataApiBuilder.Config.ObjectModel;
 
 public enum EntityCacheLevel
 {
+    [EnumMember(Value = "L1")]
     L1,
+    [EnumMember(Value = "L1L2")]
     L1L2
 }
diff --git a/src/Config/ObjectModel/EntityCacheOptions.cs b/src/Config/ObjectModel/EntityCacheOptions.cs
index a947cd6d99..fffe722780 100644
--- a/src/Config/ObjectModel/EntityCacheOptions.cs
+++ b/src/Config/ObjectModel/EntityCacheOptions.cs
@@ -20,6 +20,10 @@ public record EntityCacheOptions
 
     /// <summary>
     /// Default cache level for an entity.
+    /// Placeholder cache level value used when the entity does not explicitly set a level.
+    /// This value is stored on the EntityCacheOptions object but is NOT used at runtime
+    /// for resolution — GetEntityCacheEntryLevel() falls through to GlobalCacheEntryLevel()
+    /// (which infers the level from the runtime Level2 configuration) when UserProvidedLevelOptions is false.
     /// </summary>
     public const EntityCacheLevel DEFAULT_LEVEL = EntityCacheLevel.L1L2;
 
@@ -30,26 +34,29 @@ public record EntityCacheOptions
 
     /// <summary>
     /// Whether the cache should be used for the entity.
+    /// When null, indicates the user did not explicitly set this property, and the entity
+    /// should inherit the runtime-level cache enabled setting.
+    /// Using Enabled.HasValue (rather than a separate UserProvided flag) ensures correct
+    /// behavior regardless of whether the object was created via JsonConstructor or with-expression.
     /// </summary>
     [JsonPropertyName("enabled")]
-    public bool? Enabled { get; init; } = false;
+    public bool? Enabled { get; init; }
 
     /// <summary>
     /// The number of seconds a cache entry is valid before eligible for cache eviction.
     /// </summary>
     [JsonPropertyName("ttl-seconds")]
-    public int? TtlSeconds { get; init; } = null;
+    public int? TtlSeconds { get; init; }
 
     /// <summary>
     /// The cache levels to use for a cache entry.
     /// </summary>
     [JsonPropertyName("level")]
-    public EntityCacheLevel? Level { get; init; } = null;
+    public EntityCacheLevel? Level { get; init; }
 
     [JsonConstructor]
     public EntityCacheOptions(bool? Enabled = null, int? TtlSeconds = null, EntityCacheLevel? Level = null)
     {
-        // TODO: shouldn't we apply the same "UserProvidedXyz" logic to Enabled, too?
         this.Enabled = Enabled;
 
         if (TtlSeconds is not null)
diff --git a/src/Config/ObjectModel/RuntimeCacheOptions.cs b/src/Config/ObjectModel/RuntimeCacheOptions.cs
index b507ba6fb3..b744769db4 100644
--- a/src/Config/ObjectModel/RuntimeCacheOptions.cs
+++ b/src/Config/ObjectModel/RuntimeCacheOptions.cs
@@ -65,4 +65,12 @@ public RuntimeCacheOptions(bool? Enabled = null, int? TtlSeconds = null)
     [JsonIgnore(Condition = JsonIgnoreCondition.Always)]
     [MemberNotNullWhen(true, nameof(TtlSeconds))]
     public bool UserProvidedTtlOptions { get; init; } = false;
+
+    /// <summary>
+    /// Infers the cache level from the Level2 configuration.
+    /// If Level2 is enabled, the cache level is L1L2, otherwise L1.
+    /// </summary>
+    [JsonIgnore]
+    public EntityCacheLevel InferredLevel =>
+        Level2?.Enabled is true ? EntityCacheLevel.L1L2 : EntityCacheLevel.L1;
 }
diff --git a/src/Config/ObjectModel/RuntimeConfig.cs b/src/Config/ObjectModel/RuntimeConfig.cs
index 0684040f85..e17880d161 100644
--- a/src/Config/ObjectModel/RuntimeConfig.cs
+++ b/src/Config/ObjectModel/RuntimeConfig.cs
@@ -373,7 +373,9 @@ public RuntimeConfig(
         }
 
         SetupDataSourcesUsed();
-
+        // Resolve entity cache inheritance: if an entity's Cache.Enabled is null,
+        // inherit the global runtime cache enabled setting.
+        this.Entities = ResolveEntityCacheInheritance(this.Entities, this.Runtime);
     }
 
     /// <summary>
@@ -404,6 +406,10 @@ public RuntimeConfig(string Schema, DataSource DataSource, RuntimeOptions Runtim
         this.AzureKeyVault = AzureKeyVault;
 
         SetupDataSourcesUsed();
+
+        // Resolve entity cache inheritance: if an entity's Cache.Enabled is null,
+        // inherit the global runtime cache enabled setting.
+        this.Entities = ResolveEntityCacheInheritance(this.Entities, this.Runtime);
     }
 
     /// <summary>
@@ -565,7 +571,8 @@ public virtual int GetEntityCacheEntryTtl(string entityName)
 
     /// <summary>
     /// Returns the cache level value for a given entity.
-    /// If the property is not set, returns the default (L1L2) for a given entity.
+    /// If the entity explicitly sets level, that value is used.
+    /// Otherwise, the level is inferred from the runtime cache Level2 configuration.
     /// </summary>
     /// <param name="entityName">Name of the entity to check cache configuration.</param>
     /// <returns>Cache level that a cache entry should be stored in.</returns>
@@ -592,10 +599,35 @@ public virtual EntityCacheLevel GetEntityCacheEntryLevel(string entityName)
         {
             return entityConfig.Cache.Level.Value;
         }
-        else
-        {
-            return EntityCacheLevel.L1L2;
-        }
+
+        // GlobalCacheEntryLevel() returns null when runtime cache is not configured.
+        // Callers guard with IsCachingEnabled, so null is not expected here,
+        // but we default to L1 defensively.
+        return GlobalCacheEntryLevel() ?? EntityCacheLevel.L1;
+    }
+
+    /// <summary>
+    /// Returns the ttl-seconds value for the global cache entry.
+    /// If no value is explicitly set, returns the global default value.
+    /// </summary>
+    /// <returns>Number of seconds a cache entry should be valid before cache eviction.</returns>
+    public virtual int GlobalCacheEntryTtl()
+    {
+        return Runtime is not null && Runtime.IsCachingEnabled && Runtime.Cache.UserProvidedTtlOptions
+            ? Runtime.Cache.TtlSeconds.Value
+            : EntityCacheOptions.DEFAULT_TTL_SECONDS;
+    }
+
+    /// <summary>
+    /// Returns the cache level value for the global cache entry.
+    /// The level is inferred from the runtime cache Level2 configuration:
+    /// if Level2 is enabled, the level is L1L2; otherwise L1.
+    /// Returns null when runtime cache is not configured.
+    /// </summary>
+    /// <returns>Cache level for a cache entry, or null if runtime cache is not configured.</returns>
+    public virtual EntityCacheLevel? GlobalCacheEntryLevel()
+    {
+        return Runtime?.Cache?.InferredLevel;
     }
 
     /// <summary>
@@ -611,15 +643,41 @@ public virtual bool CanUseCache()
     }
 
     /// <summary>
-    /// Returns the ttl-seconds value for the global cache entry.
-    /// If no value is explicitly set, returns the global default value.
+    /// Resolves entity cache inheritance at construction time.
+    /// For each entity whose Cache.Enabled is null (not explicitly set by the user),
+    /// inherits the global runtime cache enabled setting (Runtime.Cache.Enabled).
+    /// This ensures Entity.IsCachingEnabled is the single source of truth for whether
+    /// an entity has caching enabled, without callers needing to check the global setting.
     /// </summary>
-    /// <returns>Number of seconds a cache entry should be valid before cache eviction.</returns>
-    public int GlobalCacheEntryTtl()
+    /// <returns>A new RuntimeEntities with inheritance resolved, or the original if no changes needed.</returns>
+    private static RuntimeEntities ResolveEntityCacheInheritance(RuntimeEntities entities, RuntimeOptions? runtime)
     {
-        return Runtime is not null && Runtime.IsCachingEnabled && Runtime.Cache.UserProvidedTtlOptions
-            ? Runtime.Cache.TtlSeconds.Value
-            : EntityCacheOptions.DEFAULT_TTL_SECONDS;
+        bool globalCacheEnabled = runtime?.Cache?.Enabled is true;
+
+        Dictionary<string, Entity> resolvedEntities = new();
+        bool anyResolved = false;
+
+        foreach (KeyValuePair<string, Entity> kvp in entities)
+        {
+            Entity entity = kvp.Value;
+
+            // If entity has no cache config at all, and global is enabled, create one inheriting enabled.
+            // If entity has cache config but Enabled is null, inherit the global value.
+            if (entity.Cache is null && globalCacheEnabled)
+            {
+                entity = entity with { Cache = new EntityCacheOptions(Enabled: true) };
+                anyResolved = true;
+            }
+            else if (entity.Cache is not null && !entity.Cache.Enabled.HasValue)
+            {
+                entity = entity with { Cache = entity.Cache with { Enabled = globalCacheEnabled } };
+                anyResolved = true;
+            }
+
+            resolvedEntities.Add(kvp.Key, entity);
+        }
+
+        return anyResolved ? new RuntimeEntities(resolvedEntities) : entities;
     }
 
     private void CheckDataSourceNamePresent(string dataSourceName)
diff --git a/src/Service.Tests/Caching/CachingConfigProcessingTests.cs b/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
index 1294c009da..fa2d76c3b6 100644
--- a/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
+++ b/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
@@ -346,6 +346,137 @@ public void DefaultTtlNotWrittenToSerializedJsonConfigFile(string cacheConfig)
         }
     }
 
+    /// <summary>
+    /// Validates that Entity.IsCachingEnabled correctly reflects inheritance from the runtime cache enabled
+    /// setting when the entity does not explicitly set cache enabled.
+    /// Inheritance is resolved at RuntimeConfig construction time via ResolveEntityCacheInheritance().
+    /// Also validates that entity-level explicit enabled overrides the runtime setting.
+    /// </summary>
+    /// <param name="globalCacheConfig">Global cache configuration JSON fragment.</param>
+    /// <param name="entityCacheConfig">Entity cache configuration JSON fragment.</param>
+    /// <param name="expectedIsEntityCachingEnabled">Whether Entity.IsCachingEnabled should return true.</param>
+    [DataRow(@",""cache"": { ""enabled"": true }", @"", true, DisplayName = "Global cache enabled, entity cache omitted: entity inherits enabled from runtime.")]
+    [DataRow(@",""cache"": { ""enabled"": true }", @",""cache"": {}", true, DisplayName = "Global cache enabled, entity cache empty: entity inherits enabled from runtime.")]
+    [DataRow(@",""cache"": { ""enabled"": true }", @",""cache"": { ""enabled"": false }", false, DisplayName = "Global cache enabled, entity cache explicitly disabled: entity explicit value wins.")]
+    [DataRow(@",""cache"": { ""enabled"": false }", @"", false, DisplayName = "Global cache disabled, entity cache omitted: entity inherits disabled from runtime.")]
+    [DataRow(@",""cache"": { ""enabled"": false }", @",""cache"": { ""enabled"": true }", true, DisplayName = "Global cache disabled, entity cache explicitly enabled: entity explicit value wins.")]
+    [DataRow(@"", @"", false, DisplayName = "No global cache, no entity cache: defaults to disabled.")]
+    [DataRow(@"", @",""cache"": { ""enabled"": true }", true, DisplayName = "No global cache, entity cache explicitly enabled: entity explicit value wins.")]
+    [DataTestMethod]
+    public void EntityIsCachingEnabled_InheritsFromRuntimeCache(
+        string globalCacheConfig,
+        string entityCacheConfig,
+        bool expectedIsEntityCachingEnabled)
+    {
+        // Arrange
+        string fullConfig = GetRawConfigJson(globalCacheConfig: globalCacheConfig, entityCacheConfig: entityCacheConfig);
+        RuntimeConfigLoader.TryParseConfig(
+            json: fullConfig,
+            out RuntimeConfig? config,
+            replacementSettings: null);
+
+        Assert.IsNotNull(config, message: "Config must not be null, runtime config JSON deserialization failed.");
+
+        Entity entity = config.Entities.First().Value;
+
+        // Act - Entity.IsCachingEnabled should reflect the inherited value resolved at construction time.
+        bool actualIsEntityCachingEnabled = entity.IsCachingEnabled;
+
+        // Assert
+        Assert.AreEqual(expected: expectedIsEntityCachingEnabled, actual: actualIsEntityCachingEnabled,
+            message: $"Entity.IsCachingEnabled should be {expectedIsEntityCachingEnabled}.");
+    }
+
+    /// <summary>
+    /// Validates that GlobalCacheEntryLevel infers the cache level from the runtime cache Level2 configuration.
+    /// When Level2 is enabled, the global level is L1L2; when Level2 is absent or disabled, the global level is L1.
+    /// </summary>
+    /// <param name="globalCacheConfig">Global cache configuration JSON fragment.</param>
+    /// <param name="expectedLevel">Expected inferred cache level.</param>
+    [DataRow(@",""cache"": { ""enabled"": true }", EntityCacheLevel.L1, DisplayName = "Global cache enabled, no Level2: inferred level is L1.")]
+    [DataRow(@",""cache"": { ""enabled"": true, ""level-2"": { ""enabled"": true } }", EntityCacheLevel.L1L2, DisplayName = "Global cache enabled, Level2 enabled: inferred level is L1L2.")]
+    [DataRow(@",""cache"": { ""enabled"": true, ""level-2"": { ""enabled"": false } }", EntityCacheLevel.L1, DisplayName = "Global cache enabled, Level2 disabled: inferred level is L1.")]
+    [DataTestMethod]
+    public void GlobalCacheEntryLevel_InfersFromLevel2Config(
+        string globalCacheConfig,
+        EntityCacheLevel expectedLevel)
+    {
+        // Arrange
+        string fullConfig = GetRawConfigJson(globalCacheConfig: globalCacheConfig, entityCacheConfig: string.Empty);
+        RuntimeConfigLoader.TryParseConfig(
+            json: fullConfig,
+            out RuntimeConfig? config,
+            replacementSettings: null);
+
+        Assert.IsNotNull(config, message: "Config must not be null, runtime config JSON deserialization failed.");
+
+        // Act
+        EntityCacheLevel? actualLevel = config.GlobalCacheEntryLevel();
+
+        // Assert
+        Assert.IsNotNull(actualLevel, message: "GlobalCacheEntryLevel should not be null when runtime cache is configured.");
+        Assert.AreEqual(expected: expectedLevel, actual: actualLevel.Value,
+            message: $"GlobalCacheEntryLevel should be {expectedLevel}.");
+    }
+
+    /// <summary>
+    /// Validates that GlobalCacheEntryLevel returns null when runtime cache is not configured,
+    /// since determining a cache level is meaningless when caching is disabled.
+    /// </summary>
+    [TestMethod]
+    public void GlobalCacheEntryLevel_ReturnsNullWhenRuntimeCacheIsNull()
+    {
+        // Arrange: no global cache config
+        string fullConfig = GetRawConfigJson(globalCacheConfig: string.Empty, entityCacheConfig: string.Empty);
+        RuntimeConfigLoader.TryParseConfig(
+            json: fullConfig,
+            out RuntimeConfig? config,
+            replacementSettings: null);
+
+        Assert.IsNotNull(config, message: "Config must not be null, runtime config JSON deserialization failed.");
+
+        // Act
+        EntityCacheLevel? actualLevel = config.GlobalCacheEntryLevel();
+
+        // Assert
+        Assert.IsNull(actualLevel, "GlobalCacheEntryLevel should return null when runtime cache is not configured.");
+    }
+
+    /// <summary>
+    /// Validates that the entity cache level is serialized with the correct casing (e.g. "L1", "L1L2")
+    /// when writing the runtime config to JSON. This ensures the serialized config passes JSON schema
+    /// validation which expects uppercase enum values.
+    /// </summary>
+    /// <param name="levelValue">The cache level value as written in the JSON config.</param>
+    /// <param name="expectedSerializedLevel">The expected string in the serialized JSON output.</param>
+    [DataRow("L1", "L1", DisplayName = "L1 level serialized with correct casing.")]
+    [DataRow("L1L2", "L1L2", DisplayName = "L1L2 level serialized with correct casing.")]
+    [DataTestMethod]
+    public void EntityCacheLevelSerializedWithCorrectCasing(string levelValue, string expectedSerializedLevel)
+    {
+        // Arrange
+        string entityCacheConfig = @",""cache"": { ""enabled"": true, ""level"": """ + levelValue + @""" }";
+        string fullConfig = GetRawConfigJson(globalCacheConfig: @",""cache"": { ""enabled"": true }", entityCacheConfig: entityCacheConfig);
+        RuntimeConfigLoader.TryParseConfig(
+            json: fullConfig,
+            out RuntimeConfig? config,
+            replacementSettings: null);
+        Assert.IsNotNull(config, message: "Config must not be null, runtime config JSON deserialization failed.");
+
+        // Act
+        string serializedConfig = config.ToJson();
+
+        // Assert
+        using JsonDocument parsedConfig = JsonDocument.Parse(serializedConfig);
+        JsonElement entityElement = parsedConfig.RootElement
+            .GetProperty("entities")
+            .EnumerateObject().First().Value;
+        JsonElement cacheElement = entityElement.GetProperty("cache");
+        string? actualLevel = cacheElement.GetProperty("level").GetString();
+        Assert.AreEqual(expected: expectedSerializedLevel, actual: actualLevel,
+            message: $"Cache level should be serialized as '{expectedSerializedLevel}', not lowercase.");
+    }
+
     /// <summary>
     /// Returns a JSON string of the runtime config with the test-provided
     /// cache configuration.