diff --git a/src/backend/core/services/livekit_events_service.py b/src/backend/core/services/livekit_events_service.py
new file mode 100644
index 00000000..d40a42ed
--- /dev/null
+++ b/src/backend/core/services/livekit_events_service.py
@@ -0,0 +1,117 @@
+"""LiveKit Events Service"""
+
+import uuid
+from enum import Enum
+
+from django.conf import settings
+
+from livekit import api
+
+from .lobby_service import LobbyService
+
+
+class LiveKitWebhookError(Exception):
+    """Base exception for LiveKit webhook processing errors."""
+
+    status_code = 500
+
+
+class AuthenticationError(LiveKitWebhookError):
+    """Authentication failed."""
+
+    status_code = 401
+
+
+class InvalidPayloadError(LiveKitWebhookError):
+    """Invalid webhook payload."""
+
+    status_code = 400
+
+
+class UnsupportedEventTypeError(LiveKitWebhookError):
+    """Unsupported event type."""
+
+    status_code = 422
+
+
+class ActionFailedError(LiveKitWebhookError):
+    """Webhook action fails to process or complete."""
+
+    status_code = 500
+
+
+class LiveKitWebhookEventType(Enum):
+    """LiveKit webhook event types."""
+
+    # Room events
+    ROOM_STARTED = "room_started"
+    ROOM_FINISHED = "room_finished"
+
+    # Participant events
+    PARTICIPANT_JOINED = "participant_joined"
+    PARTICIPANT_LEFT = "participant_left"
+
+    # Track events
+    TRACK_PUBLISHED = "track_published"
+    TRACK_UNPUBLISHED = "track_unpublished"
+
+    # Egress events
+    EGRESS_STARTED = "egress_started"
+    EGRESS_UPDATED = "egress_updated"
+    EGRESS_ENDED = "egress_ended"
+
+    # Ingress events
+    INGRESS_STARTED = "ingress_started"
+    INGRESS_ENDED = "ingress_ended"
+
+
+class LiveKitEventsService:
+    """Service for processing and handling LiveKit webhook events and notifications."""
+
+    def __init__(self):
+        """Initialize with required services."""
+
+        token_verifier = api.TokenVerifier(
+            settings.LIVEKIT_CONFIGURATION["api_key"],
+            settings.LIVEKIT_CONFIGURATION["api_secret"],
+        )
+        self.webhook_receiver = api.WebhookReceiver(token_verifier)
+        self.lobby_service = LobbyService()
+
+    def receive(self, request):
+        """Process webhook and route to appropriate handler."""
+
+        auth_token = request.headers.get("Authorization")
+        if not auth_token:
+            raise AuthenticationError("Authorization header missing")
+
+        try:
+            data = self.webhook_receiver.receive(
+                request.body.decode("utf-8"), auth_token
+            )
+        except Exception as e:
+            raise InvalidPayloadError("Invalid webhook payload") from e
+
+        try:
+            webhook_type = LiveKitWebhookEventType(data.event)
+        except ValueError as e:
+            raise UnsupportedEventTypeError(
+                f"Unknown webhook type: {data.event}"
+            ) from e
+
+        handler_name = f"_handle_{webhook_type.value}"
+        handler = getattr(self, handler_name, None)
+
+        if not handler or not callable(handler):
+            return
+
+        # pylint: disable=not-callable
+        handler(data)
+
+    def _handle_room_finished(self, data):
+        """Handle 'room_finished' event."""
+        try:
+            room_id = uuid.UUID(data.room.name)
+            self.lobby_service.clear_room_cache(room_id)
+        except Exception as e:
+            raise ActionFailedError("Failed to process room finished event") from e
diff --git a/src/backend/core/tests/services/test_livekit_events_service.py b/src/backend/core/tests/services/test_livekit_events_service.py
new file mode 100644
index 00000000..c55762b1
--- /dev/null
+++ b/src/backend/core/tests/services/test_livekit_events_service.py
@@ -0,0 +1,132 @@
+"""
+Test LiveKitEvents service.
+"""
+# pylint: disable=W0621,W0613, W0212
+
+import uuid
+from unittest import mock
+
+import pytest
+
+from core.services.livekit_events_service import (
+    ActionFailedError,
+    AuthenticationError,
+    InvalidPayloadError,
+    LiveKitEventsService,
+    UnsupportedEventTypeError,
+    api,
+)
+from core.services.lobby_service import LobbyService
+
+pytestmark = pytest.mark.django_db
+
+
+@pytest.fixture
+def mock_livekit_config(settings):
+    """Mock LiveKit configuration."""
+    settings.LIVEKIT_CONFIGURATION = {
+        "api_key": "test_api_key",
+        "api_secret": "test_api_secret",
+        "url": "https://test-livekit.example.com/",
+    }
+    return settings.LIVEKIT_CONFIGURATION
+
+
+@pytest.fixture
+def service(mock_livekit_config):
+    """Initialize LiveKitEventsService."""
+    return LiveKitEventsService()
+
+
+@mock.patch("livekit.api.TokenVerifier")
+@mock.patch("livekit.api.WebhookReceiver")
+def test_initialization(
+    mock_webhook_receiver, mock_token_verifier, mock_livekit_config
+):
+    """Should correctly initialize the service with required dependencies."""
+
+    api_key = mock_livekit_config["api_key"]
+    api_secret = mock_livekit_config["api_secret"]
+
+    service = LiveKitEventsService()
+
+    mock_token_verifier.assert_called_once_with(api_key, api_secret)
+    mock_webhook_receiver.assert_called_once_with(mock_token_verifier.return_value)
+    assert isinstance(service.lobby_service, LobbyService)
+
+
+@mock.patch.object(LobbyService, "clear_room_cache")
+def test_handle_room_finished(mock_clear_cache, service):
+    """Should clear lobby cache when room is finished."""
+
+    mock_room_name = uuid.uuid4()
+
+    mock_data = mock.MagicMock()
+    mock_data.room.name = str(mock_room_name)
+
+    service._handle_room_finished(mock_data)
+
+    mock_clear_cache.assert_called_once_with(mock_room_name)
+
+
+@mock.patch.object(
+    LobbyService, "clear_room_cache", side_effect=Exception("Test error")
+)
+def test_handle_room_finished_error(mock_clear_cache, service):
+    """Should raise ActionFailedError when processing fails."""
+    mock_data = mock.MagicMock()
+    mock_data.room.name = "00000000-0000-0000-0000-000000000000"
+    with pytest.raises(
+        ActionFailedError, match="Failed to process room finished event"
+    ):
+        service._handle_room_finished(mock_data)
+
+
+def test_handle_room_finished_invalid_room_name(service):
+    """Should raise ActionFailedError when processing fails."""
+    mock_data = mock.MagicMock()
+    mock_data.room.name = "invalid"
+    with pytest.raises(
+        ActionFailedError, match="Failed to process room finished event"
+    ):
+        service._handle_room_finished(mock_data)
+
+
+@mock.patch.object(
+    api.WebhookReceiver, "receive", side_effect=Exception("Invalid payload")
+)
+def test_receive_invalid_payload(mock_receive, service):
+    """Should raise InvalidPayloadError for invalid payloads."""
+    mock_request = mock.MagicMock()
+    mock_request.headers = {"Authorization": "test_token"}
+    mock_request.body = b"{}"
+
+    with pytest.raises(InvalidPayloadError, match="Invalid webhook payload"):
+        service.receive(mock_request)
+
+
+def test_receive_missing_auth(service):
+    """Should raise AuthenticationError when auth header is missing."""
+    mock_request = mock.MagicMock()
+    mock_request.headers = {}
+
+    with pytest.raises(AuthenticationError, match="Authorization header missing"):
+        service.receive(mock_request)
+
+
+@mock.patch.object(api.WebhookReceiver, "receive")
+def test_receive_unsupported_event(mock_receive, service):
+    """Should raise LiveKitWebhookError for unsupported events."""
+    mock_request = mock.MagicMock()
+    mock_request.headers = {"Authorization": "test_token"}
+    mock_request.body = b"{}"
+
+    # Mock returned data with unsupported event type
+    mock_data = mock.MagicMock()
+    mock_data.event = "unsupported_event"
+    mock_receive.return_value = mock_data
+
+    with pytest.raises(
+        UnsupportedEventTypeError, match="Unknown webhook type: unsupported_event"
+    ):
+        service.receive(mock_request)