diff --git a/api/app/data/enemies/goblin_chieftain.yaml b/api/app/data/enemies/goblin_chieftain.yaml
new file mode 100644
index 0000000..23a621c
--- /dev/null
+++ b/api/app/data/enemies/goblin_chieftain.yaml
@@ -0,0 +1,85 @@
+# Goblin Chieftain - Hard variant, elite tribe leader
+# A cunning and powerful goblin leader, adorned with trophies.
+# Commands respect through fear and violence, drops quality loot.
+
+enemy_id: goblin_chieftain
+name: Goblin Chieftain
+description: >
+  A large, scarred goblin wearing a crown of teeth and bones.
+  The chieftain has clawed its way to leadership through countless
+  battles and betrayals. It wields a well-maintained weapon stolen
+  from a fallen adventurer and commands its tribe with an iron fist.
+
+base_stats:
+  strength: 16
+  dexterity: 12
+  constitution: 14
+  intelligence: 10
+  wisdom: 10
+  charisma: 12
+  luck: 12
+
+abilities:
+  - basic_attack
+  - shield_bash
+  - intimidating_shout
+
+loot_table:
+  # Static drops - guaranteed materials
+  - loot_type: static
+    item_id: goblin_ear
+    drop_chance: 1.0
+    quantity_min: 2
+    quantity_max: 3
+  - loot_type: static
+    item_id: goblin_chieftain_token
+    drop_chance: 0.80
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: goblin_war_paint
+    drop_chance: 0.50
+    quantity_min: 1
+    quantity_max: 2
+
+  # Consumable drops
+  - loot_type: static
+    item_id: health_potion_medium
+    drop_chance: 0.40
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: elixir_of_strength
+    drop_chance: 0.10
+    quantity_min: 1
+    quantity_max: 1
+
+  # Procedural equipment drops - higher chance and rarity bonus
+  - loot_type: procedural
+    item_type: weapon
+    drop_chance: 0.25
+    rarity_bonus: 0.10
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: procedural
+    item_type: armor
+    drop_chance: 0.15
+    rarity_bonus: 0.05
+    quantity_min: 1
+    quantity_max: 1
+
+experience_reward: 75
+gold_reward_min: 20
+gold_reward_max: 50
+difficulty: hard
+
+tags:
+  - humanoid
+  - goblinoid
+  - leader
+  - elite
+  - armed
+
+base_damage: 14
+crit_chance: 0.15
+flee_chance: 0.25
diff --git a/api/app/data/enemies/goblin_scout.yaml b/api/app/data/enemies/goblin_scout.yaml
new file mode 100644
index 0000000..b5054fb
--- /dev/null
+++ b/api/app/data/enemies/goblin_scout.yaml
@@ -0,0 +1,56 @@
+# Goblin Scout - Easy variant, agile but fragile
+# A fast, cowardly goblin that serves as a lookout for its tribe.
+# Quick to flee, drops minor loot and the occasional small potion.
+
+enemy_id: goblin_scout
+name: Goblin Scout
+description: >
+  A small, wiry goblin with oversized ears and beady yellow eyes.
+  Goblin scouts are the first line of awareness for their tribes,
+  often found lurking in shadows or perched in trees. They prefer
+  to run rather than fight, but will attack if cornered.
+
+base_stats:
+  strength: 6
+  dexterity: 14
+  constitution: 5
+  intelligence: 6
+  wisdom: 10
+  charisma: 4
+  luck: 10
+
+abilities:
+  - basic_attack
+
+loot_table:
+  # Static drops - materials and consumables
+  - loot_type: static
+    item_id: goblin_ear
+    drop_chance: 0.60
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: goblin_trinket
+    drop_chance: 0.20
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: health_potion_small
+    drop_chance: 0.08
+    quantity_min: 1
+    quantity_max: 1
+
+experience_reward: 10
+gold_reward_min: 1
+gold_reward_max: 4
+difficulty: easy
+
+tags:
+  - humanoid
+  - goblinoid
+  - small
+  - scout
+
+base_damage: 3
+crit_chance: 0.08
+flee_chance: 0.70
diff --git a/api/app/data/enemies/goblin_warrior.yaml b/api/app/data/enemies/goblin_warrior.yaml
new file mode 100644
index 0000000..e5a8ea4
--- /dev/null
+++ b/api/app/data/enemies/goblin_warrior.yaml
@@ -0,0 +1,70 @@
+# Goblin Warrior - Medium variant, trained fighter
+# A battle-hardened goblin wielding crude but effective weapons.
+# More dangerous than scouts, fights in organized groups.
+
+enemy_id: goblin_warrior
+name: Goblin Warrior
+description: >
+  A muscular goblin clad in scavenged armor and wielding a crude
+  but deadly weapon. Goblin warriors are the backbone of any goblin
+  warband, trained to fight rather than flee. They attack with
+  surprising ferocity and coordination.
+
+base_stats:
+  strength: 12
+  dexterity: 10
+  constitution: 10
+  intelligence: 6
+  wisdom: 6
+  charisma: 4
+  luck: 8
+
+abilities:
+  - basic_attack
+  - shield_bash
+
+loot_table:
+  # Static drops - materials and consumables
+  - loot_type: static
+    item_id: goblin_ear
+    drop_chance: 0.80
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: goblin_war_paint
+    drop_chance: 0.15
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: health_potion_small
+    drop_chance: 0.15
+    quantity_min: 1
+    quantity_max: 1
+  - loot_type: static
+    item_id: iron_ore
+    drop_chance: 0.10
+    quantity_min: 1
+    quantity_max: 2
+
+  # Procedural equipment drops
+  - loot_type: procedural
+    item_type: weapon
+    drop_chance: 0.08
+    rarity_bonus: 0.0
+    quantity_min: 1
+    quantity_max: 1
+
+experience_reward: 25
+gold_reward_min: 5
+gold_reward_max: 15
+difficulty: medium
+
+tags:
+  - humanoid
+  - goblinoid
+  - warrior
+  - armed
+
+base_damage: 8
+crit_chance: 0.10
+flee_chance: 0.45
diff --git a/api/app/data/static_items/consumables.yaml b/api/app/data/static_items/consumables.yaml
new file mode 100644
index 0000000..ed07206
--- /dev/null
+++ b/api/app/data/static_items/consumables.yaml
@@ -0,0 +1,161 @@
+# Consumable items that drop from enemies or are purchased from vendors
+# These items have effects_on_use that trigger when consumed
+
+items:
+  # ==========================================================================
+  # Health Potions
+  # ==========================================================================
+
+  health_potion_small:
+    name: "Small Health Potion"
+    item_type: consumable
+    rarity: common
+    description: "A small vial of red liquid that restores a modest amount of health."
+    value: 25
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: heal_small
+        name: "Minor Healing"
+        effect_type: hot
+        power: 30
+        duration: 1
+        stacks: 1
+
+  health_potion_medium:
+    name: "Health Potion"
+    item_type: consumable
+    rarity: uncommon
+    description: "A standard healing potion used by adventurers across the realm."
+    value: 75
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: heal_medium
+        name: "Healing"
+        effect_type: hot
+        power: 75
+        duration: 1
+        stacks: 1
+
+  health_potion_large:
+    name: "Large Health Potion"
+    item_type: consumable
+    rarity: rare
+    description: "A potent healing draught that restores significant health."
+    value: 150
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: heal_large
+        name: "Major Healing"
+        effect_type: hot
+        power: 150
+        duration: 1
+        stacks: 1
+
+  # ==========================================================================
+  # Mana Potions
+  # ==========================================================================
+
+  mana_potion_small:
+    name: "Small Mana Potion"
+    item_type: consumable
+    rarity: common
+    description: "A small vial of blue liquid that restores mana."
+    value: 25
+    is_tradeable: true
+    # Note: MP restoration would need custom effect type or game logic
+
+  mana_potion_medium:
+    name: "Mana Potion"
+    item_type: consumable
+    rarity: uncommon
+    description: "A standard mana potion favored by spellcasters."
+    value: 75
+    is_tradeable: true
+
+  # ==========================================================================
+  # Status Effect Cures
+  # ==========================================================================
+
+  antidote:
+    name: "Antidote"
+    item_type: consumable
+    rarity: common
+    description: "A bitter herbal remedy that cures poison effects."
+    value: 30
+    is_tradeable: true
+
+  smelling_salts:
+    name: "Smelling Salts"
+    item_type: consumable
+    rarity: uncommon
+    description: "Pungent salts that can revive unconscious allies or cure stun."
+    value: 40
+    is_tradeable: true
+
+  # ==========================================================================
+  # Combat Buffs
+  # ==========================================================================
+
+  elixir_of_strength:
+    name: "Elixir of Strength"
+    item_type: consumable
+    rarity: rare
+    description: "A powerful elixir that temporarily increases strength."
+    value: 100
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: str_buff
+        name: "Strength Boost"
+        effect_type: buff
+        power: 5
+        duration: 5
+        stacks: 1
+
+  elixir_of_agility:
+    name: "Elixir of Agility"
+    item_type: consumable
+    rarity: rare
+    description: "A shimmering elixir that enhances reflexes and speed."
+    value: 100
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: dex_buff
+        name: "Agility Boost"
+        effect_type: buff
+        power: 5
+        duration: 5
+        stacks: 1
+
+  # ==========================================================================
+  # Food Items (simple healing, no combat use)
+  # ==========================================================================
+
+  ration:
+    name: "Trail Ration"
+    item_type: consumable
+    rarity: common
+    description: "Dried meat, hardtack, and nuts. Sustains an adventurer on long journeys."
+    value: 5
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: ration_heal
+        name: "Nourishment"
+        effect_type: hot
+        power: 10
+        duration: 1
+        stacks: 1
+
+  cooked_meat:
+    name: "Cooked Meat"
+    item_type: consumable
+    rarity: common
+    description: "Freshly cooked meat that restores health."
+    value: 15
+    is_tradeable: true
+    effects_on_use:
+      - effect_id: meat_heal
+        name: "Hearty Meal"
+        effect_type: hot
+        power: 20
+        duration: 1
+        stacks: 1
diff --git a/api/app/data/static_items/materials.yaml b/api/app/data/static_items/materials.yaml
new file mode 100644
index 0000000..80efd09
--- /dev/null
+++ b/api/app/data/static_items/materials.yaml
@@ -0,0 +1,207 @@
+# Trophy items, crafting materials, and quest items dropped by enemies
+# These items don't have combat effects but are used for quests, crafting, or selling
+
+items:
+  # ==========================================================================
+  # Goblin Drops
+  # ==========================================================================
+
+  goblin_ear:
+    name: "Goblin Ear"
+    item_type: quest_item
+    rarity: common
+    description: "A severed goblin ear. Proof of a kill, sometimes collected for bounties."
+    value: 2
+    is_tradeable: true
+
+  goblin_trinket:
+    name: "Goblin Trinket"
+    item_type: quest_item
+    rarity: common
+    description: "A crude piece of jewelry stolen by a goblin. Worth a few coins."
+    value: 8
+    is_tradeable: true
+
+  goblin_war_paint:
+    name: "Goblin War Paint"
+    item_type: quest_item
+    rarity: uncommon
+    description: "Pungent red and black paint used by goblin warriors before battle."
+    value: 15
+    is_tradeable: true
+
+  goblin_chieftain_token:
+    name: "Chieftain's Token"
+    item_type: quest_item
+    rarity: rare
+    description: "A carved bone token marking the authority of a goblin chieftain."
+    value: 50
+    is_tradeable: true
+
+  # ==========================================================================
+  # Wolf/Beast Drops
+  # ==========================================================================
+
+  wolf_pelt:
+    name: "Wolf Pelt"
+    item_type: quest_item
+    rarity: common
+    description: "A fur pelt from a wolf. Useful for crafting or selling to tanners."
+    value: 10
+    is_tradeable: true
+
+  dire_wolf_fang:
+    name: "Dire Wolf Fang"
+    item_type: quest_item
+    rarity: uncommon
+    description: "A large fang from a dire wolf. Prized by craftsmen for weapon making."
+    value: 25
+    is_tradeable: true
+
+  beast_hide:
+    name: "Beast Hide"
+    item_type: quest_item
+    rarity: common
+    description: "Thick hide from a large beast. Can be tanned into leather."
+    value: 12
+    is_tradeable: true
+
+  # ==========================================================================
+  # Undead Drops
+  # ==========================================================================
+
+  skeleton_bone:
+    name: "Skeleton Bone"
+    item_type: quest_item
+    rarity: common
+    description: "A bone from an animated skeleton. Retains faint magical energy."
+    value: 5
+    is_tradeable: true
+
+  bone_dust:
+    name: "Bone Dust"
+    item_type: quest_item
+    rarity: common
+    description: "Powdered bone from undead remains. Used in alchemy and rituals."
+    value: 8
+    is_tradeable: true
+
+  skull_fragment:
+    name: "Skull Fragment"
+    item_type: quest_item
+    rarity: uncommon
+    description: "A piece of an undead skull, still crackling with dark energy."
+    value: 20
+    is_tradeable: true
+
+  # ==========================================================================
+  # Orc Drops
+  # ==========================================================================
+
+  orc_tusk:
+    name: "Orc Tusk"
+    item_type: quest_item
+    rarity: uncommon
+    description: "A large tusk from an orc warrior. A trophy prized by collectors."
+    value: 25
+    is_tradeable: true
+
+  orc_war_banner:
+    name: "Orc War Banner"
+    item_type: quest_item
+    rarity: rare
+    description: "A bloodstained banner torn from an orc warband. Proof of a hard fight."
+    value: 45
+    is_tradeable: true
+
+  berserker_charm:
+    name: "Berserker Charm"
+    item_type: quest_item
+    rarity: rare
+    description: "A crude charm worn by orc berserkers. Said to enhance rage."
+    value: 60
+    is_tradeable: true
+
+  # ==========================================================================
+  # Bandit Drops
+  # ==========================================================================
+
+  bandit_mask:
+    name: "Bandit Mask"
+    item_type: quest_item
+    rarity: common
+    description: "A cloth mask worn by bandits to conceal their identity."
+    value: 8
+    is_tradeable: true
+
+  stolen_coin_pouch:
+    name: "Stolen Coin Pouch"
+    item_type: quest_item
+    rarity: common
+    description: "A small pouch of coins stolen by bandits. Should be returned."
+    value: 15
+    is_tradeable: true
+
+  wanted_poster:
+    name: "Wanted Poster"
+    item_type: quest_item
+    rarity: uncommon
+    description: "A crumpled wanted poster. May lead to bounty opportunities."
+    value: 5
+    is_tradeable: true
+
+  # ==========================================================================
+  # Generic/Currency Items
+  # ==========================================================================
+
+  gold_coin:
+    name: "Gold Coin"
+    item_type: quest_item
+    rarity: common
+    description: "A single gold coin. Standard currency across the realm."
+    value: 1
+    is_tradeable: true
+
+  silver_coin:
+    name: "Silver Coin"
+    item_type: quest_item
+    rarity: common
+    description: "A silver coin worth less than gold but still useful."
+    value: 1
+    is_tradeable: true
+
+  # ==========================================================================
+  # Crafting Materials (Generic)
+  # ==========================================================================
+
+  iron_ore:
+    name: "Iron Ore"
+    item_type: quest_item
+    rarity: common
+    description: "Raw iron ore that can be smelted into ingots."
+    value: 10
+    is_tradeable: true
+
+  leather_scraps:
+    name: "Leather Scraps"
+    item_type: quest_item
+    rarity: common
+    description: "Scraps of leather useful for crafting and repairs."
+    value: 5
+    is_tradeable: true
+
+  cloth_scraps:
+    name: "Cloth Scraps"
+    item_type: quest_item
+    rarity: common
+    description: "Torn cloth that can be sewn into bandages or used for crafting."
+    value: 3
+    is_tradeable: true
+
+  magic_essence:
+    name: "Magic Essence"
+    item_type: quest_item
+    rarity: uncommon
+    description: "Crystallized magical energy. Used in enchanting and alchemy."
+    value: 30
+    is_tradeable: true
diff --git a/api/app/models/enemy.py b/api/app/models/enemy.py
index 900d56c..894e7c0 100644
--- a/api/app/models/enemy.py
+++ b/api/app/models/enemy.py
@@ -21,35 +21,92 @@ class EnemyDifficulty(Enum):
     BOSS = "boss"
 
 
+class LootType(Enum):
+    """
+    Types of loot drops in enemy loot tables.
+
+    STATIC: Fixed item_id reference (consumables, quest items, materials)
+    PROCEDURAL: Procedurally generated equipment (weapons, armor with affixes)
+    """
+    STATIC = "static"
+    PROCEDURAL = "procedural"
+
+
 @dataclass
 class LootEntry:
     """
     Single entry in an enemy's loot table.
 
+    Supports two types of loot:
+
+    STATIC loot (default):
+        - item_id references a predefined item (health_potion, gold_coin, etc.)
+        - quantity_min/max define stack size
+
+    PROCEDURAL loot:
+        - item_type specifies "weapon" or "armor"
+        - rarity_bonus adds to rarity roll (difficulty contribution)
+        - Generated equipment uses the ItemGenerator system
+
     Attributes:
-        item_id: Reference to item definition
+        loot_type: Type of loot (static or procedural)
         drop_chance: Probability of dropping (0.0 to 1.0)
         quantity_min: Minimum quantity if dropped
         quantity_max: Maximum quantity if dropped
+        item_id: Reference to item definition (for STATIC loot)
+        item_type: Type of equipment to generate (for PROCEDURAL loot)
+        rarity_bonus: Added to rarity roll (0.0 to 0.5, for PROCEDURAL)
     """
 
-    item_id: str
+    # Common fields
+    loot_type: LootType = LootType.STATIC
     drop_chance: float = 0.1
     quantity_min: int = 1
     quantity_max: int = 1
 
+    # Static loot fields
+    item_id: Optional[str] = None
+
+    # Procedural loot fields
+    item_type: Optional[str] = None  # "weapon" or "armor"
+    rarity_bonus: float = 0.0  # Added to rarity roll (0.0 to 0.5)
+
     def to_dict(self) -> Dict[str, Any]:
         """Serialize loot entry to dictionary."""
-        return asdict(self)
+        data = {
+            "loot_type": self.loot_type.value,
+            "drop_chance": self.drop_chance,
+            "quantity_min": self.quantity_min,
+            "quantity_max": self.quantity_max,
+        }
+        # Only include relevant fields based on loot type
+        if self.item_id is not None:
+            data["item_id"] = self.item_id
+        if self.item_type is not None:
+            data["item_type"] = self.item_type
+            data["rarity_bonus"] = self.rarity_bonus
+        return data
 
     @classmethod
     def from_dict(cls, data: Dict[str, Any]) -> 'LootEntry':
-        """Deserialize loot entry from dictionary."""
+        """
+        Deserialize loot entry from dictionary.
+
+        Backward compatible: entries without loot_type default to STATIC,
+        and item_id is required for STATIC entries (for backward compat).
+        """
+        # Parse loot type with backward compatibility
+        loot_type_str = data.get("loot_type", "static")
+        loot_type = LootType(loot_type_str)
+
         return cls(
-            item_id=data["item_id"],
+            loot_type=loot_type,
             drop_chance=data.get("drop_chance", 0.1),
             quantity_min=data.get("quantity_min", 1),
             quantity_max=data.get("quantity_max", 1),
+            item_id=data.get("item_id"),
+            item_type=data.get("item_type"),
+            rarity_bonus=data.get("rarity_bonus", 0.0),
         )
 
 
diff --git a/api/app/services/combat_loot_service.py b/api/app/services/combat_loot_service.py
new file mode 100644
index 0000000..c990317
--- /dev/null
+++ b/api/app/services/combat_loot_service.py
@@ -0,0 +1,359 @@
+"""
+Combat Loot Service - Orchestrates loot generation from combat encounters.
+
+This service bridges the EnemyTemplate loot tables with both the StaticItemLoader
+(for consumables and materials) and ItemGenerator (for procedural equipment).
+
+The service calculates effective rarity based on:
+- Party average level
+- Enemy difficulty tier
+- Character luck stat
+- Optional loot bonus modifiers (from abilities, buffs, etc.)
+"""
+
+import random
+from dataclasses import dataclass
+from typing import List, Optional
+
+from app.models.enemy import EnemyTemplate, LootEntry, LootType, EnemyDifficulty
+from app.models.items import Item
+from app.services.item_generator import get_item_generator, ItemGenerator
+from app.services.static_item_loader import get_static_item_loader, StaticItemLoader
+from app.utils.logging import get_logger
+
+logger = get_logger(__file__)
+
+
+# Difficulty tier rarity bonuses (converted to effective luck points)
+# Higher difficulty enemies have better chances of dropping rare items
+DIFFICULTY_RARITY_BONUS = {
+    EnemyDifficulty.EASY: 0.0,
+    EnemyDifficulty.MEDIUM: 0.05,
+    EnemyDifficulty.HARD: 0.15,
+    EnemyDifficulty.BOSS: 0.30,
+}
+
+# Multiplier for converting rarity bonus to effective luck points
+# Each 0.05 bonus translates to +1 effective luck
+LUCK_CONVERSION_FACTOR = 20
+
+
+@dataclass
+class LootContext:
+    """
+    Context for loot generation calculations.
+
+    Provides all the factors that influence loot quality and rarity.
+
+    Attributes:
+        party_average_level: Average level of player characters in the encounter
+        enemy_difficulty: Difficulty tier of the enemy being looted
+        luck_stat: Party's luck stat (typically average or leader's luck)
+        loot_bonus: Additional bonus from abilities, buffs, or modifiers (0.0 to 1.0)
+    """
+    party_average_level: int = 1
+    enemy_difficulty: EnemyDifficulty = EnemyDifficulty.EASY
+    luck_stat: int = 8
+    loot_bonus: float = 0.0
+
+
+class CombatLootService:
+    """
+    Service for generating combat loot drops.
+
+    Supports two types of loot:
+    - STATIC: Predefined items loaded from YAML (consumables, materials)
+    - PROCEDURAL: Generated equipment with affixes (weapons, armor)
+
+    The service handles:
+    - Rolling for drops based on drop_chance
+    - Loading static items via StaticItemLoader
+    - Generating procedural items via ItemGenerator
+    - Calculating effective rarity based on context
+    """
+
+    def __init__(
+        self,
+        item_generator: Optional[ItemGenerator] = None,
+        static_loader: Optional[StaticItemLoader] = None
+    ):
+        """
+        Initialize the combat loot service.
+
+        Args:
+            item_generator: ItemGenerator instance (uses global singleton if None)
+            static_loader: StaticItemLoader instance (uses global singleton if None)
+        """
+        self.item_generator = item_generator or get_item_generator()
+        self.static_loader = static_loader or get_static_item_loader()
+        logger.info("CombatLootService initialized")
+
+    def generate_loot_from_enemy(
+        self,
+        enemy: EnemyTemplate,
+        context: LootContext
+    ) -> List[Item]:
+        """
+        Generate all loot drops from a defeated enemy.
+
+        Iterates through the enemy's loot table, rolling for each entry
+        and generating appropriate items based on loot type.
+
+        Args:
+            enemy: The defeated enemy template
+            context: Loot generation context (party level, luck, etc.)
+
+        Returns:
+            List of Item objects to add to player inventory
+        """
+        items = []
+
+        for entry in enemy.loot_table:
+            # Roll for drop chance
+            if random.random() >= entry.drop_chance:
+                continue
+
+            # Determine quantity
+            quantity = random.randint(entry.quantity_min, entry.quantity_max)
+
+            if entry.loot_type == LootType.STATIC:
+                # Static item: load from predefined templates
+                static_items = self._generate_static_items(entry, quantity)
+                items.extend(static_items)
+
+            elif entry.loot_type == LootType.PROCEDURAL:
+                # Procedural equipment: generate with ItemGenerator
+                procedural_items = self._generate_procedural_items(
+                    entry, quantity, context
+                )
+                items.extend(procedural_items)
+
+        logger.info(
+            "Loot generated from enemy",
+            enemy_id=enemy.enemy_id,
+            enemy_difficulty=enemy.difficulty.value,
+            item_count=len(items),
+            party_level=context.party_average_level,
+            luck=context.luck_stat
+        )
+
+        return items
+
+    def _generate_static_items(
+        self,
+        entry: LootEntry,
+        quantity: int
+    ) -> List[Item]:
+        """
+        Generate static items from a loot entry.
+
+        Args:
+            entry: The loot table entry
+            quantity: Number of items to generate
+
+        Returns:
+            List of Item instances
+        """
+        items = []
+
+        if not entry.item_id:
+            logger.warning(
+                "Static loot entry missing item_id",
+                entry=entry.to_dict()
+            )
+            return items
+
+        for _ in range(quantity):
+            item = self.static_loader.get_item(entry.item_id)
+            if item:
+                items.append(item)
+            else:
+                logger.warning(
+                    "Failed to load static item",
+                    item_id=entry.item_id
+                )
+
+        return items
+
+    def _generate_procedural_items(
+        self,
+        entry: LootEntry,
+        quantity: int,
+        context: LootContext
+    ) -> List[Item]:
+        """
+        Generate procedural items from a loot entry.
+
+        Calculates effective luck based on:
+        - Base luck stat
+        - Entry-specific rarity bonus
+        - Difficulty bonus
+        - Loot bonus from abilities/buffs
+
+        Args:
+            entry: The loot table entry
+            quantity: Number of items to generate
+            context: Loot generation context
+
+        Returns:
+            List of generated Item instances
+        """
+        items = []
+
+        if not entry.item_type:
+            logger.warning(
+                "Procedural loot entry missing item_type",
+                entry=entry.to_dict()
+            )
+            return items
+
+        # Calculate effective luck for rarity roll
+        effective_luck = self._calculate_effective_luck(entry, context)
+
+        for _ in range(quantity):
+            item = self.item_generator.generate_loot_drop(
+                character_level=context.party_average_level,
+                luck_stat=effective_luck,
+                item_type=entry.item_type
+            )
+            if item:
+                items.append(item)
+            else:
+                logger.warning(
+                    "Failed to generate procedural item",
+                    item_type=entry.item_type,
+                    level=context.party_average_level
+                )
+
+        return items
+
+    def _calculate_effective_luck(
+        self,
+        entry: LootEntry,
+        context: LootContext
+    ) -> int:
+        """
+        Calculate effective luck for rarity rolling.
+
+        Combines multiple factors:
+        - Base luck stat from party
+        - Entry-specific rarity bonus (defined per loot entry)
+        - Difficulty bonus (based on enemy tier)
+        - Loot bonus (from abilities, buffs, etc.)
+
+        The formula:
+            effective_luck = base_luck + (entry_bonus + difficulty_bonus + loot_bonus) * FACTOR
+
+        Args:
+            entry: The loot table entry
+            context: Loot generation context
+
+        Returns:
+            Effective luck stat for rarity calculations
+        """
+        # Get difficulty bonus
+        difficulty_bonus = DIFFICULTY_RARITY_BONUS.get(
+            context.enemy_difficulty, 0.0
+        )
+
+        # Sum all bonuses
+        total_bonus = (
+            entry.rarity_bonus +
+            difficulty_bonus +
+            context.loot_bonus
+        )
+
+        # Convert bonus to effective luck points
+        bonus_luck = int(total_bonus * LUCK_CONVERSION_FACTOR)
+
+        effective_luck = context.luck_stat + bonus_luck
+
+        logger.debug(
+            "Effective luck calculated",
+            base_luck=context.luck_stat,
+            entry_bonus=entry.rarity_bonus,
+            difficulty_bonus=difficulty_bonus,
+            loot_bonus=context.loot_bonus,
+            total_bonus=total_bonus,
+            effective_luck=effective_luck
+        )
+
+        return effective_luck
+
+    def generate_boss_loot(
+        self,
+        enemy: EnemyTemplate,
+        context: LootContext,
+        guaranteed_drops: int = 1
+    ) -> List[Item]:
+        """
+        Generate loot from a boss enemy with guaranteed drops.
+
+        Boss enemies are guaranteed to drop at least one piece of equipment
+        in addition to their normal loot table rolls.
+
+        Args:
+            enemy: The boss enemy template
+            context: Loot generation context
+            guaranteed_drops: Number of guaranteed equipment drops
+
+        Returns:
+            List of Item objects including guaranteed drops
+        """
+        # Generate normal loot first
+        items = self.generate_loot_from_enemy(enemy, context)
+
+        # Add guaranteed procedural drops for bosses
+        if enemy.is_boss():
+            context_for_boss = LootContext(
+                party_average_level=context.party_average_level,
+                enemy_difficulty=EnemyDifficulty.BOSS,
+                luck_stat=context.luck_stat,
+                loot_bonus=context.loot_bonus + 0.1  # Extra bonus for bosses
+            )
+
+            for _ in range(guaranteed_drops):
+                # Alternate between weapon and armor
+                item_type = random.choice(["weapon", "armor"])
+                effective_luck = self._calculate_effective_luck(
+                    LootEntry(
+                        loot_type=LootType.PROCEDURAL,
+                        item_type=item_type,
+                        rarity_bonus=0.15  # Boss-tier bonus
+                    ),
+                    context_for_boss
+                )
+
+                item = self.item_generator.generate_loot_drop(
+                    character_level=context.party_average_level,
+                    luck_stat=effective_luck,
+                    item_type=item_type
+                )
+                if item:
+                    items.append(item)
+
+            logger.info(
+                "Boss loot generated",
+                enemy_id=enemy.enemy_id,
+                guaranteed_drops=guaranteed_drops,
+                total_items=len(items)
+            )
+
+        return items
+
+
+# Global singleton
+_service_instance: Optional[CombatLootService] = None
+
+
+def get_combat_loot_service() -> CombatLootService:
+    """
+    Get the global CombatLootService instance.
+
+    Returns:
+        Singleton CombatLootService instance
+    """
+    global _service_instance
+    if _service_instance is None:
+        _service_instance = CombatLootService()
+    return _service_instance
diff --git a/api/app/services/combat_service.py b/api/app/services/combat_service.py
index 9030c7b..957c289 100644
--- a/api/app/services/combat_service.py
+++ b/api/app/services/combat_service.py
@@ -15,7 +15,7 @@ from uuid import uuid4
 
 from app.models.combat import Combatant, CombatEncounter
 from app.models.character import Character
-from app.models.enemy import EnemyTemplate
+from app.models.enemy import EnemyTemplate, EnemyDifficulty
 from app.models.stats import Stats
 from app.models.abilities import Ability, AbilityLoader
 from app.models.effects import Effect
@@ -25,6 +25,11 @@ from app.services.damage_calculator import DamageCalculator, DamageResult
 from app.services.enemy_loader import EnemyLoader, get_enemy_loader
 from app.services.session_service import get_session_service
 from app.services.character_service import get_character_service
+from app.services.combat_loot_service import (
+    get_combat_loot_service,
+    CombatLootService,
+    LootContext
+)
 from app.utils.logging import get_logger
 
 logger = get_logger(__file__)
@@ -197,6 +202,7 @@ class CombatService:
         self.character_service = get_character_service()
         self.enemy_loader = get_enemy_loader()
         self.ability_loader = AbilityLoader()
+        self.loot_service = get_combat_loot_service()
 
         logger.info("CombatService initialized")
 
@@ -898,6 +904,9 @@ class CombatService:
         """
         Calculate and distribute rewards after victory.
 
+        Uses CombatLootService for loot generation, supporting both
+        static items (consumables) and procedural equipment.
+
         Args:
             encounter: Completed combat encounter
             session: Game session
@@ -908,6 +917,9 @@ class CombatService:
         """
         rewards = CombatRewards()
 
+        # Build loot context from encounter
+        loot_context = self._build_loot_context(encounter)
+
         # Sum up rewards from defeated enemies
         for combatant in encounter.combatants:
             if not combatant.is_player and combatant.is_dead():
@@ -919,9 +931,28 @@ class CombatService:
                     rewards.experience += enemy.experience_reward
                     rewards.gold += enemy.get_gold_reward()
 
-                    # Roll for loot
-                    loot = enemy.roll_loot()
-                    rewards.items.extend(loot)
+                    # Generate loot using the loot service
+                    # Update context with this specific enemy's difficulty
+                    enemy_context = LootContext(
+                        party_average_level=loot_context.party_average_level,
+                        enemy_difficulty=enemy.difficulty,
+                        luck_stat=loot_context.luck_stat,
+                        loot_bonus=loot_context.loot_bonus
+                    )
+
+                    # Use boss loot for boss enemies
+                    if enemy.is_boss():
+                        loot_items = self.loot_service.generate_boss_loot(
+                            enemy, enemy_context
+                        )
+                    else:
+                        loot_items = self.loot_service.generate_loot_from_enemy(
+                            enemy, enemy_context
+                        )
+
+                    # Convert Item objects to dicts for serialization
+                    for item in loot_items:
+                        rewards.items.append(item.to_dict())
 
         # Distribute rewards to player characters
         player_combatants = [c for c in encounter.combatants if c.is_player]
@@ -964,6 +995,49 @@ class CombatService:
 
         return rewards
 
+    def _build_loot_context(self, encounter: CombatEncounter) -> LootContext:
+        """
+        Build loot generation context from a combat encounter.
+
+        Calculates:
+        - Party average level
+        - Party average luck stat
+        - Default difficulty (uses EASY, specific enemies override)
+
+        Args:
+            encounter: Combat encounter with player combatants
+
+        Returns:
+            LootContext for loot generation
+        """
+        player_combatants = [c for c in encounter.combatants if c.is_player]
+
+        # Calculate party average level
+        if player_combatants:
+            # Use combatant's level if available, otherwise default to 1
+            levels = []
+            for p in player_combatants:
+                # Try to get level from stats or combatant
+                level = getattr(p, 'level', 1)
+                levels.append(level)
+            avg_level = sum(levels) // len(levels) if levels else 1
+        else:
+            avg_level = 1
+
+        # Calculate party average luck
+        if player_combatants:
+            luck_values = [p.stats.luck for p in player_combatants]
+            avg_luck = sum(luck_values) // len(luck_values) if luck_values else 8
+        else:
+            avg_luck = 8
+
+        return LootContext(
+            party_average_level=avg_level,
+            enemy_difficulty=EnemyDifficulty.EASY,  # Default; overridden per-enemy
+            luck_stat=avg_luck,
+            loot_bonus=0.0  # Future: add buffs/abilities bonus
+        )
+
     # =========================================================================
     # Helper Methods
     # =========================================================================
diff --git a/api/app/services/static_item_loader.py b/api/app/services/static_item_loader.py
new file mode 100644
index 0000000..64bf313
--- /dev/null
+++ b/api/app/services/static_item_loader.py
@@ -0,0 +1,276 @@
+"""
+Static Item Loader Service - YAML-based static item loading.
+
+This service loads predefined item definitions (consumables, materials, quest items)
+from YAML files, providing a way to reference specific items by ID in loot tables.
+
+Static items differ from procedurally generated items in that they have fixed
+properties defined in YAML rather than randomly generated affixes.
+"""
+
+from pathlib import Path
+from typing import Dict, List, Optional
+import uuid
+import yaml
+
+from app.models.items import Item
+from app.models.effects import Effect
+from app.models.enums import ItemType, ItemRarity, EffectType
+from app.utils.logging import get_logger
+
+logger = get_logger(__file__)
+
+
+class StaticItemLoader:
+    """
+    Loads and manages static item definitions from YAML configuration files.
+
+    Static items are predefined items (consumables, materials, quest items)
+    that can be referenced by item_id in enemy loot tables.
+
+    Items are loaded from:
+    - api/app/data/static_items/consumables.yaml
+    - api/app/data/static_items/materials.yaml
+
+    Each call to get_item() creates a new Item instance with a unique ID,
+    so multiple drops of the same item_id become distinct inventory items.
+    """
+
+    def __init__(self, data_dir: Optional[str] = None):
+        """
+        Initialize the static item loader.
+
+        Args:
+            data_dir: Path to directory containing static item YAML files.
+                     Defaults to /app/data/static_items/
+        """
+        if data_dir is None:
+            # Default to app/data/static_items relative to this file
+            current_file = Path(__file__)
+            app_dir = current_file.parent.parent  # Go up to /app
+            data_dir = str(app_dir / "data" / "static_items")
+
+        self.data_dir = Path(data_dir)
+        self._cache: Dict[str, dict] = {}
+        self._loaded = False
+
+        logger.info("StaticItemLoader initialized", data_dir=str(self.data_dir))
+
+    def _ensure_loaded(self) -> None:
+        """Ensure items are loaded before any operation."""
+        if not self._loaded:
+            self._load_all()
+
+    def _load_all(self) -> None:
+        """Load all static item YAML files."""
+        if not self.data_dir.exists():
+            logger.warning(
+                "Static items directory not found",
+                path=str(self.data_dir)
+            )
+            self._loaded = True
+            return
+
+        # Load all YAML files in the directory
+        for yaml_file in self.data_dir.glob("*.yaml"):
+            self._load_file(yaml_file)
+
+        self._loaded = True
+        logger.info("Static items loaded", count=len(self._cache))
+
+    def _load_file(self, yaml_file: Path) -> None:
+        """
+        Load items from a single YAML file.
+
+        Args:
+            yaml_file: Path to the YAML file
+        """
+        try:
+            with open(yaml_file, 'r') as f:
+                data = yaml.safe_load(f)
+
+            if data is None:
+                logger.warning("Empty YAML file", file=str(yaml_file))
+                return
+
+            items = data.get("items", {})
+            for item_id, item_data in items.items():
+                # Store the template data with its ID
+                item_data["_item_id"] = item_id
+                self._cache[item_id] = item_data
+
+            logger.debug(
+                "Static items loaded from file",
+                file=str(yaml_file),
+                count=len(items)
+            )
+
+        except Exception as e:
+            logger.error(
+                "Failed to load static items file",
+                file=str(yaml_file),
+                error=str(e)
+            )
+
+    def get_item(self, item_id: str, quantity: int = 1) -> Optional[Item]:
+        """
+        Get an item instance by ID.
+
+        Creates a new Item instance with a unique ID for each call,
+        so multiple drops become distinct inventory items.
+
+        Args:
+            item_id: The static item ID (e.g., "health_potion_small")
+            quantity: Requested quantity (not used for individual item,
+                     but available for future stackable item support)
+
+        Returns:
+            Item instance or None if item_id not found
+        """
+        self._ensure_loaded()
+
+        template = self._cache.get(item_id)
+        if template is None:
+            logger.warning("Static item not found", item_id=item_id)
+            return None
+
+        # Create new instance with unique ID
+        instance_id = f"{item_id}_{uuid.uuid4().hex[:8]}"
+
+        # Parse item type
+        item_type_str = template.get("item_type", "quest_item")
+        try:
+            item_type = ItemType(item_type_str)
+        except ValueError:
+            logger.warning(
+                "Unknown item type, defaulting to quest_item",
+                item_type=item_type_str,
+                item_id=item_id
+            )
+            item_type = ItemType.QUEST_ITEM
+
+        # Parse rarity
+        rarity_str = template.get("rarity", "common")
+        try:
+            rarity = ItemRarity(rarity_str)
+        except ValueError:
+            logger.warning(
+                "Unknown rarity, defaulting to common",
+                rarity=rarity_str,
+                item_id=item_id
+            )
+            rarity = ItemRarity.COMMON
+
+        # Parse effects if present
+        effects = []
+        for effect_data in template.get("effects_on_use", []):
+            try:
+                effect = self._parse_effect(effect_data)
+                if effect:
+                    effects.append(effect)
+            except Exception as e:
+                logger.warning(
+                    "Failed to parse effect",
+                    item_id=item_id,
+                    error=str(e)
+                )
+
+        # Parse stat bonuses if present
+        stat_bonuses = template.get("stat_bonuses", {})
+
+        return Item(
+            item_id=instance_id,
+            name=template.get("name", item_id),
+            item_type=item_type,
+            rarity=rarity,
+            description=template.get("description", ""),
+            value=template.get("value", 1),
+            is_tradeable=template.get("is_tradeable", True),
+            stat_bonuses=stat_bonuses,
+            effects_on_use=effects,
+        )
+
+    def _parse_effect(self, effect_data: Dict) -> Optional[Effect]:
+        """
+        Parse an effect from YAML data.
+
+        Supports simplified YAML format where effect_type is a string.
+
+        Args:
+            effect_data: Effect definition from YAML
+
+        Returns:
+            Effect instance or None if parsing fails
+        """
+        # Parse effect type
+        effect_type_str = effect_data.get("effect_type", "buff")
+        try:
+            effect_type = EffectType(effect_type_str)
+        except ValueError:
+            logger.warning(
+                "Unknown effect type",
+                effect_type=effect_type_str
+            )
+            return None
+
+        # Generate effect ID if not provided
+        effect_id = effect_data.get(
+            "effect_id",
+            f"effect_{uuid.uuid4().hex[:8]}"
+        )
+
+        return Effect(
+            effect_id=effect_id,
+            name=effect_data.get("name", "Unknown Effect"),
+            effect_type=effect_type,
+            duration=effect_data.get("duration", 1),
+            power=effect_data.get("power", 0),
+            stacks=effect_data.get("stacks", 1),
+            max_stacks=effect_data.get("max_stacks", 5),
+        )
+
+    def get_all_item_ids(self) -> List[str]:
+        """
+        Get list of all available static item IDs.
+
+        Returns:
+            List of item_id strings
+        """
+        self._ensure_loaded()
+        return list(self._cache.keys())
+
+    def has_item(self, item_id: str) -> bool:
+        """
+        Check if an item ID exists.
+
+        Args:
+            item_id: The item ID to check
+
+        Returns:
+            True if item exists in cache
+        """
+        self._ensure_loaded()
+        return item_id in self._cache
+
+    def clear_cache(self) -> None:
+        """Clear the item cache, forcing reload on next access."""
+        self._cache.clear()
+        self._loaded = False
+        logger.debug("Static item cache cleared")
+
+
+# Global instance for convenience
+_loader_instance: Optional[StaticItemLoader] = None
+
+
+def get_static_item_loader() -> StaticItemLoader:
+    """
+    Get the global StaticItemLoader instance.
+
+    Returns:
+        Singleton StaticItemLoader instance
+    """
+    global _loader_instance
+    if _loader_instance is None:
+        _loader_instance = StaticItemLoader()
+    return _loader_instance
diff --git a/api/tests/test_combat_loot_service.py b/api/tests/test_combat_loot_service.py
new file mode 100644
index 0000000..c12308b
--- /dev/null
+++ b/api/tests/test_combat_loot_service.py
@@ -0,0 +1,428 @@
+"""
+Tests for CombatLootService.
+
+Tests the service that orchestrates loot generation from combat,
+supporting both static and procedural loot drops.
+"""
+
+import pytest
+from unittest.mock import Mock, patch
+
+from app.services.combat_loot_service import (
+    CombatLootService,
+    LootContext,
+    get_combat_loot_service,
+    DIFFICULTY_RARITY_BONUS,
+    LUCK_CONVERSION_FACTOR
+)
+from app.models.enemy import (
+    EnemyTemplate,
+    EnemyDifficulty,
+    LootEntry,
+    LootType
+)
+from app.models.stats import Stats
+from app.models.items import Item
+from app.models.enums import ItemType, ItemRarity
+
+
+class TestLootContext:
+    """Test LootContext dataclass."""
+
+    def test_default_values(self):
+        """Test default context values."""
+        context = LootContext()
+
+        assert context.party_average_level == 1
+        assert context.enemy_difficulty == EnemyDifficulty.EASY
+        assert context.luck_stat == 8
+        assert context.loot_bonus == 0.0
+
+    def test_custom_values(self):
+        """Test creating context with custom values."""
+        context = LootContext(
+            party_average_level=10,
+            enemy_difficulty=EnemyDifficulty.HARD,
+            luck_stat=15,
+            loot_bonus=0.1
+        )
+
+        assert context.party_average_level == 10
+        assert context.enemy_difficulty == EnemyDifficulty.HARD
+        assert context.luck_stat == 15
+        assert context.loot_bonus == 0.1
+
+
+class TestDifficultyBonuses:
+    """Test difficulty rarity bonus constants."""
+
+    def test_easy_bonus(self):
+        """Easy enemies have no bonus."""
+        assert DIFFICULTY_RARITY_BONUS[EnemyDifficulty.EASY] == 0.0
+
+    def test_medium_bonus(self):
+        """Medium enemies have small bonus."""
+        assert DIFFICULTY_RARITY_BONUS[EnemyDifficulty.MEDIUM] == 0.05
+
+    def test_hard_bonus(self):
+        """Hard enemies have moderate bonus."""
+        assert DIFFICULTY_RARITY_BONUS[EnemyDifficulty.HARD] == 0.15
+
+    def test_boss_bonus(self):
+        """Boss enemies have large bonus."""
+        assert DIFFICULTY_RARITY_BONUS[EnemyDifficulty.BOSS] == 0.30
+
+
+class TestCombatLootServiceInit:
+    """Test service initialization."""
+
+    def test_init_uses_defaults(self):
+        """Service should initialize with default dependencies."""
+        service = CombatLootService()
+
+        assert service.item_generator is not None
+        assert service.static_loader is not None
+
+    def test_singleton_returns_same_instance(self):
+        """get_combat_loot_service should return singleton."""
+        service1 = get_combat_loot_service()
+        service2 = get_combat_loot_service()
+
+        assert service1 is service2
+
+
+class TestCombatLootServiceEffectiveLuck:
+    """Test effective luck calculation."""
+
+    def test_base_luck_no_bonus(self):
+        """With no bonuses, effective luck equals base luck."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            rarity_bonus=0.0
+        )
+        context = LootContext(
+            luck_stat=8,
+            enemy_difficulty=EnemyDifficulty.EASY,
+            loot_bonus=0.0
+        )
+
+        effective = service._calculate_effective_luck(entry, context)
+
+        # No bonus, so effective should equal base
+        assert effective == 8
+
+    def test_difficulty_bonus_adds_luck(self):
+        """Difficulty bonus should increase effective luck."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            rarity_bonus=0.0
+        )
+        context = LootContext(
+            luck_stat=8,
+            enemy_difficulty=EnemyDifficulty.BOSS,  # 0.30 bonus
+            loot_bonus=0.0
+        )
+
+        effective = service._calculate_effective_luck(entry, context)
+
+        # Boss bonus = 0.30 * 20 = 6 extra luck
+        assert effective == 8 + 6
+
+    def test_entry_rarity_bonus_adds_luck(self):
+        """Entry rarity bonus should increase effective luck."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            rarity_bonus=0.10  # Entry-specific bonus
+        )
+        context = LootContext(
+            luck_stat=8,
+            enemy_difficulty=EnemyDifficulty.EASY,
+            loot_bonus=0.0
+        )
+
+        effective = service._calculate_effective_luck(entry, context)
+
+        # 0.10 * 20 = 2 extra luck
+        assert effective == 8 + 2
+
+    def test_combined_bonuses(self):
+        """All bonuses should stack."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            rarity_bonus=0.10
+        )
+        context = LootContext(
+            luck_stat=10,
+            enemy_difficulty=EnemyDifficulty.HARD,  # 0.15
+            loot_bonus=0.05
+        )
+
+        effective = service._calculate_effective_luck(entry, context)
+
+        # Total bonus = 0.10 + 0.15 + 0.05 = 0.30
+        # Extra luck = 0.30 * 20 = 6
+        expected = 10 + 6
+        assert effective == expected
+
+
+class TestCombatLootServiceStaticItems:
+    """Test static item generation."""
+
+    def test_generate_static_items_returns_items(self):
+        """Should return Item instances for static entries."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="health_potion_small",
+            drop_chance=1.0
+        )
+
+        items = service._generate_static_items(entry, quantity=1)
+
+        assert len(items) == 1
+        assert items[0].name == "Small Health Potion"
+
+    def test_generate_static_items_respects_quantity(self):
+        """Should generate correct quantity of items."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="goblin_ear",
+            drop_chance=1.0
+        )
+
+        items = service._generate_static_items(entry, quantity=3)
+
+        assert len(items) == 3
+        # All should be goblin ears with unique IDs
+        for item in items:
+            assert "goblin_ear" in item.item_id
+
+    def test_generate_static_items_missing_id(self):
+        """Should return empty list if item_id is missing."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id=None,
+            drop_chance=1.0
+        )
+
+        items = service._generate_static_items(entry, quantity=1)
+
+        assert len(items) == 0
+
+
+class TestCombatLootServiceProceduralItems:
+    """Test procedural item generation."""
+
+    def test_generate_procedural_items_returns_items(self):
+        """Should return generated Item instances."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            drop_chance=1.0,
+            rarity_bonus=0.0
+        )
+        context = LootContext(party_average_level=5)
+
+        items = service._generate_procedural_items(entry, quantity=1, context=context)
+
+        assert len(items) == 1
+        assert items[0].is_weapon()
+
+    def test_generate_procedural_armor(self):
+        """Should generate armor when item_type is armor."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="armor",
+            drop_chance=1.0
+        )
+        context = LootContext(party_average_level=5)
+
+        items = service._generate_procedural_items(entry, quantity=1, context=context)
+
+        assert len(items) == 1
+        assert items[0].is_armor()
+
+    def test_generate_procedural_missing_type(self):
+        """Should return empty list if item_type is missing."""
+        service = CombatLootService()
+
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type=None,
+            drop_chance=1.0
+        )
+        context = LootContext()
+
+        items = service._generate_procedural_items(entry, quantity=1, context=context)
+
+        assert len(items) == 0
+
+
+class TestCombatLootServiceGenerateFromEnemy:
+    """Test full loot generation from enemy templates."""
+
+    @pytest.fixture
+    def sample_enemy(self):
+        """Create a sample enemy template for testing."""
+        return EnemyTemplate(
+            enemy_id="test_goblin",
+            name="Test Goblin",
+            description="A test goblin",
+            base_stats=Stats(),
+            abilities=["basic_attack"],
+            loot_table=[
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="goblin_ear",
+                    drop_chance=1.0,  # Guaranteed drop for testing
+                    quantity_min=1,
+                    quantity_max=1
+                )
+            ],
+            experience_reward=10,
+            difficulty=EnemyDifficulty.EASY
+        )
+
+    def test_generate_loot_from_enemy_basic(self, sample_enemy):
+        """Should generate loot from enemy loot table."""
+        service = CombatLootService()
+        context = LootContext()
+
+        items = service.generate_loot_from_enemy(sample_enemy, context)
+
+        assert len(items) == 1
+        assert "goblin_ear" in items[0].item_id
+
+    def test_generate_loot_respects_drop_chance(self):
+        """Items with 0 drop chance should never drop."""
+        enemy = EnemyTemplate(
+            enemy_id="test_enemy",
+            name="Test Enemy",
+            description="Test",
+            base_stats=Stats(),
+            abilities=[],
+            loot_table=[
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="rare_item",
+                    drop_chance=0.0,  # Never drops
+                )
+            ],
+            difficulty=EnemyDifficulty.EASY
+        )
+        service = CombatLootService()
+        context = LootContext()
+
+        # Run multiple times to ensure it never drops
+        for _ in range(10):
+            items = service.generate_loot_from_enemy(enemy, context)
+            assert len(items) == 0
+
+    def test_generate_loot_multiple_entries(self):
+        """Should process all loot table entries."""
+        enemy = EnemyTemplate(
+            enemy_id="test_enemy",
+            name="Test Enemy",
+            description="Test",
+            base_stats=Stats(),
+            abilities=[],
+            loot_table=[
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="goblin_ear",
+                    drop_chance=1.0,
+                ),
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="health_potion_small",
+                    drop_chance=1.0,
+                )
+            ],
+            difficulty=EnemyDifficulty.EASY
+        )
+        service = CombatLootService()
+        context = LootContext()
+
+        items = service.generate_loot_from_enemy(enemy, context)
+
+        assert len(items) == 2
+
+
+class TestCombatLootServiceBossLoot:
+    """Test boss loot generation."""
+
+    @pytest.fixture
+    def boss_enemy(self):
+        """Create a boss enemy template for testing."""
+        return EnemyTemplate(
+            enemy_id="test_boss",
+            name="Test Boss",
+            description="A test boss",
+            base_stats=Stats(strength=20, constitution=20),
+            abilities=["basic_attack"],
+            loot_table=[
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="goblin_chieftain_token",
+                    drop_chance=1.0,
+                )
+            ],
+            experience_reward=100,
+            difficulty=EnemyDifficulty.BOSS
+        )
+
+    def test_generate_boss_loot_includes_guaranteed_drops(self, boss_enemy):
+        """Boss loot should include guaranteed equipment drops."""
+        service = CombatLootService()
+        context = LootContext(party_average_level=10)
+
+        items = service.generate_boss_loot(boss_enemy, context, guaranteed_drops=1)
+
+        # Should have at least the loot table drop + guaranteed drop
+        assert len(items) >= 2
+
+    def test_generate_boss_loot_non_boss_skips_guaranteed(self):
+        """Non-boss enemies shouldn't get guaranteed drops."""
+        enemy = EnemyTemplate(
+            enemy_id="test_enemy",
+            name="Test Enemy",
+            description="Test",
+            base_stats=Stats(),
+            abilities=[],
+            loot_table=[
+                LootEntry(
+                    loot_type=LootType.STATIC,
+                    item_id="goblin_ear",
+                    drop_chance=1.0,
+                )
+            ],
+            difficulty=EnemyDifficulty.EASY  # Not a boss
+        )
+        service = CombatLootService()
+        context = LootContext()
+
+        items = service.generate_boss_loot(enemy, context, guaranteed_drops=2)
+
+        # Should only have the one loot table drop
+        assert len(items) == 1
diff --git a/api/tests/test_combat_service.py b/api/tests/test_combat_service.py
index 37e089d..16bdba1 100644
--- a/api/tests/test_combat_service.py
+++ b/api/tests/test_combat_service.py
@@ -623,14 +623,22 @@ class TestRewardsCalculation:
         service = CombatService.__new__(CombatService)
         service.enemy_loader = Mock()
         service.character_service = Mock()
+        service.loot_service = Mock()
 
         # Mock enemy template for rewards
         mock_template = Mock()
         mock_template.experience_reward = 50
         mock_template.get_gold_reward.return_value = 25
-        mock_template.roll_loot.return_value = [{"item_id": "sword", "quantity": 1}]
+        mock_template.difficulty = Mock()
+        mock_template.difficulty.value = "easy"
+        mock_template.is_boss.return_value = False
         service.enemy_loader.load_enemy.return_value = mock_template
 
+        # Mock loot service to return mock items
+        mock_item = Mock()
+        mock_item.to_dict.return_value = {"item_id": "sword", "quantity": 1}
+        service.loot_service.generate_loot_from_enemy.return_value = [mock_item]
+
         mock_session = Mock()
         mock_session.is_solo.return_value = True
         mock_session.solo_character_id = "test_char"
diff --git a/api/tests/test_loot_entry.py b/api/tests/test_loot_entry.py
new file mode 100644
index 0000000..999591a
--- /dev/null
+++ b/api/tests/test_loot_entry.py
@@ -0,0 +1,224 @@
+"""
+Tests for LootEntry model with hybrid loot support.
+
+Tests the extended LootEntry dataclass that supports both static
+and procedural loot types with backward compatibility.
+"""
+
+import pytest
+
+from app.models.enemy import LootEntry, LootType
+
+
+class TestLootEntryBackwardCompatibility:
+    """Test that existing YAML format still works."""
+
+    def test_from_dict_defaults_to_static(self):
+        """Old-style entries without loot_type should default to STATIC."""
+        entry_data = {
+            "item_id": "rusty_dagger",
+            "drop_chance": 0.15,
+        }
+        entry = LootEntry.from_dict(entry_data)
+
+        assert entry.loot_type == LootType.STATIC
+        assert entry.item_id == "rusty_dagger"
+        assert entry.drop_chance == 0.15
+        assert entry.quantity_min == 1
+        assert entry.quantity_max == 1
+
+    def test_from_dict_with_all_old_fields(self):
+        """Test entry with all old-style fields."""
+        entry_data = {
+            "item_id": "gold_coin",
+            "drop_chance": 0.50,
+            "quantity_min": 1,
+            "quantity_max": 3,
+        }
+        entry = LootEntry.from_dict(entry_data)
+
+        assert entry.loot_type == LootType.STATIC
+        assert entry.item_id == "gold_coin"
+        assert entry.drop_chance == 0.50
+        assert entry.quantity_min == 1
+        assert entry.quantity_max == 3
+
+    def test_to_dict_includes_loot_type(self):
+        """Serialization should include loot_type."""
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="health_potion",
+            drop_chance=0.2
+        )
+        data = entry.to_dict()
+
+        assert data["loot_type"] == "static"
+        assert data["item_id"] == "health_potion"
+        assert data["drop_chance"] == 0.2
+
+
+class TestLootEntryStaticType:
+    """Test static loot entries."""
+
+    def test_static_entry_creation(self):
+        """Test creating a static loot entry."""
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="goblin_ear",
+            drop_chance=0.60,
+            quantity_min=1,
+            quantity_max=2
+        )
+
+        assert entry.loot_type == LootType.STATIC
+        assert entry.item_id == "goblin_ear"
+        assert entry.item_type is None
+        assert entry.rarity_bonus == 0.0
+
+    def test_static_from_dict_explicit(self):
+        """Test parsing explicit static entry."""
+        entry_data = {
+            "loot_type": "static",
+            "item_id": "health_potion_small",
+            "drop_chance": 0.10,
+        }
+        entry = LootEntry.from_dict(entry_data)
+
+        assert entry.loot_type == LootType.STATIC
+        assert entry.item_id == "health_potion_small"
+
+    def test_static_to_dict_omits_procedural_fields(self):
+        """Static entries should omit procedural-only fields."""
+        entry = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="gold_coin",
+            drop_chance=0.5
+        )
+        data = entry.to_dict()
+
+        assert "item_id" in data
+        assert "item_type" not in data
+        assert "rarity_bonus" not in data
+
+
+class TestLootEntryProceduralType:
+    """Test procedural loot entries."""
+
+    def test_procedural_entry_creation(self):
+        """Test creating a procedural loot entry."""
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            drop_chance=0.10,
+            rarity_bonus=0.15
+        )
+
+        assert entry.loot_type == LootType.PROCEDURAL
+        assert entry.item_type == "weapon"
+        assert entry.rarity_bonus == 0.15
+        assert entry.item_id is None
+
+    def test_procedural_from_dict(self):
+        """Test parsing procedural entry from dict."""
+        entry_data = {
+            "loot_type": "procedural",
+            "item_type": "armor",
+            "drop_chance": 0.08,
+            "rarity_bonus": 0.05,
+        }
+        entry = LootEntry.from_dict(entry_data)
+
+        assert entry.loot_type == LootType.PROCEDURAL
+        assert entry.item_type == "armor"
+        assert entry.drop_chance == 0.08
+        assert entry.rarity_bonus == 0.05
+
+    def test_procedural_to_dict_includes_item_type(self):
+        """Procedural entries should include item_type and rarity_bonus."""
+        entry = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            drop_chance=0.15,
+            rarity_bonus=0.10
+        )
+        data = entry.to_dict()
+
+        assert data["loot_type"] == "procedural"
+        assert data["item_type"] == "weapon"
+        assert data["rarity_bonus"] == 0.10
+        assert "item_id" not in data
+
+    def test_procedural_default_rarity_bonus(self):
+        """Procedural entries default to 0.0 rarity bonus."""
+        entry_data = {
+            "loot_type": "procedural",
+            "item_type": "weapon",
+            "drop_chance": 0.10,
+        }
+        entry = LootEntry.from_dict(entry_data)
+
+        assert entry.rarity_bonus == 0.0
+
+
+class TestLootTypeEnum:
+    """Test LootType enum values."""
+
+    def test_static_value(self):
+        """Test STATIC enum value."""
+        assert LootType.STATIC.value == "static"
+
+    def test_procedural_value(self):
+        """Test PROCEDURAL enum value."""
+        assert LootType.PROCEDURAL.value == "procedural"
+
+    def test_from_string(self):
+        """Test creating enum from string."""
+        assert LootType("static") == LootType.STATIC
+        assert LootType("procedural") == LootType.PROCEDURAL
+
+    def test_invalid_string_raises(self):
+        """Test that invalid string raises ValueError."""
+        with pytest.raises(ValueError):
+            LootType("invalid")
+
+
+class TestLootEntryRoundTrip:
+    """Test serialization/deserialization round trips."""
+
+    def test_static_round_trip(self):
+        """Static entry should survive round trip."""
+        original = LootEntry(
+            loot_type=LootType.STATIC,
+            item_id="health_potion_small",
+            drop_chance=0.15,
+            quantity_min=1,
+            quantity_max=2
+        )
+
+        data = original.to_dict()
+        restored = LootEntry.from_dict(data)
+
+        assert restored.loot_type == original.loot_type
+        assert restored.item_id == original.item_id
+        assert restored.drop_chance == original.drop_chance
+        assert restored.quantity_min == original.quantity_min
+        assert restored.quantity_max == original.quantity_max
+
+    def test_procedural_round_trip(self):
+        """Procedural entry should survive round trip."""
+        original = LootEntry(
+            loot_type=LootType.PROCEDURAL,
+            item_type="weapon",
+            drop_chance=0.25,
+            rarity_bonus=0.15,
+            quantity_min=1,
+            quantity_max=1
+        )
+
+        data = original.to_dict()
+        restored = LootEntry.from_dict(data)
+
+        assert restored.loot_type == original.loot_type
+        assert restored.item_type == original.item_type
+        assert restored.drop_chance == original.drop_chance
+        assert restored.rarity_bonus == original.rarity_bonus
diff --git a/api/tests/test_static_item_loader.py b/api/tests/test_static_item_loader.py
new file mode 100644
index 0000000..244b072
--- /dev/null
+++ b/api/tests/test_static_item_loader.py
@@ -0,0 +1,194 @@
+"""
+Tests for StaticItemLoader service.
+
+Tests the service that loads predefined items (consumables, materials)
+from YAML files for use in loot tables.
+"""
+
+import pytest
+from pathlib import Path
+
+from app.services.static_item_loader import StaticItemLoader, get_static_item_loader
+from app.models.enums import ItemType, ItemRarity
+
+
+class TestStaticItemLoaderInitialization:
+    """Test service initialization."""
+
+    def test_init_with_default_path(self):
+        """Service should initialize with default data path."""
+        loader = StaticItemLoader()
+        assert loader.data_dir.exists() or not loader._loaded
+
+    def test_init_with_custom_path(self, tmp_path):
+        """Service should accept custom data path."""
+        loader = StaticItemLoader(data_dir=str(tmp_path))
+        assert loader.data_dir == tmp_path
+
+    def test_singleton_returns_same_instance(self):
+        """get_static_item_loader should return singleton."""
+        loader1 = get_static_item_loader()
+        loader2 = get_static_item_loader()
+        assert loader1 is loader2
+
+
+class TestStaticItemLoaderLoading:
+    """Test YAML loading functionality."""
+
+    def test_loads_consumables(self):
+        """Should load consumable items from YAML."""
+        loader = get_static_item_loader()
+
+        # Check that health potion exists
+        assert loader.has_item("health_potion_small")
+        assert loader.has_item("health_potion_medium")
+
+    def test_loads_materials(self):
+        """Should load material items from YAML."""
+        loader = get_static_item_loader()
+
+        # Check that materials exist
+        assert loader.has_item("goblin_ear")
+        assert loader.has_item("wolf_pelt")
+
+    def test_get_all_item_ids_returns_list(self):
+        """get_all_item_ids should return list of item IDs."""
+        loader = get_static_item_loader()
+        item_ids = loader.get_all_item_ids()
+
+        assert isinstance(item_ids, list)
+        assert len(item_ids) > 0
+        assert "health_potion_small" in item_ids
+
+    def test_has_item_returns_false_for_missing(self):
+        """has_item should return False for non-existent items."""
+        loader = get_static_item_loader()
+        assert not loader.has_item("nonexistent_item_xyz")
+
+
+class TestStaticItemLoaderGetItem:
+    """Test item retrieval."""
+
+    def test_get_item_returns_item_object(self):
+        """get_item should return an Item instance."""
+        loader = get_static_item_loader()
+        item = loader.get_item("health_potion_small")
+
+        assert item is not None
+        assert item.name == "Small Health Potion"
+        assert item.item_type == ItemType.CONSUMABLE
+        assert item.rarity == ItemRarity.COMMON
+
+    def test_get_item_has_unique_id(self):
+        """Each call should create item with unique ID."""
+        loader = get_static_item_loader()
+
+        item1 = loader.get_item("health_potion_small")
+        item2 = loader.get_item("health_potion_small")
+
+        assert item1.item_id != item2.item_id
+        assert "health_potion_small" in item1.item_id
+        assert "health_potion_small" in item2.item_id
+
+    def test_get_item_returns_none_for_missing(self):
+        """get_item should return None for non-existent items."""
+        loader = get_static_item_loader()
+        item = loader.get_item("nonexistent_item_xyz")
+
+        assert item is None
+
+    def test_get_item_consumable_has_effects(self):
+        """Consumable items should have effects_on_use."""
+        loader = get_static_item_loader()
+        item = loader.get_item("health_potion_small")
+
+        assert len(item.effects_on_use) > 0
+        effect = item.effects_on_use[0]
+        assert effect.name == "Minor Healing"
+        assert effect.power > 0
+
+    def test_get_item_quest_item_type(self):
+        """Quest items should have correct type."""
+        loader = get_static_item_loader()
+        item = loader.get_item("goblin_ear")
+
+        assert item is not None
+        assert item.item_type == ItemType.QUEST_ITEM
+        assert item.rarity == ItemRarity.COMMON
+
+    def test_get_item_has_value(self):
+        """Items should have value set."""
+        loader = get_static_item_loader()
+        item = loader.get_item("health_potion_small")
+
+        assert item.value > 0
+
+    def test_get_item_is_tradeable(self):
+        """Items should default to tradeable."""
+        loader = get_static_item_loader()
+        item = loader.get_item("goblin_ear")
+
+        assert item.is_tradeable is True
+
+
+class TestStaticItemLoaderVariousItems:
+    """Test loading various item types."""
+
+    def test_medium_health_potion(self):
+        """Test medium health potion properties."""
+        loader = get_static_item_loader()
+        item = loader.get_item("health_potion_medium")
+
+        assert item is not None
+        assert item.rarity == ItemRarity.UNCOMMON
+        assert item.value > 25  # More expensive than small
+
+    def test_large_health_potion(self):
+        """Test large health potion properties."""
+        loader = get_static_item_loader()
+        item = loader.get_item("health_potion_large")
+
+        assert item is not None
+        assert item.rarity == ItemRarity.RARE
+
+    def test_chieftain_token_rarity(self):
+        """Test that chieftain token is rare."""
+        loader = get_static_item_loader()
+        item = loader.get_item("goblin_chieftain_token")
+
+        assert item is not None
+        assert item.rarity == ItemRarity.RARE
+
+    def test_elixir_has_buff_effect(self):
+        """Test that elixirs have buff effects."""
+        loader = get_static_item_loader()
+        item = loader.get_item("elixir_of_strength")
+
+        if item:  # Only test if item exists
+            assert len(item.effects_on_use) > 0
+
+
+class TestStaticItemLoaderCache:
+    """Test caching behavior."""
+
+    def test_clear_cache(self):
+        """clear_cache should reset loaded state."""
+        loader = StaticItemLoader()
+
+        # Trigger loading
+        loader._ensure_loaded()
+        assert loader._loaded is True
+
+        # Clear cache
+        loader.clear_cache()
+        assert loader._loaded is False
+        assert len(loader._cache) == 0
+
+    def test_lazy_loading(self):
+        """Items should be loaded lazily on first access."""
+        loader = StaticItemLoader()
+        assert loader._loaded is False
+
+        # Access triggers loading
+        _ = loader.has_item("health_potion_small")
+        assert loader._loaded is True
diff --git a/docs/PHASE4_COMBAT_IMPLEMENTATION.md b/docs/PHASE4_COMBAT_IMPLEMENTATION.md
index c5279c0..98eb1ae 100644
--- a/docs/PHASE4_COMBAT_IMPLEMENTATION.md
+++ b/docs/PHASE4_COMBAT_IMPLEMENTATION.md
@@ -1757,37 +1757,69 @@ base_damage = attacker_stats.spell_power + ability_base_power  # Magical
 
 ---
 
-### Future Work: Combat Loot Integration
+### Task 2.7: Combat Loot Integration ✅ COMPLETE
 
-**Status:** Planned for future phase
+**Status:** Complete
 
-The ItemGenerator is ready for integration with combat loot drops. Future implementation will:
+Integrated the ItemGenerator with combat loot drops via a hybrid loot system supporting both static and procedural drops.
 
-**1. Update Enemy Loot Tables** - Add procedural generation options:
+**Implementation Summary:**
 
+**1. Extended LootEntry Model** (`app/models/enemy.py`):
 ```yaml
-# Example enhanced enemy loot entry
+# New hybrid loot table format
 loot_table:
-  - type: "static"
+  - loot_type: "static"
     item_id: "health_potion_small"
     drop_chance: 0.5
-  - type: "generated"
+  - loot_type: "procedural"
     item_type: "weapon"
-    rarity_range: ["rare", "epic"]
+    rarity_bonus: 0.10
     drop_chance: 0.1
 ```
 
-**2. Integrate with CombatService._calculate_rewards()** - Use ItemGenerator for loot rolls
+**2. Created CombatLootService** (`app/services/combat_loot_service.py`):
+- Orchestrates loot generation from combat encounters
+- Combines StaticItemLoader (consumables) + ItemGenerator (equipment)
+- Full rarity formula: `effective_luck = base_luck + (entry_bonus + difficulty_bonus + loot_bonus) * 20`
 
-**3. Boss Guaranteed Drops** - Higher-tier enemies guarantee better rarity
+**3. Created StaticItemLoader** (`app/services/static_item_loader.py`):
+- Loads predefined items from `app/data/static_items/` YAML files
+- Supports consumables, materials, and quest items
 
-**4. Luck Stat Integration** - Player luck affects all loot rolls
+**4. Integrated with CombatService._calculate_rewards()**:
+- Builds `LootContext` from encounter (party level, luck, difficulty)
+- Calls `CombatLootService.generate_loot_from_enemy()` for each defeated enemy
+- Boss enemies get guaranteed equipment drops via `generate_boss_loot()`
 
-**Implementation Notes:**
-- Current enemy loot tables use `item_id` references (static items only)
-- ItemGenerator provides `generate_loot_drop(character_level, luck_stat)` method
-- Generated items must be stored as full objects (not IDs) in character inventory
-- Consider adding `LootService` wrapper for consistent loot generation across all sources
+**5. Difficulty Rarity Bonuses:**
+- EASY: +0% | MEDIUM: +5% | HARD: +15% | BOSS: +30%
+
+**6. Enemy Variants Created** (proof-of-concept):
+- `goblin_scout.yaml` (Easy) - static drops only
+- `goblin_warrior.yaml` (Medium) - static + 8% procedural weapon
+- `goblin_chieftain.yaml` (Hard) - static + 25% weapon, 15% armor
+
+**Files Created:**
+- `app/services/combat_loot_service.py`
+- `app/services/static_item_loader.py`
+- `app/data/static_items/consumables.yaml`
+- `app/data/static_items/materials.yaml`
+- `app/data/enemies/goblin_scout.yaml`
+- `app/data/enemies/goblin_warrior.yaml`
+- `app/data/enemies/goblin_chieftain.yaml`
+- `tests/test_loot_entry.py` (16 tests)
+- `tests/test_static_item_loader.py` (19 tests)
+- `tests/test_combat_loot_service.py` (24 tests)
+
+**Checklist:**
+- [x] LootType enum and extended LootEntry (backward compatible)
+- [x] StaticItemLoader service for consumables/materials
+- [x] CombatLootService with full rarity formula
+- [x] CombatService integration with `_build_loot_context()`
+- [x] Static items YAML files (consumables, materials)
+- [x] Goblin variant YAML files (scout, warrior, chieftain)
+- [x] Unit tests (59 new tests passing)
 
 ---