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/EntityCacheOptions.cs b/src/Config/ObjectModel/EntityCacheOptions.cs
index a947cd6d99..5a748cad5f 100644
--- a/src/Config/ObjectModel/EntityCacheOptions.cs
+++ b/src/Config/ObjectModel/EntityCacheOptions.cs
@@ -30,26 +30,29 @@ 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..217a91eeda 100644
--- a/src/Config/ObjectModel/RuntimeConfig.cs
+++ b/src/Config/ObjectModel/RuntimeConfig.cs
@@ -565,7 +565,8 @@ 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>
@@ -592,22 +593,39 @@ public virtual EntityCacheLevel GetEntityCacheEntryLevel(string entityName)
         {
             return entityConfig.Cache.Level.Value;
         }
-        else
-        {
-            return EntityCacheLevel.L1L2;
-        }
+
+        return GlobalCacheEntryLevel();
     }
 
     /// <summary>
-    /// Whether the caching service should be used for a given operation. This is determined by
-    /// - whether caching is enabled globally
-    /// - whether the datasource is SQL and session context is disabled.
+    /// Determines whether caching is enabled for a given entity, taking into account
+    /// inheritance from the runtime cache settings.
+    /// If the entity explicitly sets Enabled (Enabled.HasValue is true), that value is used.
+    /// If the entity does not set Enabled (Enabled is null), the runtime cache enabled value is inherited.
+    /// Using Enabled.HasValue instead of a separate UserProvided flag ensures correctness
+    /// regardless of whether the object was created via JsonConstructor or with-expression.
     /// </summary>
-    /// <returns>Whether cache operations should proceed.</returns>
-    public virtual bool CanUseCache()
+    /// <param name="entityName">Name of the entity to check cache configuration.</param>
+    /// <returns>Whether caching is enabled for the entity.</returns>
+    /// <exception cref="DataApiBuilderException">Raised when an invalid entity name is provided.</exception>
+    public virtual bool IsEntityCachingEnabled(string entityName)
     {
-        bool setSessionContextEnabled = DataSource.GetTypedOptions<MsSqlOptions>()?.SetSessionContext ?? true;
-        return IsCachingEnabled && !setSessionContextEnabled;
+        if (!Entities.TryGetValue(entityName, out Entity? entityConfig))
+        {
+            throw new DataApiBuilderException(
+                message: $"{entityName} is not a valid entity.",
+                statusCode: HttpStatusCode.BadRequest,
+                subStatusCode: DataApiBuilderException.SubStatusCodes.EntityNotFound);
+        }
+
+        // If the entity explicitly set Enabled, use that value.
+        if (entityConfig.Cache is not null && entityConfig.Cache.Enabled.HasValue)
+        {
+            return entityConfig.Cache.Enabled.Value;
+        }
+
+        // Otherwise, inherit from the runtime cache enabled setting.
+        return Runtime?.Cache?.Enabled is true;
     }
 
     /// <summary>
@@ -615,13 +633,39 @@ public virtual bool CanUseCache()
     /// 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 int GlobalCacheEntryTtl()
+    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.
+    /// If runtime cache is not configured, the default cache level is used.
+    /// </summary>
+    /// <returns>Cache level that a cache entry should be stored in.</returns>
+    public virtual EntityCacheLevel GlobalCacheEntryLevel()
+    {
+        return Runtime?.Cache is not null
+            ? Runtime.Cache.InferredLevel
+            : EntityCacheOptions.DEFAULT_LEVEL;
+    }
+
+    /// <summary>
+    /// Whether the caching service should be used for a given operation. This is determined by
+    /// - whether caching is enabled globally
+    /// - whether the datasource is SQL and session context is disabled.
+    /// </summary>
+    /// <returns>Whether cache operations should proceed.</returns>
+    public virtual bool CanUseCache()
+    {
+        bool setSessionContextEnabled = DataSource.GetTypedOptions<MsSqlOptions>()?.SetSessionContext ?? true;
+        return IsCachingEnabled && !setSessionContextEnabled;
+    }
+
     private void CheckDataSourceNamePresent(string dataSourceName)
     {
         if (!_dataSourceNameToDataSource.ContainsKey(dataSourceName))
diff --git a/src/Core/Resolvers/SqlQueryEngine.cs b/src/Core/Resolvers/SqlQueryEngine.cs
index 6523589532..f567251771 100644
--- a/src/Core/Resolvers/SqlQueryEngine.cs
+++ b/src/Core/Resolvers/SqlQueryEngine.cs
@@ -330,7 +330,7 @@ public object ResolveList(JsonElement array, ObjectField fieldSchema, ref IMetad
             {
                 // Entity level cache behavior checks
                 bool dbPolicyConfigured = !string.IsNullOrEmpty(structure.DbPolicyPredicatesForOperations[EntityActionOperation.Read]);
-                bool entityCacheEnabled = runtimeConfig.Entities[structure.EntityName].IsCachingEnabled;
+                bool entityCacheEnabled = runtimeConfig.IsEntityCachingEnabled(structure.EntityName);
 
                 // If a db policy is configured for the read operation in the context of the executing role, skip the cache.
                 // We want to avoid caching token metadata because token metadata can change frequently and we want to avoid caching it.
@@ -466,7 +466,7 @@ public object ResolveList(JsonElement array, ObjectField fieldSchema, ref IMetad
             if (runtimeConfig.CanUseCache())
             {
                 // Entity level cache behavior checks
-                bool entityCacheEnabled = runtimeConfig.Entities[structure.EntityName].IsCachingEnabled;
+                bool entityCacheEnabled = runtimeConfig.IsEntityCachingEnabled(structure.EntityName);
 
                 // Stored procedures do not support nor honor runtime config defined
                 // authorization policies. Here, DAB only checks that the entity has
diff --git a/src/Service.Tests/Caching/CachingConfigProcessingTests.cs b/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
index 1294c009da..abcb08ccac 100644
--- a/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
+++ b/src/Service.Tests/Caching/CachingConfigProcessingTests.cs
@@ -346,6 +346,115 @@ public void DefaultTtlNotWrittenToSerializedJsonConfigFile(string cacheConfig)
         }
     }
 
+    /// <summary>
+    /// Validates that IsEntityCachingEnabled correctly inherits from the runtime cache enabled
+    /// setting when the entity does not explicitly set cache enabled.
+    /// 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 IsEntityCachingEnabled 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"": true }", @",""cache"": { ""enabled"": true }", true, DisplayName = "Global cache enabled, entity cache explicitly enabled: 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 IsEntityCachingEnabled_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.");
+
+        string entityName = config.Entities.First().Key;
+
+        // Act
+        bool actualIsEntityCachingEnabled = config.IsEntityCachingEnabled(entityName);
+
+        // Assert
+        Assert.AreEqual(expected: expectedIsEntityCachingEnabled, actual: actualIsEntityCachingEnabled,
+            message: $"IsEntityCachingEnabled 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.")]
+    [DataRow(@"", EntityCacheLevel.L1L2, DisplayName = "No global cache: default level is L1L2.")]
+    [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.AreEqual(expected: expectedLevel, actual: actualLevel,
+            message: $"GlobalCacheEntryLevel should be {expectedLevel}.");
+    }
+
+    /// <summary>
+    /// Validates that GetEntityCacheEntryLevel returns the entity-level explicit value when set,
+    /// and falls back to the runtime-inferred level (from Level2) when the entity doesn't set it.
+    /// </summary>
+    /// <param name="globalCacheConfig">Global cache configuration JSON fragment.</param>
+    /// <param name="entityCacheConfig">Entity cache configuration JSON fragment.</param>
+    /// <param name="expectedLevel">Expected cache level returned by GetEntityCacheEntryLevel.</param>
+    [DataRow(@",""cache"": { ""enabled"": true, ""level-2"": { ""enabled"": true } }", @",""cache"": { ""enabled"": true }", EntityCacheLevel.L1L2, DisplayName = "Level2 enabled, entity has no level: inherits L1L2 from runtime.")]
+    [DataRow(@",""cache"": { ""enabled"": true }", @",""cache"": { ""enabled"": true }", EntityCacheLevel.L1, DisplayName = "No Level2, entity has no level: inherits L1 from runtime.")]
+    [DataRow(@",""cache"": { ""enabled"": true, ""level-2"": { ""enabled"": true } }", @",""cache"": { ""enabled"": true, ""level"": ""L1"" }", EntityCacheLevel.L1, DisplayName = "Level2 enabled, entity explicitly sets L1: entity value wins.")]
+    [DataRow(@",""cache"": { ""enabled"": true }", @",""cache"": { ""enabled"": true, ""level"": ""L1L2"" }", EntityCacheLevel.L1L2, DisplayName = "No Level2, entity explicitly sets L1L2: entity value wins.")]
+    [DataTestMethod]
+    public void GetEntityCacheEntryLevel_InheritsFromRuntimeLevel2(
+        string globalCacheConfig,
+        string entityCacheConfig,
+        EntityCacheLevel expectedLevel)
+    {
+        // 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.");
+
+        string entityName = config.Entities.First().Key;
+
+        // Act
+        EntityCacheLevel actualLevel = config.GetEntityCacheEntryLevel(entityName);
+
+        // Assert
+        Assert.AreEqual(expected: expectedLevel, actual: actualLevel,
+            message: $"GetEntityCacheEntryLevel should be {expectedLevel}.");
+    }
+
     /// <summary>
     /// Returns a JSON string of the runtime config with the test-provided
     /// cache configuration.
diff --git a/src/Service.Tests/Caching/DabCacheServiceIntegrationTests.cs b/src/Service.Tests/Caching/DabCacheServiceIntegrationTests.cs
index 68c9225b96..8572673c45 100644
--- a/src/Service.Tests/Caching/DabCacheServiceIntegrationTests.cs
+++ b/src/Service.Tests/Caching/DabCacheServiceIntegrationTests.cs
@@ -777,6 +777,9 @@ private static Mock<RuntimeConfigProvider> CreateMockRuntimeConfigProvider(strin
             mockRuntimeConfig
                 .Setup(c => c.CanUseCache())
                 .Returns(true);
+            mockRuntimeConfig
+                .Setup(c => c.IsEntityCachingEnabled(It.IsAny<string>()))
+                .Returns(true);
             mockRuntimeConfig
                 .Setup(c => c.GetEntityCacheEntryTtl(It.IsAny<string>()))
                 .Returns(60);