diff --git a/src/NATS.Server/NatsServer.cs b/src/NATS.Server/NatsServer.cs
index 6297f1b..fbf540a 100644
--- a/src/NATS.Server/NatsServer.cs
+++ b/src/NATS.Server/NatsServer.cs
@@ -99,7 +99,10 @@ public sealed class NatsServer : IMessageRouter, ISubListAccess, IDisposable
                 var clientInfo = _serverInfo;
                 if (_authService.NonceRequired)
                 {
-                    nonce = _authService.GenerateNonce();
+                    var rawNonce = _authService.GenerateNonce();
+                    var nonceStr = _authService.EncodeNonce(rawNonce);
+                    // The client signs the nonce string (ASCII), not the raw bytes
+                    nonce = Encoding.ASCII.GetBytes(nonceStr);
                     clientInfo = new ServerInfo
                     {
                         ServerId = _serverInfo.ServerId,
@@ -109,7 +112,7 @@ public sealed class NatsServer : IMessageRouter, ISubListAccess, IDisposable
                         Port = _serverInfo.Port,
                         MaxPayload = _serverInfo.MaxPayload,
                         AuthRequired = _serverInfo.AuthRequired,
-                        Nonce = _authService.EncodeNonce(nonce),
+                        Nonce = nonceStr,
                     };
                 }
 
diff --git a/tests/NATS.Server.Tests/NKeyIntegrationTests.cs b/tests/NATS.Server.Tests/NKeyIntegrationTests.cs
new file mode 100644
index 0000000..83309f6
--- /dev/null
+++ b/tests/NATS.Server.Tests/NKeyIntegrationTests.cs
@@ -0,0 +1,82 @@
+using System.Net;
+using System.Net.Sockets;
+using Microsoft.Extensions.Logging.Abstractions;
+using NATS.Client.Core;
+using NATS.NKeys;
+using NATS.Server.Auth;
+
+namespace NATS.Server.Tests;
+
+public class NKeyIntegrationTests : IAsyncLifetime
+{
+    private NatsServer _server = null!;
+    private int _port;
+    private readonly CancellationTokenSource _cts = new();
+    private Task _serverTask = null!;
+    private KeyPair _userKeyPair = null!;
+    private string _userSeed = null!;
+    private string _userPublicKey = null!;
+
+    private static int GetFreePort()
+    {
+        using var sock = new Socket(AddressFamily.InterNetwork, SocketType.Stream, ProtocolType.Tcp);
+        sock.Bind(new IPEndPoint(IPAddress.Loopback, 0));
+        return ((IPEndPoint)sock.LocalEndPoint!).Port;
+    }
+
+    public async Task InitializeAsync()
+    {
+        _port = GetFreePort();
+        _userKeyPair = KeyPair.CreatePair(PrefixByte.User);
+        _userPublicKey = _userKeyPair.GetPublicKey();
+        _userSeed = _userKeyPair.GetSeed();
+
+        _server = new NatsServer(new NatsOptions
+        {
+            Port = _port,
+            NKeys = [new NKeyUser { Nkey = _userPublicKey }],
+        }, NullLoggerFactory.Instance);
+
+        _serverTask = _server.StartAsync(_cts.Token);
+        await _server.WaitForReadyAsync();
+    }
+
+    public async Task DisposeAsync()
+    {
+        await _cts.CancelAsync();
+        _server.Dispose();
+    }
+
+    [Fact]
+    public async Task NKey_auth_success()
+    {
+        await using var client = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://127.0.0.1:{_port}",
+            AuthOpts = new NatsAuthOpts { NKey = _userPublicKey, Seed = _userSeed },
+        });
+
+        await client.ConnectAsync();
+        await client.PingAsync();
+    }
+
+    [Fact]
+    public async Task NKey_auth_wrong_key_fails()
+    {
+        // Generate a different key pair not known to the server
+        var otherKp = KeyPair.CreatePair(PrefixByte.User);
+
+        await using var client = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://127.0.0.1:{_port}",
+            AuthOpts = new NatsAuthOpts { NKey = otherKp.GetPublicKey(), Seed = otherKp.GetSeed() },
+            MaxReconnectRetry = 0,
+        });
+
+        await Should.ThrowAsync<NatsException>(async () =>
+        {
+            await client.ConnectAsync();
+            await client.PingAsync();
+        });
+    }
+}
diff --git a/tests/NATS.Server.Tests/PermissionIntegrationTests.cs b/tests/NATS.Server.Tests/PermissionIntegrationTests.cs
new file mode 100644
index 0000000..358da95
--- /dev/null
+++ b/tests/NATS.Server.Tests/PermissionIntegrationTests.cs
@@ -0,0 +1,119 @@
+using System.Net;
+using System.Net.Sockets;
+using Microsoft.Extensions.Logging.Abstractions;
+using NATS.Client.Core;
+using NATS.Server.Auth;
+
+namespace NATS.Server.Tests;
+
+public class PermissionIntegrationTests : IAsyncLifetime
+{
+    private NatsServer _server = null!;
+    private int _port;
+    private readonly CancellationTokenSource _cts = new();
+    private Task _serverTask = null!;
+
+    private static int GetFreePort()
+    {
+        using var sock = new Socket(AddressFamily.InterNetwork, SocketType.Stream, ProtocolType.Tcp);
+        sock.Bind(new IPEndPoint(IPAddress.Loopback, 0));
+        return ((IPEndPoint)sock.LocalEndPoint!).Port;
+    }
+
+    public async Task InitializeAsync()
+    {
+        _port = GetFreePort();
+        _server = new NatsServer(new NatsOptions
+        {
+            Port = _port,
+            Users =
+            [
+                new User
+                {
+                    Username = "publisher",
+                    Password = "pass",
+                    Permissions = new Permissions
+                    {
+                        Publish = new SubjectPermission { Allow = ["events.>"] },
+                        Subscribe = new SubjectPermission { Deny = [">"] },
+                    },
+                },
+                new User
+                {
+                    Username = "subscriber",
+                    Password = "pass",
+                    Permissions = new Permissions
+                    {
+                        Publish = new SubjectPermission { Deny = [">"] },
+                        Subscribe = new SubjectPermission { Allow = ["events.>"] },
+                    },
+                },
+                new User
+                {
+                    Username = "admin",
+                    Password = "pass",
+                    // No permissions — full access
+                },
+            ],
+        }, NullLoggerFactory.Instance);
+
+        _serverTask = _server.StartAsync(_cts.Token);
+        await _server.WaitForReadyAsync();
+    }
+
+    public async Task DisposeAsync()
+    {
+        await _cts.CancelAsync();
+        _server.Dispose();
+    }
+
+    [Fact]
+    public async Task Publisher_can_publish_to_allowed_subject()
+    {
+        await using var pub = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://publisher:pass@127.0.0.1:{_port}",
+        });
+        await using var admin = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://admin:pass@127.0.0.1:{_port}",
+        });
+
+        await pub.ConnectAsync();
+        await admin.ConnectAsync();
+
+        await using var sub = await admin.SubscribeCoreAsync<string>("events.test");
+        await admin.PingAsync();
+
+        await pub.PublishAsync("events.test", "hello");
+
+        using var timeout = new CancellationTokenSource(TimeSpan.FromSeconds(5));
+        var msg = await sub.Msgs.ReadAsync(timeout.Token);
+        msg.Data.ShouldBe("hello");
+    }
+
+    [Fact]
+    public async Task Admin_has_full_access()
+    {
+        await using var admin1 = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://admin:pass@127.0.0.1:{_port}",
+        });
+        await using var admin2 = new NatsConnection(new NatsOpts
+        {
+            Url = $"nats://admin:pass@127.0.0.1:{_port}",
+        });
+
+        await admin1.ConnectAsync();
+        await admin2.ConnectAsync();
+
+        await using var sub = await admin2.SubscribeCoreAsync<string>("anything.at.all");
+        await admin2.PingAsync();
+
+        await admin1.PublishAsync("anything.at.all", "data");
+
+        using var timeout = new CancellationTokenSource(TimeSpan.FromSeconds(5));
+        var msg = await sub.Msgs.ReadAsync(timeout.Token);
+        msg.Data.ShouldBe("data");
+    }
+}