diff --git a/package-lock.json b/package-lock.json
index 8f196d996..d760b1162 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -9163,6 +9163,10 @@
         "@typeberry/jam-host-calls": "*",
         "@typeberry/logger": "*",
         "@typeberry/numbers": "*",
+        "@typeberry/ordering": "*",
+        "@typeberry/pvm-host-calls": "*",
+        "@typeberry/pvm-interface": "*",
+        "@typeberry/pvm-interpreter": "*",
         "@typeberry/state": "*",
         "@typeberry/transition": "*",
         "@typeberry/utils": "*"
diff --git a/packages/core/pvm-interface/pvm.ts b/packages/core/pvm-interface/pvm.ts
index 1d86ad2cb..5ce94c5e1 100644
--- a/packages/core/pvm-interface/pvm.ts
+++ b/packages/core/pvm-interface/pvm.ts
@@ -17,6 +17,9 @@ export interface IPvmInterpreter {
   /** Prepare SPI program to be executed. */
   resetJam(program: Uint8Array, args: Uint8Array, pc: number, gas: Gas): void;
 
+  /** Prepare a generic (non-SPI) program to be executed. */
+  resetGeneric(rawProgram: Uint8Array, pc: number, gas: Gas): void;
+
   /** Execute loaded program. */
   runProgram(): void;
 
diff --git a/packages/jam/in-core/externalities/refine.test.ts b/packages/jam/in-core/externalities/refine.test.ts
index cb30bbad5..bbeb42d9c 100644
--- a/packages/jam/in-core/externalities/refine.test.ts
+++ b/packages/jam/in-core/externalities/refine.test.ts
@@ -12,13 +12,15 @@ import {
 } from "@typeberry/block";
 import { Bytes, BytesBlob } from "@typeberry/bytes";
 import { HashDictionary } from "@typeberry/collections";
-import { tinyChainSpec } from "@typeberry/config";
+import { PvmBackend, tinyChainSpec } from "@typeberry/config";
 import { HASH_SIZE } from "@typeberry/hash";
-import { SegmentExportError } from "@typeberry/jam-host-calls";
+import { SegmentExportError, tryAsMachineId, tryAsProgramCounter } from "@typeberry/jam-host-calls";
 import { tryAsU32, tryAsU64 } from "@typeberry/numbers";
 import { InMemoryService, InMemoryState, PreimageItem, ServiceAccountInfo, type State } from "@typeberry/state";
 import { RefineExternalitiesImpl, type RefineExternalitiesParams } from "./refine.js";
 
+const MINIMAL_PROGRAM = new Uint8Array([0, 1, 1, 0, 0x00]);
+
 function createSegment(byte = 0xab): Segment {
   return Bytes.fill(SEGMENT_BYTES, byte);
 }
@@ -81,6 +83,7 @@ function createExt(overrides: Partial<RefineExternalitiesParams> = {}) {
     currentServiceId: tryAsServiceId(42),
     lookupState: overrides.lookupState ?? defaultState,
     exportOffset: overrides.exportOffset ?? 0,
+    pvmBackend: PvmBackend.BuiltIn,
     ...overrides,
   });
 }
@@ -212,4 +215,63 @@ describe("RefineExternalitiesImpl", () => {
       assert.deepStrictEqual(exported[0].raw.subarray(0, 5), new Uint8Array([1, 2, 3, 4, 5]));
     });
   });
+
+  describe("machineInit", () => {
+    it("should create a new inner PVM and return a machine ID", async () => {
+      const ext = createExt();
+      const code = BytesBlob.blobFrom(MINIMAL_PROGRAM);
+      const pc = tryAsProgramCounter(0);
+
+      const result = await ext.machineInit(code, pc);
+
+      assert.strictEqual(result.isOk, true);
+      assert.strictEqual(result.ok, tryAsMachineId(0));
+    });
+
+    it("should assign sequential machine IDs", async () => {
+      const ext = createExt();
+      const code = BytesBlob.blobFrom(MINIMAL_PROGRAM);
+      const pc = tryAsProgramCounter(0);
+
+      const r1 = await ext.machineInit(code, pc);
+      const r2 = await ext.machineInit(code, pc);
+      const r3 = await ext.machineInit(code, pc);
+
+      assert.strictEqual(r1.isOk, true);
+      assert.strictEqual(r1.ok, tryAsMachineId(0));
+      assert.strictEqual(r2.isOk, true);
+      assert.strictEqual(r2.ok, tryAsMachineId(1));
+      assert.strictEqual(r3.isOk, true);
+      assert.strictEqual(r3.ok, tryAsMachineId(2));
+    });
+
+    it("should return error for invalid program blob", async () => {
+      const ext = createExt();
+      const invalidCode = BytesBlob.blobFrom(new Uint8Array([0xff, 0xff, 0xff]));
+      const pc = tryAsProgramCounter(0);
+
+      const result = await ext.machineInit(invalidCode, pc);
+
+      assert.strictEqual(result.isError, true);
+    });
+
+    it("should return error for empty program blob", async () => {
+      const ext = createExt();
+      const emptyCode = BytesBlob.blobFrom(new Uint8Array([]));
+      const pc = tryAsProgramCounter(0);
+
+      const result = await ext.machineInit(emptyCode, pc);
+
+      assert.strictEqual(result.isError, true);
+    });
+
+    it("should accept a non-zero program counter", async () => {
+      const ext = createExt();
+      const code = BytesBlob.blobFrom(MINIMAL_PROGRAM);
+      const pc = tryAsProgramCounter(1);
+
+      const result = await ext.machineInit(code, pc);
+      assert.strictEqual(result.isOk, true);
+    });
+  });
 });
diff --git a/packages/jam/in-core/externalities/refine.ts b/packages/jam/in-core/externalities/refine.ts
index d202373fe..65f13438c 100644
--- a/packages/jam/in-core/externalities/refine.ts
+++ b/packages/jam/in-core/externalities/refine.ts
@@ -6,6 +6,8 @@ import {
   tryAsSegmentIndex,
 } from "@typeberry/block";
 import type { BytesBlob } from "@typeberry/bytes";
+import { SortedArray } from "@typeberry/collections";
+import type { PvmBackend } from "@typeberry/config";
 import type { Blake2bHash } from "@typeberry/hash";
 import {
   type MachineId,
@@ -17,15 +19,29 @@ import {
   type ProgramCounter,
   type RefineExternalities,
   SegmentExportError,
+  tryAsMachineId,
   type ZeroVoidError,
 } from "@typeberry/jam-host-calls";
 import type { U64 } from "@typeberry/numbers";
-import type { HostCallMemory, HostCallRegisters } from "@typeberry/pvm-host-calls";
-import type { BigGas } from "@typeberry/pvm-interface";
-import type { ProgramDecoderError } from "@typeberry/pvm-interpreter";
+import { Ordering } from "@typeberry/ordering";
+import { type HostCallMemory, type HostCallRegisters, PvmInstanceManager } from "@typeberry/pvm-host-calls";
+import { type BigGas, type IPvmInterpreter, tryAsGas } from "@typeberry/pvm-interface";
+import { ProgramDecoder, type ProgramDecoderError } from "@typeberry/pvm-interpreter";
 import type { State } from "@typeberry/state";
 import { type OK, Result } from "@typeberry/utils";
 
+type MachineEntry = [MachineId, IPvmInterpreter];
+
+const machineComparator = (a: MachineEntry, b: MachineEntry) => {
+  if (a[0] < b[0]) {
+    return Ordering.Less;
+  }
+  if (a[0] > b[0]) {
+    return Ordering.Greater;
+  }
+  return Ordering.Equal;
+};
+
 /**
  * Parameters required to create a RefineExternalitiesImpl.
  */
@@ -36,9 +52,16 @@ export type RefineExternalitiesParams = {
   lookupState: State;
   /** Export offset -- sum of exports from prior work items in this package. */
   exportOffset: number;
+  /**
+   * PVM backend to use for creating inner PVM instances.
+   * NIT: Could accept PVMInstanceManager
+   */
+  pvmBackend: PvmBackend;
 };
 
 export class RefineExternalitiesImpl implements RefineExternalities {
+  /** Inner PVM instances sorted by MachineId. */
+  private machines: SortedArray<MachineEntry> = SortedArray.fromSortedArray(machineComparator);
   /** Service being refined (used as default for historicalLookup). */
   private readonly currentServiceId: ServiceId;
   /** State at the lookup anchor for preimage lookups. */
@@ -47,6 +70,8 @@ export class RefineExternalitiesImpl implements RefineExternalities {
   private readonly exportedSegments: Segment[] = [];
   /** Offset for segment indexing (sum of exports from prior items). */
   private readonly exportOffset: number;
+  /** PVM backend for creating inner machines. */
+  private readonly pvmBackend: PvmBackend;
 
   static create(params: RefineExternalitiesParams) {
     return new RefineExternalitiesImpl(params);
@@ -56,6 +81,7 @@ export class RefineExternalitiesImpl implements RefineExternalities {
     this.currentServiceId = params.currentServiceId;
     this.lookupState = params.lookupState;
     this.exportOffset = params.exportOffset;
+    this.pvmBackend = params.pvmBackend;
   }
 
   getExportedSegments(): readonly Segment[] {
@@ -103,8 +129,36 @@ export class RefineExternalitiesImpl implements RefineExternalities {
     throw new Error("Method not implemented.");
   }
 
-  machineInit(_code: BytesBlob, _programCounter: ProgramCounter): Promise<Result<MachineId, ProgramDecoderError>> {
-    throw new Error("Method not implemented.");
+  async machineInit(code: BytesBlob, programCounter: ProgramCounter): Promise<Result<MachineId, ProgramDecoderError>> {
+    // https://graypaper.fluffylabs.dev/#/ab2cdbd/346400346400?v=0.7.2
+    const deblobResult = ProgramDecoder.deblob(code.raw);
+    if (deblobResult.isError) {
+      return Result.error(deblobResult.error, deblobResult.details);
+    }
+
+    const manager = await PvmInstanceManager.new(this.pvmBackend);
+    const innerPvm = await manager.getInstance();
+
+    innerPvm.resetGeneric(code.raw, Number(programCounter), tryAsGas(0));
+
+    // https://graypaper.fluffylabs.dev/#/ab2cdbd/348c00348c00?v=0.7.2
+    // Binary search for the minimal free MachineId
+    const arr = this.machines.array;
+    let low = 0;
+    let high = arr.length;
+    while (low < high) {
+      const mid = (low + high) >> 1;
+      if (arr[mid][0] > BigInt(mid)) {
+        high = mid;
+      } else {
+        low = mid + 1;
+      }
+    }
+
+    const machineId = tryAsMachineId(low);
+    // https://graypaper.fluffylabs.dev/#/ab2cdbd/340501340b01?v=0.7.2
+    this.machines.insert([machineId, innerPvm]);
+    return Result.ok(machineId);
   }
 
   machineInvoke(
diff --git a/packages/jam/in-core/in-core.ts b/packages/jam/in-core/in-core.ts
index 9cf86a05c..c53157807 100644
--- a/packages/jam/in-core/in-core.ts
+++ b/packages/jam/in-core/in-core.ts
@@ -442,6 +442,7 @@ export class InCore {
       currentServiceId: args.currentServiceId,
       lookupState: args.lookupState,
       exportOffset: args.exportOffset,
+      pvmBackend: this.pvmBackend,
     });
 
     return {
diff --git a/packages/jam/in-core/package.json b/packages/jam/in-core/package.json
index 1cda131cc..aa70d66af 100644
--- a/packages/jam/in-core/package.json
+++ b/packages/jam/in-core/package.json
@@ -18,6 +18,10 @@
     "@typeberry/jam-host-calls": "*",
     "@typeberry/logger": "*",
     "@typeberry/numbers": "*",
+    "@typeberry/ordering": "*",
+    "@typeberry/pvm-host-calls": "*",
+    "@typeberry/pvm-interface": "*",
+    "@typeberry/pvm-interpreter": "*",
     "@typeberry/state": "*",
     "@typeberry/transition": "*",
     "@typeberry/utils": "*"