diff --git a/src/servers/xero/main.py b/src/servers/xero/main.py
index 011a073..b541a25 100644
--- a/src/servers/xero/main.py
+++ b/src/servers/xero/main.py
@@ -1117,6 +1117,11 @@ async def handle_list_tools() -> list[Tool]:
                                 ],
                             },
                         },
+                        "status": {
+                            "type": "string",
+                            "description": "Updated invoice status. Use AUTHORISED to push the draft into the invoices section in Xero. Allowed transitions from DRAFT: SUBMITTED, AUTHORISED, DELETED.",
+                            "enum": ["DRAFT", "SUBMITTED", "AUTHORISED", "DELETED"],
+                        },
                     },
                     "required": ["invoiceId"],
                 },
@@ -2329,6 +2334,8 @@ async def handle_call_tool(
                             line_item["ItemCode"] = item["itemCode"]
                         line_items.append(line_item)
                     invoice["LineItems"] = line_items
+                if arguments.get("status"):
+                    invoice["Status"] = arguments["status"]
 
                 result = await call_xero_api(
                     f"{ACCOUNTING_API}/Invoices/{invoice_id}",
diff --git a/tests/servers/xero/test_update_invoice_status.py b/tests/servers/xero/test_update_invoice_status.py
new file mode 100644
index 0000000..a629d2e
--- /dev/null
+++ b/tests/servers/xero/test_update_invoice_status.py
@@ -0,0 +1,115 @@
+"""
+Offline handler-level test for the update_invoice status field (TSK-16147).
+
+Mocks Xero HTTP calls and Nango credentials so the test runs with no network
+access and no real tenant. Verifies:
+  1. The status field is in the registered tool schema with the correct enum.
+  2. status="AUTHORISED" is forwarded to Xero in the POST payload.
+  3. Omitting status leaves the payload unchanged (no Status key).
+  4. The DRAFT-only guard still rejects updates against non-DRAFT invoices.
+"""
+
+import asyncio
+import json
+from unittest.mock import patch, AsyncMock
+
+from mcp.types import ListToolsRequest, CallToolRequest, CallToolRequestParams
+
+from src.servers.xero import main as xero_main
+
+
+def _draft_invoice_response():
+    return {"Invoices": [{"InvoiceID": "inv-1", "Status": "DRAFT"}]}
+
+
+def _authorised_invoice_response():
+    return {"Invoices": [{"InvoiceID": "inv-1", "Status": "AUTHORISED"}]}
+
+
+async def _invoke(tool_name: str, arguments: dict, api_responses: list):
+    """Run the call_tool handler with mocked Xero + Nango."""
+    srv = xero_main.create_server(user_id="test-user")
+    handler = srv.request_handlers[CallToolRequest]
+
+    # Mock the Xero HTTP layer: each call returns the next item in api_responses.
+    api_mock = AsyncMock(side_effect=api_responses)
+    creds_mock = AsyncMock(return_value=("fake-token", "fake-tenant"))
+
+    with patch.object(xero_main, "call_xero_api", api_mock), patch.object(
+        xero_main, "get_xero_credentials", creds_mock
+    ):
+        request = CallToolRequest(
+            method="tools/call",
+            params=CallToolRequestParams(name=tool_name, arguments=arguments),
+        )
+        result = await handler(request)
+    return result, api_mock
+
+
+async def test_schema_exposes_status():
+    srv = xero_main.create_server(user_id="test-user")
+    list_handler = srv.request_handlers[ListToolsRequest]
+    result = await list_handler(ListToolsRequest(method="tools/list"))
+    tool = next(t for t in result.root.tools if t.name == "update_invoice")
+    status = tool.inputSchema["properties"]["status"]
+    assert status["type"] == "string"
+    assert status["enum"] == ["DRAFT", "SUBMITTED", "AUTHORISED", "DELETED"]
+    assert "status" not in tool.inputSchema["required"]
+    print("PASS  schema exposes status with correct enum and is optional")
+
+
+async def test_status_authorised_is_forwarded():
+    _, api_mock = await _invoke(
+        "update_invoice",
+        {"invoiceId": "inv-1", "status": "AUTHORISED"},
+        api_responses=[_draft_invoice_response(), _authorised_invoice_response()],
+    )
+    # Two calls: GET for guard, POST for update
+    assert api_mock.call_count == 2
+    post_call = api_mock.call_args_list[1]
+    payload = post_call.kwargs["data"]
+    invoice_payload = payload["Invoices"][0]
+    assert invoice_payload["InvoiceID"] == "inv-1"
+    assert invoice_payload["Status"] == "AUTHORISED"
+    print("PASS  status=AUTHORISED forwarded in POST payload:", invoice_payload)
+
+
+async def test_status_omitted_means_no_status_key():
+    _, api_mock = await _invoke(
+        "update_invoice",
+        {"invoiceId": "inv-1", "reference": "PO-123"},
+        api_responses=[_draft_invoice_response(), _draft_invoice_response()],
+    )
+    post_call = api_mock.call_args_list[1]
+    invoice_payload = post_call.kwargs["data"]["Invoices"][0]
+    assert (
+        "Status" not in invoice_payload
+    ), f"expected no Status key when omitted, got {invoice_payload}"
+    assert invoice_payload["Reference"] == "PO-123"
+    print("PASS  status omitted -> no Status key in payload:", invoice_payload)
+
+
+async def test_draft_guard_still_blocks_non_draft():
+    non_draft = {"Invoices": [{"InvoiceID": "inv-1", "Status": "AUTHORISED"}]}
+    result, api_mock = await _invoke(
+        "update_invoice",
+        {"invoiceId": "inv-1", "status": "DELETED"},
+        api_responses=[non_draft],
+    )
+    # Handler catches the ValueError and returns an Error TextContent
+    text = result.root.content[0].text
+    assert "Only DRAFT invoices can be updated" in text, text
+    assert api_mock.call_count == 1  # never reached the POST
+    print("PASS  non-DRAFT invoice rejected before POST:", text.strip())
+
+
+async def main():
+    await test_schema_exposes_status()
+    await test_status_authorised_is_forwarded()
+    await test_status_omitted_means_no_status_key()
+    await test_draft_guard_still_blocks_non_draft()
+    print("\nAll 4 tests passed.")
+
+
+if __name__ == "__main__":
+    asyncio.run(main())