diff --git a/cmd/ai.go b/cmd/ai.go
index ca3b337..e940ff7 100644
--- a/cmd/ai.go
+++ b/cmd/ai.go
@@ -1,6 +1,14 @@
 package main
 
-import "github.com/zerodha/fastglue"
+import (
+	"github.com/abhinavxd/libredesk/internal/envelope"
+	"github.com/zerodha/fastglue"
+)
+
+type providerUpdateReq struct {
+	Provider string `json:"provider"`
+	APIKey   string `json:"api_key"`
+}
 
 // handleAICompletion handles AI completion requests
 func handleAICompletion(r *fastglue.Request) error {
@@ -27,3 +35,18 @@ func handleGetAIPrompts(r *fastglue.Request) error {
 	}
 	return r.SendEnvelope(resp)
 }
+
+// handleUpdateAIProvider updates the AI provider
+func handleUpdateAIProvider(r *fastglue.Request) error {
+	var (
+		app = r.Context.(*App)
+		req providerUpdateReq
+	)
+	if err := r.Decode(&req, "json"); err != nil {
+		return sendErrorEnvelope(r, envelope.NewError(envelope.InputError, "Error unmarshalling request", nil))
+	}
+	if err := app.ai.UpdateProvider(req.Provider, req.APIKey); err != nil {
+		return sendErrorEnvelope(r, err)
+	}
+	return r.SendEnvelope("Provider updated successfully")
+}
diff --git a/cmd/handlers.go b/cmd/handlers.go
index dbb31b5..1c26540 100644
--- a/cmd/handlers.go
+++ b/cmd/handlers.go
@@ -174,6 +174,7 @@ func initHandlers(g *fastglue.Fastglue, hub *ws.Hub) {
 	// AI completion.
 	g.GET("/api/v1/ai/prompts", auth(handleGetAIPrompts))
 	g.POST("/api/v1/ai/completion", auth(handleAICompletion))
+	g.PUT("/api/v1/ai/provider", perm(handleUpdateAIProvider, "ai:manage"))
 
 	// WebSocket.
 	g.GET("/ws", auth(func(r *fastglue.Request) error {
diff --git a/frontend/src/api/index.js b/frontend/src/api/index.js
index 013013c..2119100 100644
--- a/frontend/src/api/index.js
+++ b/frontend/src/api/index.js
@@ -265,6 +265,7 @@ const updateView = (id, data) =>
 const deleteView = (id) => http.delete(`/api/v1/views/me/${id}`)
 const getAiPrompts = () => http.get('/api/v1/ai/prompts')
 const aiCompletion = (data) => http.post('/api/v1/ai/completion', data)
+const updateAIProvider = (data) => http.put('/api/v1/ai/provider', data)
 
 export default {
   login,
@@ -328,6 +329,7 @@ export default {
   updateAutomationRule,
   updateAutomationRuleWeights,
   updateAutomationRulesExecutionMode,
+  updateAIProvider,
   createAutomationRule,
   toggleAutomationRule,
   deleteAutomationRule,
diff --git a/frontend/src/features/admin/roles/RoleForm.vue b/frontend/src/features/admin/roles/RoleForm.vue
index 4813657..2f874c4 100644
--- a/frontend/src/features/admin/roles/RoleForm.vue
+++ b/frontend/src/features/admin/roles/RoleForm.vue
@@ -13,7 +13,11 @@
       <FormItem>
         <FormLabel>Description</FormLabel>
         <FormControl>
-          <Input type="text" placeholder="This role is for all support agents" v-bind="componentField" />
+          <Input
+            type="text"
+            placeholder="This role is for all support agents"
+            v-bind="componentField"
+          />
         </FormControl>
         <FormMessage />
       </FormItem>
@@ -24,13 +28,19 @@
     <div v-for="entity in permissions" :key="entity.name" class="box p-4">
       <p class="text-lg mb-5">{{ entity.name }}</p>
       <div class="space-y-4">
-        <FormField v-for="permission in entity.permissions" :key="permission.name" type="checkbox"
-          :name="permission.name">
+        <FormField
+          v-for="permission in entity.permissions"
+          :key="permission.name"
+          type="checkbox"
+          :name="permission.name"
+        >
           <FormItem class="flex flex-col gap-y-5 space-y-0 rounded-lg">
             <div class="flex space-x-3">
               <FormControl>
-                <Checkbox :checked="selectedPermissions.includes(permission.name)"
-                  @update:checked="(newValue) => handleChange(newValue, permission.name)" />
+                <Checkbox
+                  :checked="selectedPermissions.includes(permission.name)"
+                  @update:checked="(newValue) => handleChange(newValue, permission.name)"
+                />
                 <FormLabel>{{ permission.label }}</FormLabel>
               </FormControl>
             </div>
@@ -69,7 +79,7 @@ const props = defineProps({
   },
   isLoading: {
     type: Boolean,
-    required: false,
+    required: false
   }
 })
 
@@ -77,7 +87,7 @@ const permissions = ref([
   {
     name: 'Conversation',
     permissions: [
-      { name: 'conversations:read', label: 'View conversations' },
+      { name: 'conversations:read', label: 'View conversation' },
       { name: 'conversations:read_assigned', label: 'View conversations assigned to me' },
       { name: 'conversations:read_all', label: 'View all conversations' },
       { name: 'conversations:read_unassigned', label: 'View all unassigned conversations' },
@@ -89,7 +99,7 @@ const permissions = ref([
       { name: 'conversations:update_tags', label: 'Add or remove conversation tags' },
       { name: 'messages:read', label: 'View conversation messages' },
       { name: 'messages:write', label: 'Send messages in conversations' },
-      { name: 'view:manage', label: 'Create and manage conversation views' },
+      { name: 'view:manage', label: 'Create and manage conversation views' }
     ]
   },
   {
@@ -110,8 +120,9 @@ const permissions = ref([
       { name: 'reports:manage', label: 'Manage Reports' },
       { name: 'business_hours:manage', label: 'Manage Business Hours' },
       { name: 'sla:manage', label: 'Manage SLA Policies' },
+      { name: 'ai:manage', label: 'Manage AI Features' }
     ]
-  },
+  }
 ])
 
 const selectedPermissions = ref([])
diff --git a/frontend/src/features/conversation/MacroActionsPreview.vue b/frontend/src/features/conversation/MacroActionsPreview.vue
index a07b66a..572fb19 100644
--- a/frontend/src/features/conversation/MacroActionsPreview.vue
+++ b/frontend/src/features/conversation/MacroActionsPreview.vue
@@ -1,12 +1,12 @@
 <template>
   <div class="flex flex-wrap">
-    <div class="flex flex-wrap">
+    <div class="flex flex-wrap gap-2">
       <div
         v-for="action in actions"
         :key="action.type"
         class="flex items-center bg-white border border-gray-200 rounded shadow-sm transition-all duration-300 ease-in-out hover:shadow-md group gap-2 py-1"
       >
-        <div class="flex items-center space-x-2 px-2 ">
+        <div class="flex items-center space-x-2 px-2">
           <component
             :is="getIcon(action.type)"
             size="16"
diff --git a/frontend/src/features/conversation/ReplyBox.vue b/frontend/src/features/conversation/ReplyBox.vue
index db75d43..b63d3b2 100644
--- a/frontend/src/features/conversation/ReplyBox.vue
+++ b/frontend/src/features/conversation/ReplyBox.vue
@@ -1,4 +1,38 @@
 <template>
+  <Dialog :open="openAIKeyPrompt" @update:open="openAIKeyPrompt = false">
+    <DialogContent class="sm:max-w-lg">
+      <DialogHeader class="space-y-2">
+        <DialogTitle>Enter OpenAI API Key</DialogTitle>
+        <DialogDescription>
+          OpenAI API key is not set or invalid. Please enter a valid API key to use AI features.
+        </DialogDescription>
+      </DialogHeader>
+      <Form v-slot="{ handleSubmit }" as="" keep-values :validation-schema="formSchema">
+        <form id="apiKeyForm" @submit="handleSubmit($event, updateProvider)">
+          <FormField v-slot="{ componentField }" name="apiKey">
+            <FormItem>
+              <FormLabel>API Key</FormLabel>
+              <FormControl>
+                <Input type="text" placeholder="Enter your API key" v-bind="componentField" />
+              </FormControl>
+              <FormMessage />
+            </FormItem>
+          </FormField>
+        </form>
+        <DialogFooter>
+          <Button
+            type="submit"
+            form="apiKeyForm"
+            :is-loading="isOpenAIKeyUpdating"
+            :disabled="isOpenAIKeyUpdating"
+          >
+            Save
+          </Button>
+        </DialogFooter>
+      </Form>
+    </DialogContent>
+  </Dialog>
+
   <div class="text-foreground bg-background">
     <!-- Fullscreen editor -->
     <Dialog :open="isEditorFullscreen" @update:open="isEditorFullscreen = false">
@@ -98,15 +132,44 @@ import { ref, onMounted, nextTick, watch, computed } from 'vue'
 import { transformImageSrcToCID } from '@/utils/strings'
 import { handleHTTPError } from '@/utils/http'
 import { EMITTER_EVENTS } from '@/constants/emitterEvents.js'
+import { useUserStore } from '@/stores/user'
 import api from '@/api'
 
 import { useConversationStore } from '@/stores/conversation'
-import { Dialog, DialogContent } from '@/components/ui/dialog'
+import { Button } from '@/components/ui/button'
+import {
+  Dialog,
+  DialogContent,
+  DialogDescription,
+  DialogFooter,
+  DialogHeader,
+  DialogTitle
+} from '@/components/ui/dialog'
+import { Input } from '@/components/ui/input'
 import { useEmitter } from '@/composables/useEmitter'
 import ReplyBoxContent from '@/features/conversation/ReplyBoxContent.vue'
+import {
+  Form,
+  FormField,
+  FormItem,
+  FormLabel,
+  FormControl,
+  FormMessage
+} from '@/components/ui/form'
+import { toTypedSchema } from '@vee-validate/zod'
+import * as z from 'zod'
+
+const formSchema = toTypedSchema(
+  z.object({
+    apiKey: z.string().min(1, 'API key is required')
+  })
+)
 
 const conversationStore = useConversationStore()
 const emitter = useEmitter()
+const userStore = useUserStore()
+const openAIKeyPrompt = ref(false)
+const isOpenAIKeyUpdating = ref(false)
 
 // Shared state between the two editor components.
 const clearEditorContent = ref(false)
@@ -164,6 +227,10 @@ const handleAiPromptSelected = async (key) => {
       timestamp: Date.now()
     })
   } catch (error) {
+    // Check if user needs to enter OpenAI API key and has permission to do so.
+    if (error.response?.status === 400 && userStore.can('ai:manage')) {
+      openAIKeyPrompt.value = true
+    }
     emitter.emit(EMITTER_EVENTS.SHOW_TOAST, {
       title: 'Error',
       variant: 'destructive',
@@ -172,6 +239,30 @@ const handleAiPromptSelected = async (key) => {
   }
 }
 
+/**
+ * updateProvider updates the OpenAI API key.
+ * @param {Object} values - The form values containing the API key
+ */
+const updateProvider = async (values) => {
+  try {
+    isOpenAIKeyUpdating.value = true
+    await api.updateAIProvider({ api_key: values.apiKey, provider: 'openai' })
+    openAIKeyPrompt.value = false
+    emitter.emit(EMITTER_EVENTS.SHOW_TOAST, {
+      title: 'Success',
+      description: 'API key saved successfully.'
+    })
+  } catch (error) {
+    emitter.emit(EMITTER_EVENTS.SHOW_TOAST, {
+      title: 'Error',
+      variant: 'destructive',
+      description: handleHTTPError(error).message
+    })
+  } finally {
+    isOpenAIKeyUpdating.value = false
+  }
+}
+
 /**
  * Handles the file upload process when files are selected.
  * Uploads each file to the server and adds them to the conversation's mediaFiles.
diff --git a/internal/ai/ai.go b/internal/ai/ai.go
index e4e7795..c4f352a 100644
--- a/internal/ai/ai.go
+++ b/internal/ai/ai.go
@@ -5,6 +5,7 @@ import (
 	"database/sql"
 	"embed"
 	"encoding/json"
+	"errors"
 
 	"github.com/abhinavxd/libredesk/internal/ai/models"
 	"github.com/abhinavxd/libredesk/internal/dbutil"
@@ -16,6 +17,9 @@ import (
 var (
 	//go:embed queries.sql
 	efs embed.FS
+
+	ErrInvalidAPIKey = errors.New("invalid API Key")
+	ErrApiKeyNotSet  = errors.New("api Key not set")
 )
 
 // Manager manages LLM providers.
@@ -35,6 +39,7 @@ type queries struct {
 	GetDefaultProvider *sqlx.Stmt `query:"get-default-provider"`
 	GetPrompt          *sqlx.Stmt `query:"get-prompt"`
 	GetPrompts         *sqlx.Stmt `query:"get-prompts"`
+	SetOpenAIKey       *sqlx.Stmt `query:"set-openai-key"`
 }
 
 // New creates and returns a new instance of the Manager.
@@ -69,6 +74,14 @@ func (m *Manager) Completion(k string, prompt string) (string, error) {
 
 	response, err := client.SendPrompt(payload)
 	if err != nil {
+		if errors.Is(err, ErrInvalidAPIKey) {
+			m.lo.Error("error invalid API key", "error", err)
+			return "", envelope.NewError(envelope.InputError, "OpenAI API Key is invalid, Please ask your administrator to set it up", nil)
+		}
+		if errors.Is(err, ErrApiKeyNotSet) {
+			m.lo.Error("error API key not set", "error", err)
+			return "", envelope.NewError(envelope.InputError, "OpenAI API Key is not set, Please ask your administrator to set it up", nil)
+		}
 		m.lo.Error("error sending prompt to provider", "error", err)
 		return "", envelope.NewError(envelope.GeneralError, err.Error(), nil)
 	}
@@ -86,6 +99,26 @@ func (m *Manager) GetPrompts() ([]models.Prompt, error) {
 	return prompts, nil
 }
 
+// UpdateProvider updates a provider.
+func (m *Manager) UpdateProvider(provider, apiKey string) error {
+	switch ProviderType(provider) {
+	case ProviderOpenAI:
+		return m.setOpenAIAPIKey(apiKey)
+	default:
+		m.lo.Error("unsupported provider type", "provider", provider)
+		return envelope.NewError(envelope.GeneralError, "Unsupported provider type", nil)
+	}
+}
+
+// setOpenAIAPIKey sets the OpenAI API key in the database.
+func (m *Manager) setOpenAIAPIKey(apiKey string) error {
+	if _, err := m.q.SetOpenAIKey.Exec(apiKey); err != nil {
+		m.lo.Error("error setting OpenAI API key", "error", err)
+		return envelope.NewError(envelope.GeneralError, "Error setting OpenAI API key", nil)
+	}
+	return nil
+}
+
 // getPrompt returns a prompt from the database.
 func (m *Manager) getPrompt(k string) (string, error) {
 	var p models.Prompt
diff --git a/internal/ai/openai.go b/internal/ai/openai.go
index 8be93e7..28d959b 100644
--- a/internal/ai/openai.go
+++ b/internal/ai/openai.go
@@ -8,6 +8,7 @@ import (
 	"net/http"
 	"time"
 
+	"github.com/valyala/fasthttp"
 	"github.com/zerodha/logf"
 )
 
@@ -28,7 +29,7 @@ func NewOpenAIClient(apiKey string, lo *logf.Logger) *OpenAIClient {
 // SendPrompt sends a prompt to the OpenAI API and returns the response text.
 func (o *OpenAIClient) SendPrompt(payload PromptPayload) (string, error) {
 	if o.apikey == "" {
-		return "", fmt.Errorf("OpenAI API key is not set, Please ask your administrator to set the key")
+		return "", ErrApiKeyNotSet
 	}
 
 	apiURL := "https://api.openai.com/v1/chat/completions"
@@ -48,7 +49,7 @@ func (o *OpenAIClient) SendPrompt(payload PromptPayload) (string, error) {
 		return "", fmt.Errorf("marshalling request body: %w", err)
 	}
 
-	req, err := http.NewRequest("POST", apiURL, bytes.NewBuffer(bodyBytes))
+	req, err := http.NewRequest(fasthttp.MethodPost, apiURL, bytes.NewBuffer(bodyBytes))
 	if err != nil {
 		o.lo.Error("error creating request", "error", err)
 		return "", fmt.Errorf("error creating request: %w", err)
@@ -65,11 +66,12 @@ func (o *OpenAIClient) SendPrompt(payload PromptPayload) (string, error) {
 	defer resp.Body.Close()
 
 	if resp.StatusCode == http.StatusUnauthorized {
-		return "", fmt.Errorf("OpenAI API key is invalid, Please ask your administrator to update the key")
+		return "", ErrInvalidAPIKey
 	}
 
 	if resp.StatusCode != http.StatusOK {
 		body, _ := io.ReadAll(resp.Body)
+		o.lo.Error("non-ok response received from openai API", "status", resp.Status, "code", resp.StatusCode, "response_text", body)
 		return "", fmt.Errorf("API error: %s, body: %s", resp.Status, body)
 	}
 
diff --git a/internal/ai/queries.sql b/internal/ai/queries.sql
index f1d2b3b..69a22c2 100644
--- a/internal/ai/queries.sql
+++ b/internal/ai/queries.sql
@@ -5,4 +5,13 @@ SELECT id, name, provider, config, is_default FROM ai_providers where is_default
 SELECT id, key, title, content FROM ai_prompts where key = $1;
 
 -- name: get-prompts
-SELECT id, key, title FROM ai_prompts order by title;
\ No newline at end of file
+SELECT id, key, title FROM ai_prompts order by title;
+
+-- name: set-openai-key
+UPDATE ai_providers 
+SET config = jsonb_set(
+    COALESCE(config, '{}'::jsonb),
+    '{api_key}', 
+    to_jsonb($1::text)
+) 
+WHERE provider = 'openai';
diff --git a/internal/authz/models/models.go b/internal/authz/models/models.go
index ceca36d..e47c22e 100644
--- a/internal/authz/models/models.go
+++ b/internal/authz/models/models.go
@@ -62,6 +62,9 @@ const (
 
 	// OpenID Connect SSO
 	PermOIDCManage = "oidc:manage"
+
+	// AI
+	PermAIManage = "ai:manage"
 )
 
 var validPermissions = map[string]struct{}{
@@ -93,6 +96,7 @@ var validPermissions = map[string]struct{}{
 	PermGeneralSettingsManage:           {},
 	PermNotificationSettingsManage:      {},
 	PermOIDCManage:                      {},
+	PermAIManage:                        {},
 }
 
 // IsValidPermission returns true if it's a valid permission.
diff --git a/internal/migrations/v0.4.0.go b/internal/migrations/v0.4.0.go
new file mode 100644
index 0000000..5ee8a0c
--- /dev/null
+++ b/internal/migrations/v0.4.0.go
@@ -0,0 +1,18 @@
+package migrations
+
+import (
+	"github.com/jmoiron/sqlx"
+	"github.com/knadh/koanf/v2"
+	"github.com/knadh/stuffbin"
+)
+
+// V0_4_0 updates the database schema to V0_4_0.
+func V0_4_0(db *sqlx.DB, fs stuffbin.FileSystem, ko *koanf.Koanf) error {
+	// Admin role gets the new ai:manage permission, as this user is supposed to have all permissions.
+	_, err := db.Exec(`
+		UPDATE roles 
+		SET permissions = array_append(permissions, 'ai:manage')
+		WHERE name = 'Admin' AND NOT ('ai:manage' = ANY(permissions));
+	`)
+	return err
+}
diff --git a/schema.sql b/schema.sql
index 67e4c3b..e2b9009 100644
--- a/schema.sql
+++ b/schema.sql
@@ -536,28 +536,30 @@ VALUES
 	(
 		'Admin',
 		'Role for users who have complete access to everything.',
-		'{general_settings:manage,notification_settings:manage,oidc:manage,conversations:read_all,conversations:read_unassigned,conversations:read_assigned,conversations:read_team_inbox,conversations:read,conversations:update_user_assignee,conversations:update_team_assignee,conversations:update_priority,conversations:update_status,conversations:update_tags,messages:read,messages:write,view:manage,status:manage,tags:manage,macros:manage,users:manage,teams:manage,automations:manage,inboxes:manage,roles:manage,reports:manage,templates:manage,business_hours:manage,sla:manage}'
+		'{ai:manage,general_settings:manage,notification_settings:manage,oidc:manage,conversations:read_all,conversations:read_unassigned,conversations:read_assigned,conversations:read_team_inbox,conversations:read,conversations:update_user_assignee,conversations:update_team_assignee,conversations:update_priority,conversations:update_status,conversations:update_tags,messages:read,messages:write,view:manage,status:manage,tags:manage,macros:manage,users:manage,teams:manage,automations:manage,inboxes:manage,roles:manage,reports:manage,templates:manage,business_hours:manage,sla:manage}'
 	);
 
 
 -- Email notification templates
-INSERT INTO public.templates
+INSERT INTO templates
 ("type", body, is_default, "name", subject, is_builtin)
-VALUES('email_notification'::public."template_type", '<p>Hello {{ .agent.full_name }},</p>
+VALUES('email_notification'::template_type, '
+<p>Hi {{ .Agent.FirstName }},</p>
 
 <p>A new conversation has been assigned to you:</p>
 
 <div>
-    Reference number: {{.conversation.reference_number }} <br>
-    Priority: {{.conversation.priority }}<br>
-    Subject: {{.conversation.subject }}
+    Reference number: {{ .Conversation.ReferenceNumber }} <br>
+    Subject: {{ .Conversation.Subject }}
 </div>
 
 <p>
-<a href="{{ RootURL }}/inboxes/assigned/conversation/{{ .conversation.uuid }}">View Conversation</a>
+    <a href="{{ RootURL }}/inboxes/assigned/conversation/{{ .Conversation.UUID }}">View Conversation</a>
 </p>
 
-<div >
+<div>
     Best regards,<br>
     Libredesk
-</div>', false, 'Conversation assigned', 'New conversation assigned to you', true);
\ No newline at end of file
+</div>
+
+', false, 'Conversation assigned', 'New conversation assigned to you', true);
\ No newline at end of file