diff --git a/libs/backend-apisix/e2e/resources/service-upstream.e2e-spec.ts b/libs/backend-apisix/e2e/resources/service-upstream.e2e-spec.ts
index 15e0f135..305b174a 100644
--- a/libs/backend-apisix/e2e/resources/service-upstream.e2e-spec.ts
+++ b/libs/backend-apisix/e2e/resources/service-upstream.e2e-spec.ts
@@ -1,3 +1,4 @@
+import { Differ } from '@api7/adc-differ';
 import * as ADCSDK from '@api7/adc-sdk';
 
 import { BackendAPISIX } from '../../src';
@@ -22,6 +23,143 @@ describe('Service-Upstreams E2E', () => {
     });
   });
 
+  describe('Service inline upstream', () => {
+    const serviceName = 'test-inline-upstream';
+    const service = {
+      name: serviceName,
+      upstream: {
+        type: 'roundrobin',
+        nodes: [
+          {
+            host: 'httpbin.org',
+            port: 443,
+            weight: 100,
+          },
+        ],
+      },
+    } satisfies ADCSDK.Service;
+
+    it('Create service with inline upstream', async () =>
+      syncEvents(backend, Differ.diff({ services: [service] }, {})));
+
+    it('Dump (inline upstream should exist)', async () => {
+      const result = await dumpConfiguration(backend);
+      const testService = result.services?.find((s) => s.name === serviceName);
+      expect(testService).toBeDefined();
+      expect(testService?.upstream).toMatchObject({
+        type: 'roundrobin',
+        nodes: [
+          {
+            host: 'httpbin.org',
+            port: 443,
+            weight: 100,
+          },
+        ],
+      });
+      // Verify that inline upstream has no id and name
+      expect(testService?.upstream?.id).toBeUndefined();
+      expect(testService?.upstream?.name).toBeUndefined();
+    });
+
+    const updatedService = {
+      name: serviceName,
+      upstream: {
+        type: 'roundrobin',
+        nodes: [
+          {
+            host: 'httpbin.org',
+            port: 443,
+            weight: 50,
+          },
+          {
+            host: 'example.com',
+            port: 80,
+            weight: 50,
+          },
+        ],
+      },
+    } satisfies ADCSDK.Service;
+    it('Update service inline upstream', async () =>
+      syncEvents(
+        backend,
+        Differ.diff(
+          { services: [updatedService] },
+          await dumpConfiguration(backend),
+        ),
+      ));
+
+    it('Dump (inline upstream should be updated)', async () => {
+      const result = await dumpConfiguration(backend);
+      const testService = result.services?.find((s) => s.name === serviceName);
+      expect(testService).toBeDefined();
+      expect(testService?.upstream?.nodes).toHaveLength(2);
+      expect(testService?.upstream).toMatchObject(updatedService.upstream);
+      // Verify that inline upstream still has no id and name
+      expect(testService?.upstream?.id).toBeUndefined();
+      expect(testService?.upstream?.name).toBeUndefined();
+    });
+
+    const serviceWithoutUpstream = {
+      name: serviceName,
+      hosts: ['test.example.com'],
+    } satisfies ADCSDK.Service;
+    it('Update service to remove inline upstream', async () =>
+      syncEvents(
+        backend,
+        Differ.diff(
+          { services: [serviceWithoutUpstream] },
+          await dumpConfiguration(backend),
+        ),
+      ));
+
+    it('Dump (inline upstream should be removed)', async () => {
+      const result = await dumpConfiguration(backend);
+      const testService = result.services?.find((s) => s.name === serviceName);
+      expect(testService).toBeDefined();
+      expect(testService?.upstream).toBeUndefined();
+      expect(testService?.hosts).toEqual(['test.example.com']);
+    });
+
+    const serviceForDeletion = {
+      name: serviceName,
+      hosts: ['test.example.com'],
+      upstream: {
+        type: 'roundrobin',
+        nodes: [
+          {
+            host: 'httpbin.org',
+            port: 443,
+            weight: 100,
+          },
+        ],
+      },
+    } satisfies ADCSDK.Service;
+    it('Re-add inline upstream for deletion test', async () =>
+      syncEvents(
+        backend,
+        Differ.diff(
+          { services: [serviceForDeletion] },
+          await dumpConfiguration(backend),
+        ),
+      ));
+
+    it('Dump (inline upstream should exist again)', async () => {
+      const result = await dumpConfiguration(backend);
+      const testService = result.services?.find((s) => s.name === serviceName);
+      expect(testService).toBeDefined();
+      expect(testService?.upstream).toBeDefined();
+    });
+
+    it('Delete service with inline upstream', async () =>
+      syncEvents(backend, Differ.diff({}, await dumpConfiguration(backend))));
+
+    it('Dump again (service should not exist)', async () => {
+      const result = await dumpConfiguration(backend);
+      const testService = result.services?.find((s) => s.name === serviceName);
+      expect(testService).toBeUndefined();
+    });
+  });
+
   describe('Service multiple upstreams', () => {
     const serviceName = 'test';
     const service = {
diff --git a/libs/backend-apisix/package.json b/libs/backend-apisix/package.json
index b57d2037..3e8960b1 100644
--- a/libs/backend-apisix/package.json
+++ b/libs/backend-apisix/package.json
@@ -9,7 +9,8 @@
     }
   },
   "devDependencies": {
-    "@api7/adc-sdk": "workspace:*"
+    "@api7/adc-sdk": "workspace:*",
+    "@api7/adc-differ": "workspace:*"
   },
   "nx": {
     "name": "backend-apisix",
diff --git a/libs/backend-apisix/src/fetcher.ts b/libs/backend-apisix/src/fetcher.ts
index 78b78309..1c88f05e 100644
--- a/libs/backend-apisix/src/fetcher.ts
+++ b/libs/backend-apisix/src/fetcher.ts
@@ -1,6 +1,7 @@
 import * as ADCSDK from '@api7/adc-sdk';
 import { type AxiosInstance } from 'axios';
 import { produce } from 'immer';
+import { unset } from 'lodash';
 import {
   Subject,
   combineLatest,
@@ -271,6 +272,8 @@ export class Fetcher extends ADCSDK.backend.BackendEventSource {
               produce(service, (serviceDraft) => {
                 if (service.upstream_id)
                   serviceDraft.upstream = upstreamIdMap[service.upstream_id];
+                unset(serviceDraft, 'upstream.id');
+                unset(serviceDraft, 'upstream.name');
                 if (upstreamServiceIdMap[service.id])
                   serviceDraft.upstreams = upstreamServiceIdMap[service.id];
               }),
diff --git a/libs/backend-apisix/src/operator.ts b/libs/backend-apisix/src/operator.ts
index 25789ef5..ebae40ce 100644
--- a/libs/backend-apisix/src/operator.ts
+++ b/libs/backend-apisix/src/operator.ts
@@ -6,11 +6,13 @@ import {
   Subject,
   catchError,
   concatMap,
+  delay,
   from,
   map,
   mergeMap,
   of,
   reduce,
+  retry,
   tap,
   throwError,
 } from 'rxjs';
@@ -43,6 +45,11 @@ export class Operator extends ADCSDK.backend.BackendEventSource {
         : `${resourceTypeToAPIName(resourceType)}/${resourceId}`
     }`;
 
+    // Handle service operations separately
+    if (resourceType === ADCSDK.ResourceType.SERVICE) {
+      return this.operateService(event, path);
+    }
+
     return from(
       this.client.request({
         method: 'DELETE',
@@ -55,6 +62,123 @@ export class Operator extends ADCSDK.backend.BackendEventSource {
     );
   }
 
+  private operateService(event: ADCSDK.Event, servicePath: string) {
+    const { type } = event;
+
+    // Handle service deletion
+    if (type === ADCSDK.EventType.DELETE) {
+      // Delete service with upstream: delete service first, then upstream
+      if (event.oldValue && (event.oldValue as ADCSDK.Service).upstream) {
+        return this.deleteServiceWithUpstream(event, servicePath);
+      }
+      return from(this.client.request({ url: servicePath, method: 'DELETE' }));
+    }
+
+    // Handle service create/update
+    const data = this.fromADC(event, this.opts.version) as typing.Service;
+    const oldUpstream = event.oldValue
+      ? (event.oldValue as ADCSDK.Service).upstream
+      : undefined;
+    const newUpstream = (event.newValue as ADCSDK.Service).upstream;
+
+    // oldValue has upstream, newValue doesn't -> delete upstream
+    if (oldUpstream && !newUpstream) {
+      return this.deleteUpstreamThenUpdateService(event, data, servicePath);
+    }
+
+    // newValue has upstream -> create/update upstream
+    if (newUpstream) {
+      return this.upsertServiceWithUpstream(event, data, servicePath);
+    }
+
+    // Service without upstream
+    return from(this.client.request({ url: servicePath, method: 'PUT', data }));
+  }
+
+  private getUpstreamUrl(upstreamId: string) {
+    return `/apisix/admin/upstreams/${upstreamId}`;
+  }
+
+  private upsertServiceWithUpstream(
+    event: ADCSDK.Event,
+    data: typing.Service,
+    servicePath: string,
+  ) {
+    // Create/Update upstream first, then service
+    return from(
+      this.client.request({
+        url: this.getUpstreamUrl(event.resourceId),
+        method: 'PUT',
+        data: {
+          ...data.upstream,
+          id: event.resourceId,
+          name: event.resourceName,
+        },
+      }),
+    ).pipe(
+      concatMap(() =>
+        this.client.request({
+          url: servicePath,
+          method: 'PUT',
+          data: { ...data, upstream: undefined, upstream_id: event.resourceId },
+        }),
+      ),
+    );
+  }
+
+  private deleteUpstreamWithRetry(upstreamId: string) {
+    return from(
+      this.client.request({
+        url: this.getUpstreamUrl(upstreamId),
+        method: 'DELETE',
+      }),
+    ).pipe(
+      retry({
+        count: 3,
+        delay: (error: Error | AxiosError, retryCount: number) => {
+          if (
+            axios.isAxiosError(error) &&
+            error.response?.data?.error_msg?.includes('is still using it')
+          ) {
+            return of(null).pipe(delay(100 * Math.pow(2, retryCount - 1)));
+          }
+          return throwError(() => error);
+        },
+      }),
+    );
+  }
+
+  private deleteServiceWithUpstream(event: ADCSDK.Event, servicePath: string) {
+    return this.executeServiceOpThenDeleteUpstream(
+      { url: servicePath, method: 'DELETE' },
+      event.resourceId,
+    );
+  }
+
+  private deleteUpstreamThenUpdateService(
+    event: ADCSDK.Event,
+    data: typing.Service,
+    servicePath: string,
+  ) {
+    return this.executeServiceOpThenDeleteUpstream(
+      { url: servicePath, method: 'PUT', data },
+      event.resourceId,
+    );
+  }
+
+  private executeServiceOpThenDeleteUpstream(
+    serviceRequest: {
+      url: string;
+      method: 'DELETE' | 'PUT';
+      data?: typing.Service;
+    },
+    upstreamId: string,
+  ) {
+    return from(this.client.request(serviceRequest)).pipe(
+      concatMap(() => this.deleteUpstreamWithRetry(upstreamId)),
+    );
+  }
+
   public sync(
     events: Array<ADCSDK.Event>,
     opts: ADCSDK.BackendSyncOptions = { exitOnFailure: true },
diff --git a/libs/backend-apisix/src/transformer.ts b/libs/backend-apisix/src/transformer.ts
index a577b51c..e22a30fc 100644
--- a/libs/backend-apisix/src/transformer.ts
+++ b/libs/backend-apisix/src/transformer.ts
@@ -47,7 +47,9 @@ export class ToADC {
 
       hosts: service.hosts,
 
-      upstream: this.transformUpstream(service.upstream),
+      upstream: service.upstream
+        ? this.transformUpstream(service.upstream)
+        : undefined,
       upstreams: service.upstreams,
       plugins: service.plugins,
     } as ADCSDK.Service);
@@ -282,7 +284,9 @@ export class FromADC {
       name: service.name,
       desc: service.description,
       labels: FromADC.transformLabels(service.labels),
-      upstream: this.transformUpstream(service.upstream),
+      upstream: service.upstream
+        ? this.transformUpstream(service.upstream)
+        : undefined,
       plugins: service.plugins,
       hosts: service.hosts,
     });
diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml
index a65f9849..9afd19b9 100644
--- a/pnpm-lock.yaml
+++ b/pnpm-lock.yaml
@@ -86,7 +86,7 @@ importers:
         version: 21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(@types/node@22.16.5)(@zkochan/js-yaml@0.0.7)(babel-plugin-macros@3.1.0)(eslint@9.33.0(jiti@2.4.2))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))(ts-node@10.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@types/node@22.16.5)(typescript@5.8.3))(typescript@5.8.3)
       '@nx/vite':
         specifier: 21.4.1
-        version: 21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))(typescript@5.8.3)(vite@6.3.5(@types/node@22.16.5)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))(vitest@3.2.4)
+        version: 21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))(typescript@5.8.3)(vite@6.3.5(@types/node@22.16.5)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))(vitest@3.2.4(@types/node@22.16.5)(@vitest/ui@3.2.4)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))
       '@nx/web':
         specifier: 21.4.1
         version: 21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))
@@ -146,7 +146,7 @@ importers:
         version: 8.41.0(eslint@9.33.0(jiti@2.4.2))(typescript@5.8.3)
       '@vitest/coverage-v8':
         specifier: ^3.0.5
-        version: 3.2.4(vitest@3.2.4)
+        version: 3.2.4(vitest@3.2.4(@types/node@22.16.5)(@vitest/ui@3.2.4)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))
       '@vitest/ui':
         specifier: ^3.0.0
         version: 3.2.4(vitest@3.2.4)
@@ -247,6 +247,9 @@ importers:
 
   libs/backend-apisix:
     devDependencies:
+      '@api7/adc-differ':
+        specifier: workspace:*
+        version: link:../differ
       '@api7/adc-sdk':
         specifier: workspace:*
         version: link:../sdk
@@ -286,12 +289,6 @@ importers:
 
   libs/sdk: {}
 
-  libs/tstetsetse:
-    dependencies:
-      tslib:
-        specifier: ^2.3.0
-        version: 2.6.3
-
 packages:
 
   '@ampproject/remapping@2.3.0':
@@ -8378,7 +8375,7 @@ snapshots:
   '@nx/nx-win32-x64-msvc@21.4.1':
     optional: true
 
-  '@nx/vite@21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))(typescript@5.8.3)(vite@6.3.5(@types/node@22.16.5)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))(vitest@3.2.4)':
+  '@nx/vite@21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))(typescript@5.8.3)(vite@6.3.5(@types/node@22.16.5)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))(vitest@3.2.4(@types/node@22.16.5)(@vitest/ui@3.2.4)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))':
     dependencies:
       '@nx/devkit': 21.4.1(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))
       '@nx/js': 21.4.1(@babel/traverse@7.28.0)(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17))(nx@21.4.1(@swc-node/register@1.9.2(@swc/core@1.13.5(@swc/helpers@0.5.17))(@swc/types@0.1.24)(typescript@5.8.3))(@swc/core@1.13.5(@swc/helpers@0.5.17)))
@@ -9217,7 +9214,7 @@ snapshots:
   '@unrs/resolver-binding-win32-x64-msvc@1.11.1':
     optional: true
 
-  '@vitest/coverage-v8@3.2.4(vitest@3.2.4)':
+  '@vitest/coverage-v8@3.2.4(vitest@3.2.4(@types/node@22.16.5)(@vitest/ui@3.2.4)(jiti@2.4.2)(less@4.1.3)(sass-embedded@1.86.0)(sass@1.86.0)(terser@5.39.1)(yaml@2.8.0))':
     dependencies:
       '@ampproject/remapping': 2.3.0
       '@bcoe/v8-coverage': 1.0.2