diff --git a/litellm/integrations/otel/model/config.py b/litellm/integrations/otel/model/config.py
index a109ba898ff..991b156ae64 100644
--- a/litellm/integrations/otel/model/config.py
+++ b/litellm/integrations/otel/model/config.py
@@ -1,6 +1,7 @@
 """Typed configuration for the OpenTelemetry instrumentation."""
 
 from enum import Enum
+from functools import lru_cache
 from typing import Any, List
 
 from pydantic import AliasChoices, BaseModel, Field, field_validator, model_validator
@@ -47,7 +48,12 @@ class _OTelV2Flag(BaseSettings):
     enabled: bool = Field(default=False, validation_alias=AliasChoices(OTEL_V2_ENV))
 
 
+@lru_cache(maxsize=1)
 def is_otel_v2_enabled() -> bool:
+    # Resolved once at startup and cached: constructing the pydantic-settings
+    # model re-scans the environment and cost ~28us, which on the proxy hot path
+    # (auth, logging-callback setup) compounded into a measurable throughput
+    # regression. Tests that toggle the env must call ``is_otel_v2_enabled.cache_clear()``.
     return _OTelV2Flag().enabled
 
 
diff --git a/tests/test_litellm/integrations/otel/test_otel_v2_mount.py b/tests/test_litellm/integrations/otel/test_otel_v2_mount.py
index 956d8c53cee..7240d49d022 100644
--- a/tests/test_litellm/integrations/otel/test_otel_v2_mount.py
+++ b/tests/test_litellm/integrations/otel/test_otel_v2_mount.py
@@ -35,6 +35,13 @@ from litellm.integrations.otel.mount import (  # noqa: E402
 )
 
 
+@pytest.fixture(autouse=True)
+def _clear_otel_v2_flag_cache():
+    is_otel_v2_enabled.cache_clear()
+    yield
+    is_otel_v2_enabled.cache_clear()
+
+
 class _FakeSpan:
     """Minimal recording span capturing what the hook writes."""
 
@@ -70,8 +77,10 @@ def _instrumented_app():
 def test_gate_toggles_with_env(monkeypatch):
     """The startup mount is guarded by this flag."""
     monkeypatch.delenv("LITELLM_OTEL_V2", raising=False)
+    is_otel_v2_enabled.cache_clear()
     assert is_otel_v2_enabled() is False
     monkeypatch.setenv("LITELLM_OTEL_V2", "1")
+    is_otel_v2_enabled.cache_clear()
     assert is_otel_v2_enabled() is True
 
 
diff --git a/tests/test_litellm/integrations/otel/test_otel_v2_sources_of_truth.py b/tests/test_litellm/integrations/otel/test_otel_v2_sources_of_truth.py
index 3447f5bdb7e..4bb26a70b02 100644
--- a/tests/test_litellm/integrations/otel/test_otel_v2_sources_of_truth.py
+++ b/tests/test_litellm/integrations/otel/test_otel_v2_sources_of_truth.py
@@ -1,6 +1,8 @@
 """Tests for the OTel v2 sources of truth: span registry, semconv keys, config,
 and the typed StandardLoggingPayload adapter. These need no OTel SDK."""
 
+import pytest
+
 from litellm.integrations.otel import (
     BAGGAGE_PROMOTED_KEYS,
     DB,
@@ -28,6 +30,13 @@ from litellm.integrations.otel.model.spans import (
 )
 
 
+@pytest.fixture(autouse=True)
+def _clear_otel_v2_flag_cache():
+    is_otel_v2_enabled.cache_clear()
+    yield
+    is_otel_v2_enabled.cache_clear()
+
+
 def _sample_payload(**overrides):
     payload = {
         "call_type": "acompletion",
@@ -561,11 +570,37 @@ def test_capture_message_content_normalizer_only_touches_strings():
 
 def test_v2_flag_is_off_by_default(monkeypatch):
     monkeypatch.delenv("LITELLM_OTEL_V2", raising=False)
+    is_otel_v2_enabled.cache_clear()
     assert is_otel_v2_enabled() is False
     monkeypatch.setenv("LITELLM_OTEL_V2", "true")
+    is_otel_v2_enabled.cache_clear()
     assert is_otel_v2_enabled() is True
 
 
+def test_v2_flag_resolved_once_not_per_call(monkeypatch):
+    """Regression for LIT-3895: ``is_otel_v2_enabled`` sits on the proxy hot path
+    (auth, logging-callback setup). Building the pydantic-settings model on every
+    call re-scanned the environment at ~28us a pop and dropped throughput, so the
+    flag must be resolved once and cached rather than reconstructed per call."""
+    from litellm.integrations.otel.model import config as config_mod
+
+    constructions = 0
+    real_flag = config_mod._OTelV2Flag
+
+    def _counting_flag(*args, **kwargs):
+        nonlocal constructions
+        constructions += 1
+        return real_flag(*args, **kwargs)
+
+    monkeypatch.setattr(config_mod, "_OTelV2Flag", _counting_flag)
+    config_mod.is_otel_v2_enabled.cache_clear()
+
+    for _ in range(50):
+        config_mod.is_otel_v2_enabled()
+
+    assert constructions == 1
+
+
 def test_config_from_env(monkeypatch):
     for var in (
         "OTEL_EXPORTER",