diff --git a/src/components/Item/Item.module.scss b/src/components/Item/Item.module.scss
index f348062..32fc906 100644
--- a/src/components/Item/Item.module.scss
+++ b/src/components/Item/Item.module.scss
@@ -14,6 +14,24 @@
     opacity: calc(var(--opacity-50) / 100);
     pointer-events: none;
   }
+
+  // Compact density overrides
+  &[data-size='compact'] {
+    padding-block: var(--spacing-xs);
+    padding-inline-start: var(--spacing-md);
+
+    .content {
+      gap: var(--spacing-px);
+    }
+
+    .title {
+      @include body;
+    }
+
+    .description {
+      @include body-sm;
+    }
+  }
 }
 
 .clickable {
diff --git a/src/components/Item/Item.stories.tsx b/src/components/Item/Item.stories.tsx
index 8e5969f..132ba7a 100644
--- a/src/components/Item/Item.stories.tsx
+++ b/src/components/Item/Item.stories.tsx
@@ -13,6 +13,10 @@ const meta: Meta<typeof Item> = {
   argTypes: {
     title: { control: 'text' },
     description: { control: 'text' },
+    size: {
+      control: 'radio',
+      options: ['default', 'compact'],
+    },
     clickable: { control: 'boolean' },
     selected: { control: 'boolean' },
     disabled: { control: 'boolean' },
@@ -88,3 +92,41 @@ function SelectableListComponent() {
 export const SelectableList: Story = {
   render: () => <SelectableListComponent />,
 };
+
+const transactions = [
+  { id: 'tx-1', title: 'Payment received', description: '2 minutes ago', amount: '+$120.00' },
+  { id: 'tx-2', title: 'Invoice paid', description: '1 hour ago', amount: '-$45.50' },
+  { id: 'tx-3', title: 'Transfer sent', description: 'Yesterday', amount: '-$300.00' },
+];
+
+function SizeComparisonComponent() {
+  return (
+    <div style={{ display: 'flex', gap: 'var(--spacing-2xl)' }}>
+      {(['default', 'compact'] as const).map((size) => (
+        <div key={size} style={{ display: 'flex', flexDirection: 'column', width: 320 }}>
+          {transactions.map((transaction) => (
+            <Item
+              key={transaction.id}
+              size={size}
+              title={transaction.title}
+              description={transaction.description}
+              trailing={<span>{transaction.amount}</span>}
+            />
+          ))}
+        </div>
+      ))}
+    </div>
+  );
+}
+
+export const SizeComparison: Story = {
+  parameters: {
+    docs: {
+      description: {
+        story:
+          'Default and compact densities side by side. Compact tightens padding, gap, and type scale for dense lists such as transaction rows.',
+      },
+    },
+  },
+  render: () => <SizeComparisonComponent />,
+};
diff --git a/src/components/Item/Item.test-stories.tsx b/src/components/Item/Item.test-stories.tsx
index 0191b49..17b8bd6 100644
--- a/src/components/Item/Item.test-stories.tsx
+++ b/src/components/Item/Item.test-stories.tsx
@@ -58,6 +58,15 @@ export function NonClickableItem() {
   return <Item title="Static item" clickable={false} />;
 }
 
+// Sizes
+export function CompactItem() {
+  return <Item title="Payment received" description="2 minutes ago" size="compact" />;
+}
+
+export function DefaultSizeItem() {
+  return <Item title="Payment received" description="2 minutes ago" />;
+}
+
 // States
 export function SelectedItem() {
   return (
diff --git a/src/components/Item/Item.test.tsx b/src/components/Item/Item.test.tsx
index e3ce687..053011e 100644
--- a/src/components/Item/Item.test.tsx
+++ b/src/components/Item/Item.test.tsx
@@ -5,6 +5,8 @@ import {
   ItemWithLeading,
   ItemWithTrailing,
   ItemWithBothSlots,
+  CompactItem,
+  DefaultSizeItem,
   ClickableItem,
   NonClickableItem,
   SelectedItem,
@@ -49,6 +51,19 @@ test.describe('Item', () => {
     });
   });
 
+  test.describe('Sizes', () => {
+    test('compact item has data-size="compact"', async ({ mount, page }) => {
+      await mount(<CompactItem />);
+      await expect(page.locator('[data-size="compact"]')).toBeVisible();
+    });
+
+    test('default item has no data-size attribute', async ({ mount, page }) => {
+      await mount(<DefaultSizeItem />);
+      await expect(page.getByText('Payment received')).toBeVisible();
+      await expect(page.locator('[data-size]')).toHaveCount(0);
+    });
+  });
+
   test.describe('Clickable behavior', () => {
     test('clickable item responds to click', async ({ mount, page }) => {
       await mount(<ClickableItem />);
diff --git a/src/components/Item/Item.tsx b/src/components/Item/Item.tsx
index cbf042e..64b677d 100644
--- a/src/components/Item/Item.tsx
+++ b/src/components/Item/Item.tsx
@@ -4,12 +4,16 @@ import * as React from 'react';
 import clsx from 'clsx';
 import styles from './Item.module.scss';
 
+export type ItemSize = 'default' | 'compact';
+
 export interface ItemProps extends Omit<React.ComponentPropsWithoutRef<'div'>, 'title'> {
   title: string;
   description?: string;
   leading?: React.ReactNode;
   trailing?: React.ReactNode;
   trailingPadding?: 'sm' | 'lg';
+  /** Item density — compact reduces padding and type scale for dense lists */
+  size?: ItemSize;
   clickable?: boolean;
   selected?: boolean;
   disabled?: boolean;
@@ -24,6 +28,7 @@ export const Item = React.forwardRef<HTMLDivElement, ItemProps>(
       leading,
       trailing,
       trailingPadding,
+      size = 'default',
       clickable = true,
       selected,
       disabled,
@@ -51,6 +56,7 @@ export const Item = React.forwardRef<HTMLDivElement, ItemProps>(
     const itemProps = {
       ref: forwardedRef,
       className: clsx(styles.root, clickable && styles.clickable, className),
+      'data-size': size !== 'default' ? size : undefined,
       'data-clickable': clickable ? undefined : 'false',
       'data-selected': selected || undefined,
       'data-disabled': disabled || undefined,
diff --git a/src/components/Item/index.ts b/src/components/Item/index.ts
index e4f285d..6f6e98a 100644
--- a/src/components/Item/index.ts
+++ b/src/components/Item/index.ts
@@ -1,2 +1,2 @@
 export { Item } from './Item';
-export type { ItemProps } from './Item';
+export type { ItemProps, ItemSize } from './Item';
diff --git a/src/index.ts b/src/index.ts
index 282bb56..9a36231 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -186,7 +186,7 @@ export type { CentralIconName, CentralIconProps } from './components/Icon';
 
 export { Input, type InputProps } from './components/Input';
 
-export { Item, type ItemProps } from './components/Item';
+export { Item, type ItemProps, type ItemSize } from './components/Item';
 
 export { Logo } from './components/Logo';
 export type { LogoProps } from './components/Logo';