diff --git a/examples/doc-examples/example_net_stream.py b/examples/doc-examples/example_net_stream.py
new file mode 100644
index 00000000..62dff05e
--- /dev/null
+++ b/examples/doc-examples/example_net_stream.py
@@ -0,0 +1,262 @@
+"""
+Enhanced NetStream Example for py-libp2p with State Management
+
+This example demonstrates the new NetStream features including:
+- State tracking and transitions
+- Proper error handling and validation
+- Resource cleanup and event notifications
+- Thread-safe operations with Trio locks
+
+Based on the standard echo demo but enhanced to show NetStream state management.
+"""
+
+import argparse
+import random
+import secrets
+
+import multiaddr
+import trio
+
+from libp2p import (
+    new_host,
+)
+from libp2p.crypto.secp256k1 import (
+    create_new_key_pair,
+)
+from libp2p.custom_types import (
+    TProtocol,
+)
+from libp2p.network.stream.exceptions import (
+    StreamClosed,
+    StreamEOF,
+    StreamReset,
+)
+from libp2p.network.stream.net_stream import (
+    NetStream,
+    StreamState,
+)
+from libp2p.peer.peerinfo import (
+    info_from_p2p_addr,
+)
+
+PROTOCOL_ID = TProtocol("/echo/1.0.0")
+
+
+async def enhanced_echo_handler(stream: NetStream) -> None:
+    """
+    Enhanced echo handler that demonstrates NetStream state management.
+    """
+    print(f"New connection established: {stream}")
+    print(f"Initial stream state: {await stream.state}")
+
+    try:
+        # Verify stream is in expected initial state
+        assert await stream.state == StreamState.OPEN
+        assert await stream.is_readable()
+        assert await stream.is_writable()
+        print("✓ Stream initialized in OPEN state")
+
+        # Read incoming data with proper state checking
+        print("Waiting for client data...")
+
+        while await stream.is_readable():
+            try:
+                # Read data from client
+                data = await stream.read(1024)
+                if not data:
+                    print("Received empty data, client may have closed")
+                    break
+
+                print(f"Received: {data.decode('utf-8').strip()}")
+
+                # Check if we can still write before echoing
+                if await stream.is_writable():
+                    await stream.write(data)
+                    print(f"Echoed: {data.decode('utf-8').strip()}")
+                else:
+                    print("Cannot echo - stream not writable")
+                    break
+
+            except StreamEOF:
+                print("Client closed their write side (EOF)")
+                break
+            except StreamReset:
+                print("Stream was reset by client")
+                return
+            except StreamClosed as e:
+                print(f"Stream operation failed: {e}")
+                break
+
+        # Demonstrate graceful closure
+        current_state = await stream.state
+        print(f"Current state before close: {current_state}")
+
+        if current_state not in [StreamState.CLOSE_BOTH, StreamState.RESET]:
+            await stream.close()
+            print("Server closed write side")
+
+        final_state = await stream.state
+        print(f"Final stream state: {final_state}")
+
+    except Exception as e:
+        print(f"Handler error: {e}")
+        # Reset stream on unexpected errors
+        if await stream.state not in [StreamState.RESET, StreamState.CLOSE_BOTH]:
+            await stream.reset()
+            print("Stream reset due to error")
+
+
+async def enhanced_client_demo(stream: NetStream) -> None:
+    """
+    Enhanced client that demonstrates various NetStream state scenarios.
+    """
+    print(f"Client stream established: {stream}")
+    print(f"Initial state: {await stream.state}")
+
+    try:
+        # Verify initial state
+        assert await stream.state == StreamState.OPEN
+        print("✓ Client stream in OPEN state")
+
+        # Scenario 1: Normal communication
+        message = b"Hello from enhanced NetStream client!\n"
+
+        if await stream.is_writable():
+            await stream.write(message)
+            print(f"Sent: {message.decode('utf-8').strip()}")
+        else:
+            print("Cannot write - stream not writable")
+            return
+
+        # Close write side to signal EOF to server
+        await stream.close()
+        print("Client closed write side")
+
+        # Verify state transition
+        state_after_close = await stream.state
+        print(f"State after close: {state_after_close}")
+        assert state_after_close == StreamState.CLOSE_WRITE
+        assert await stream.is_readable()  # Should still be readable
+        assert not await stream.is_writable()  # Should not be writable
+
+        # Try to write (should fail)
+        try:
+            await stream.write(b"This should fail")
+            print("ERROR: Write succeeded when it should have failed!")
+        except StreamClosed as e:
+            print(f"✓ Expected error when writing to closed stream: {e}")
+
+        # Read the echo response
+        if await stream.is_readable():
+            try:
+                response = await stream.read()
+                print(f"Received echo: {response.decode('utf-8').strip()}")
+            except StreamEOF:
+                print("Server closed their write side")
+            except StreamReset:
+                print("Stream was reset")
+
+        # Check final state
+        final_state = await stream.state
+        print(f"Final client state: {final_state}")
+
+    except Exception as e:
+        print(f"Client error: {e}")
+        # Reset on error
+        await stream.reset()
+        print("Client reset stream due to error")
+
+
+async def run_enhanced_demo(
+    port: int, destination: str, seed: int | None = None
+) -> None:
+    """
+    Run enhanced echo demo with NetStream state management.
+    """
+    listen_addr = multiaddr.Multiaddr(f"/ip4/0.0.0.0/tcp/{port}")
+
+    # Generate or use provided key
+    if seed:
+        random.seed(seed)
+        secret_number = random.getrandbits(32 * 8)
+        secret = secret_number.to_bytes(length=32, byteorder="big")
+    else:
+        secret = secrets.token_bytes(32)
+
+    host = new_host(key_pair=create_new_key_pair(secret))
+
+    async with host.run(listen_addrs=[listen_addr]):
+        print(f"Host ID: {host.get_id().to_string()}")
+        print("=" * 60)
+
+        if not destination:  # Server mode
+            print("🖥️  ENHANCED ECHO SERVER MODE")
+            print("=" * 60)
+
+            # Set the enhanced stream handler
+            host.set_stream_handler(PROTOCOL_ID, enhanced_echo_handler)
+
+            print(
+                "Run client from another console:\n"
+                f"python3 example_net_stream.py "
+                f"-d {host.get_addrs()[0]}\n"
+            )
+            print("Waiting for connections...")
+            print("Press Ctrl+C to stop server")
+            await trio.sleep_forever()
+
+        else:  # Client mode
+            print("📱 ENHANCED ECHO CLIENT MODE")
+            print("=" * 60)
+
+            # Connect to server
+            maddr = multiaddr.Multiaddr(destination)
+            info = info_from_p2p_addr(maddr)
+            await host.connect(info)
+            print(f"Connected to server: {info.peer_id.pretty()}")
+
+            # Create stream and run enhanced demo
+            stream = await host.new_stream(info.peer_id, [PROTOCOL_ID])
+            await enhanced_client_demo(stream)
+
+            print("\n" + "=" * 60)
+            print("CLIENT DEMO COMPLETE")
+
+
+def main() -> None:
+    example_maddr = (
+        "/ip4/127.0.0.1/tcp/8000/p2p/QmQn4SwGkDZKkUEpBRBvTmheQycxAHJUNmVEnjA2v1qe8Q"
+    )
+
+    parser = argparse.ArgumentParser(
+        formatter_class=argparse.RawDescriptionHelpFormatter
+    )
+    parser.add_argument("-p", "--port", default=0, type=int, help="source port number")
+    parser.add_argument(
+        "-d",
+        "--destination",
+        type=str,
+        help=f"destination multiaddr string, e.g. {example_maddr}",
+    )
+    parser.add_argument(
+        "-s",
+        "--seed",
+        type=int,
+        help="seed for deterministic peer ID generation",
+    )
+    parser.add_argument(
+        "--demo-states", action="store_true", help="run state transition demo only"
+    )
+
+    args = parser.parse_args()
+
+    try:
+        trio.run(run_enhanced_demo, args.port, args.destination, args.seed)
+    except KeyboardInterrupt:
+        print("\n👋 Demo interrupted by user")
+    except Exception as e:
+        print(f"❌ Demo failed: {e}")
+
+
+if __name__ == "__main__":
+    main()
diff --git a/libp2p/network/stream/net_stream.py b/libp2p/network/stream/net_stream.py
index 5b1e2668..073abfb4 100644
--- a/libp2p/network/stream/net_stream.py
+++ b/libp2p/network/stream/net_stream.py
@@ -39,7 +39,67 @@ class StreamState(Enum):
 
 
 class NetStream(INetStream):
-    """Class representing NetStream Handler"""
+    """
+    Summary
+    _______
+    A Network stream implementation.
+
+    NetStream wraps a muxed stream and provides proper state tracking, resource cleanup,
+    and event notification capabilities.
+
+    State Machine
+    _____________
+
+    .. code:: markdown
+
+        [CREATED] → OPEN → CLOSE_READ → CLOSE_BOTH → [CLEANUP]
+                      ↓         ↗           ↗
+                 CLOSE_WRITE → ←          ↗
+                      ↓                   ↗
+                    RESET → → → → → → → →
+
+    State Transitions
+    _________________
+        - OPEN → CLOSE_READ: EOF encountered during read()
+        - OPEN → CLOSE_WRITE: Explicit close() call
+        - OPEN → RESET: reset() call or critical stream error
+        - CLOSE_READ → CLOSE_BOTH: Explicit close() call
+        - CLOSE_WRITE → CLOSE_BOTH: EOF encountered during read()
+        - Any state → RESET: reset() call
+
+    Terminal States (trigger cleanup)
+    _________________________________
+        - CLOSE_BOTH: Stream fully closed, triggers resource cleanup
+        - RESET: Stream reset/terminated, triggers resource cleanup
+
+    Operation Validity by State
+    ___________________________
+        OPEN:        read() ✓  write() ✓  close() ✓  reset() ✓
+        CLOSE_READ:  read() ✗  write() ✓  close() ✓  reset() ✓
+        CLOSE_WRITE: read() ✓  write() ✗  close() ✓  reset() ✓
+        CLOSE_BOTH:  read() ✗  write() ✗  close() ✓  reset() ✓
+        RESET:       read() ✗  write() ✗  close() ✓  reset() ✓
+
+    Cleanup Process (triggered by CLOSE_BOTH or RESET)
+    __________________________________________________
+        1. Remove stream from SwarmConn
+        2. Notify all listeners with ClosedStream event
+        3. Decrement reference counter
+        4. Background cleanup via nursery (if provided)
+
+    Thread Safety
+    _____________
+        All state operations are protected by trio.Lock() for safe concurrent access.
+        State checks and modifications are atomic operations.
+
+    Example: See :file:`examples/doc-examples/example_net_stream.py`
+
+    :param muxed_stream (IMuxedStream): The underlying muxed stream
+    :param nursery (Optional[trio.Nursery]): Nursery for background cleanup tasks
+    :raises StreamClosed: When attempting invalid operations on closed streams
+    :raises StreamEOF: When EOF is encountered during read operations
+    :raises StreamReset: When the underlying stream has been reset
+    """
 
     muxed_stream: IMuxedStream
     protocol_id: Optional[TProtocol]
@@ -87,7 +147,10 @@ class NetStream(INetStream):
         Read from stream.
 
         :param n: number of bytes to read
-        :return: bytes of input
+        :raises StreamClosed: If `NetStream` is closed for reading
+        :raises StreamReset: If `NetStream` is reset
+        :raises StreamEOF: If trying to read after reaching end of file
+        :return: Bytes read from the stream
         """
         async with self._state_lock:
             if self.__stream_state in [
@@ -126,6 +189,8 @@ class NetStream(INetStream):
         Write to stream.
 
         :param data: bytes to write
+        :raises StreamClosed: If `NetStream` is closed for writing or reset
+        :raises StreamClosed: If `StreamError` occurred while writing
         """
         async with self._state_lock:
             if self.__stream_state in [
@@ -218,21 +283,24 @@ class NetStream(INetStream):
         """Delegate to the underlying muxed stream."""
         return self.muxed_stream.get_remote_address()
 
-    def is_closed(self) -> bool:
+    async def is_closed(self) -> bool:
         """Check if stream is closed."""
-        return self.__stream_state in [StreamState.CLOSE_BOTH, StreamState.RESET]
+        current_state = await self.state
+        return current_state in [StreamState.CLOSE_BOTH, StreamState.RESET]
 
-    def is_readable(self) -> bool:
+    async def is_readable(self) -> bool:
         """Check if stream is readable."""
-        return self.__stream_state not in [
+        current_state = await self.state
+        return current_state not in [
             StreamState.CLOSE_READ,
             StreamState.CLOSE_BOTH,
             StreamState.RESET,
         ]
 
-    def is_writable(self) -> bool:
+    async def is_writable(self) -> bool:
         """Check if stream is writable."""
-        return self.__stream_state not in [
+        current_state = await self.state
+        return current_state not in [
             StreamState.CLOSE_WRITE,
             StreamState.CLOSE_BOTH,
             StreamState.RESET,
diff --git a/newsfragments/300.breaking.rst b/newsfragments/300.breaking.rst
new file mode 100644
index 00000000..b1d1cfe3
--- /dev/null
+++ b/newsfragments/300.breaking.rst
@@ -0,0 +1 @@
+The `NetStream.state` property is now async and requires `await`. Update any direct state access to use `await stream.state`.
diff --git a/newsfragments/300.bugfix.rst b/newsfragments/300.bugfix.rst
new file mode 100644
index 00000000..9f947490
--- /dev/null
+++ b/newsfragments/300.bugfix.rst
@@ -0,0 +1 @@
+Added proper state management and resource cleanup to `NetStream`, fixing memory leaks and improved error handling.