diff --git a/p2p/host/basic/basic_host.go b/p2p/host/basic/basic_host.go
index d98aa0e337..abd18795c9 100644
--- a/p2p/host/basic/basic_host.go
+++ b/p2p/host/basic/basic_host.go
@@ -683,6 +683,11 @@ func (s *streamWrapper) Write(b []byte) (int, error) {
 }
 
 func (s *streamWrapper) Close() error {
+	// Set a read deadline to prevent Close() from blocking indefinitely
+	// waiting for the multistream-select handshake to complete.
+	// This can happen when the remote peer is slow or unresponsive.
+	// See: https://github.com/multiformats/go-multistream/issues/47
+	_ = s.Stream.SetReadDeadline(time.Now().Add(DefaultNegotiationTimeout))
 	return s.rw.Close()
 }
 
diff --git a/p2p/host/basic/basic_host_synctest_test.go b/p2p/host/basic/basic_host_synctest_test.go
new file mode 100644
index 0000000000..eb78cfcbcd
--- /dev/null
+++ b/p2p/host/basic/basic_host_synctest_test.go
@@ -0,0 +1,81 @@
+//go:build go1.25
+
+package basichost_test
+
+import (
+	"testing"
+	"testing/synctest"
+	"time"
+
+	"github.com/libp2p/go-libp2p/core/network"
+	basichost "github.com/libp2p/go-libp2p/p2p/host/basic"
+	"github.com/libp2p/go-libp2p/x/simlibp2p"
+
+	"github.com/stretchr/testify/require"
+)
+
+// TestStreamCloseDoesNotHangOnUnresponsivePeer verifies that stream.Close()
+// returns within DefaultNegotiationTimeout even when the remote peer never
+// completes the multistream handshake. Without the read deadline fix in
+// streamWrapper.Close(), this would hang indefinitely.
+func TestStreamCloseDoesNotHangOnUnresponsivePeer_synctest(t *testing.T) {
+	synctest.Test(t, func(t *testing.T) {
+		ctx := t.Context()
+
+		h1, h2 := simlibp2p.GetBasicHostPair(t)
+		defer h1.Close()
+		defer h2.Close()
+
+		const testProto = "/test/hang"
+
+		// Manually add protocol to peerstore so h1 thinks h2 supports it.
+		// This makes NewStream use lazy multistream (skipping negotiation until Close).
+		h1.Peerstore().AddProtocols(h2.ID(), testProto)
+
+		// h2 accepts streams at the network level but never responds to
+		// multistream protocol negotiation, simulating an unresponsive peer.
+		h2.Network().SetStreamHandler(func(s network.Stream) {
+			// Read incoming data but never write back - simulates unresponsive peer
+			buf := make([]byte, 1024)
+			for {
+				_, err := s.Read(buf)
+				if err != nil {
+					return
+				}
+			}
+		})
+
+		// Open stream to h2 - uses lazy multistream because protocol is "known"
+		s, err := h1.NewStream(ctx, h2.ID(), testProto)
+		require.NoError(t, err)
+
+		// Trigger the lazy handshake by writing data.
+		// The write succeeds (buffered), but the read handshake will block
+		// because h2 never sends a response.
+		_, err = s.Write([]byte("trigger handshake"))
+		require.NoError(t, err)
+
+		// Close() should return within DefaultNegotiationTimeout because the fix
+		// sets a read deadline before calling the underlying Close().
+		// Without the fix, this would hang indefinitely.
+		elapsedCh := make(chan time.Duration)
+		go func() {
+			start := time.Now()
+			_ = s.Close()
+			elapsedCh <- time.Since(start)
+		}()
+
+		maxExpected := basichost.DefaultNegotiationTimeout
+		var elapsed time.Duration
+		select {
+		case elapsed = <-elapsedCh:
+		case <-time.After(maxExpected + time.Second):
+			t.Fatal("timeout waiting for Close()")
+		}
+
+		require.Equal(t, elapsed, maxExpected,
+			"Close() took %v, expected < %v (DefaultNegotiationTimeout + margin)", elapsed, maxExpected)
+
+		t.Logf("Close() returned in %v (limit: %v)", elapsed, maxExpected)
+	})
+}