diff --git a/app/client/src/ce/selectors/appIDESelectors.test.ts b/app/client/src/ce/selectors/appIDESelectors.test.ts
new file mode 100644
index 0000000000..4c01ca5fab
--- /dev/null
+++ b/app/client/src/ce/selectors/appIDESelectors.test.ts
@@ -0,0 +1,64 @@
+import type { EntityItem } from "@appsmith/entities/IDE/constants";
+import { groupAndSortEntitySegmentList } from "./appIDESelectors";
+import { PluginType } from "entities/Action";
+
+describe("groupAndSortEntitySegmentList", () => {
+  it("should group and sort entity segment list alphabetically", () => {
+    const items: EntityItem[] = [
+      {
+        title: "BalanceTransactions",
+        type: PluginType.API,
+        key: "1",
+        group: "Users",
+      },
+      { title: "AllUsers", type: PluginType.API, key: "2", group: "Users" },
+      { title: "Query 1", type: PluginType.SAAS, key: "3", group: "Movies" },
+      {
+        title: "Query 2",
+        type: PluginType.SAAS,
+        key: "4",
+        group: "Movies",
+      },
+      {
+        title: "Query 3",
+        type: PluginType.SAAS,
+        key: "5",
+        group: "Movies",
+      },
+      { title: "Random", type: PluginType.API, key: "6" },
+    ];
+
+    const result = groupAndSortEntitySegmentList(items);
+
+    // Users, Movies, NA
+    expect(result.length).toBe(3);
+
+    // Check sorting of groups alphabetically
+    expect(result.map((group) => group.group)).toEqual([
+      "Movies",
+      "NA",
+      "Users",
+    ]);
+
+    // Check sorting of items within each group alphabetically
+    expect(result[0].items.map((item) => item.title)).toEqual([
+      "Query 1",
+      "Query 2",
+      "Query 3",
+    ]);
+    expect(result[2].items.map((item) => item.title)).toEqual([
+      "AllUsers",
+      "BalanceTransactions",
+    ]);
+
+    // Check items without group sorted correctly under "NA" group
+    expect(result[1].items.map((item) => item.title)).toEqual(["Random"]);
+  });
+
+  it("should handle empty input", () => {
+    const result = groupAndSortEntitySegmentList([]);
+    expect(result).toEqual([]);
+  });
+
+  // Add more test cases to cover edge cases or specific scenarios
+});