diff --git a/README.md b/README.md
index e9f6190..b14bf90 100644
--- a/README.md
+++ b/README.md
@@ -51,6 +51,8 @@ The plugin uses two hooks to inject `AGENTS.md` content into Claude Code session
 
 Each `AGENTS.md` is injected only once per session to avoid context duplication.
 
+Injected content is capped at 8000 characters by default, truncated at a heading or paragraph boundary with a notice pointing at the full file. Set `AGENTS_MD_MAX_CHARS` to change the cap (minimum 500).
+
 ## Usage
 
 Create `AGENTS.md` files in your project to provide context to Claude Code:
diff --git a/hook.ts b/hook.ts
index f61d654..9cd5420 100755
--- a/hook.ts
+++ b/hook.ts
@@ -3,6 +3,7 @@
 import * as fs from 'fs';
 import * as path from 'path';
 import * as os from 'os';
+import { pathToFileURL } from 'url';
 
 interface HookInput {
   session_id: string;
@@ -82,6 +83,39 @@ function findClosestAgentsMd(filePath: string, projectRoot: string): string | nu
   return null;
 }
 
+const DEFAULT_MAX_CHARS = 8000;
+const MIN_MAX_CHARS = 500;
+
+function getMaxChars(): number {
+  const configured = Number(process.env.AGENTS_MD_MAX_CHARS);
+  if (!Number.isInteger(configured) || configured <= 0) {
+    return DEFAULT_MAX_CHARS;
+  }
+  return Math.max(configured, MIN_MAX_CHARS);
+}
+
+// Cuts at the last paragraph or heading break before maxChars so we don't
+// truncate mid-sentence, then appends a notice pointing at the full file.
+// The notice's own length comes out of the budget so the result still fits maxChars,
+// even when a long filePath or a small maxChars would otherwise make the notice alone overflow it.
+function capContent(content: string, maxChars: number, filePath: string): string {
+  if (content.length <= maxChars) {
+    return content;
+  }
+
+  const notice = `\n\n[AGENTS.md truncated at ${maxChars} characters. Read the full file at ${filePath}]`.slice(
+    0,
+    maxChars
+  );
+  const budget = Math.max(maxChars - notice.length, 0);
+  const head = content.slice(0, budget);
+  const boundary = Math.max(head.lastIndexOf('\n\n'), head.lastIndexOf('\n#'));
+  const cut = boundary > 0 ? boundary : budget;
+  const truncated = content.slice(0, cut).trimEnd();
+
+  return `${truncated}${notice}`;
+}
+
 function outputContext(eventName: string, content: string): void {
   const output: HookOutput = {
     hookSpecificOutput: {
@@ -111,7 +145,7 @@ function handleSessionStart(input: HookInput): void {
 
   const content = fs.readFileSync(agentsPath, 'utf-8');
   saveInjectedPath(session_id, agentsPath);
-  outputContext('SessionStart', content);
+  outputContext('SessionStart', capContent(content, getMaxChars(), agentsPath));
 }
 
 function handlePostToolUse(input: HookInput): void {
@@ -137,7 +171,7 @@ function handlePostToolUse(input: HookInput): void {
 
   const content = fs.readFileSync(agentsPath, 'utf-8');
   saveInjectedPath(session_id, agentsPath);
-  outputContext('PostToolUse', content);
+  outputContext('PostToolUse', capContent(content, getMaxChars(), agentsPath));
 }
 
 function main(): void {
@@ -163,4 +197,8 @@ function main(): void {
   }
 }
 
-main();
+if (process.argv[1] && import.meta.url === pathToFileURL(process.argv[1]).href) {
+  main();
+}
+
+export { capContent, getMaxChars, DEFAULT_MAX_CHARS };
diff --git a/package.json b/package.json
index 4c8eea4..155db74 100644
--- a/package.json
+++ b/package.json
@@ -4,7 +4,7 @@
   "private": true,
   "type": "module",
   "scripts": {
-    "test": "node test/run.ts"
+    "test": "node --test test/run.ts test/cap.ts"
   },
   "devDependencies": {
     "@anthropic-ai/claude-agent-sdk": "^0.1.67",
diff --git a/test/cap.ts b/test/cap.ts
new file mode 100644
index 0000000..8cfb4c0
--- /dev/null
+++ b/test/cap.ts
@@ -0,0 +1,71 @@
+import { describe, it } from 'node:test';
+import * as assert from 'node:assert';
+import { capContent, getMaxChars } from '../hook.ts';
+
+const NOTICE = '[AGENTS.md truncated';
+
+describe('capContent', () => {
+  const cases = [
+    {
+      name: 'injects the whole file when under cap',
+      content: 'short content',
+      maxChars: 8000,
+      expectTruncated: false,
+    },
+    {
+      name: 'truncates at a paragraph boundary when over cap',
+      content: `${'a'.repeat(50)}\n\n${'b'.repeat(300)}`,
+      maxChars: 200,
+      expectTruncated: true,
+      expectBoundary: 'a'.repeat(50),
+    },
+    {
+      name: 'truncates at a heading boundary when over cap',
+      content: `${'a'.repeat(50)}\n# Next section\n${'b'.repeat(300)}`,
+      maxChars: 200,
+      expectTruncated: true,
+      expectBoundary: 'a'.repeat(50),
+    },
+  ];
+
+  for (const testCase of cases) {
+    it(testCase.name, () => {
+      const result = capContent(testCase.content, testCase.maxChars, '/tmp/AGENTS.md');
+
+      if (!testCase.expectTruncated) {
+        assert.strictEqual(result, testCase.content);
+        return;
+      }
+
+      assert.ok(result.includes(NOTICE), 'expected truncation notice');
+      assert.ok(result.includes('/tmp/AGENTS.md'), 'expected notice to point at the file');
+      assert.ok(result.startsWith(testCase.expectBoundary as string), 'expected cut at boundary');
+      assert.ok(!result.includes('bbb'), 'expected content past the boundary to be dropped');
+      assert.ok(result.length <= testCase.maxChars, 'expected result to fit within the cap');
+    });
+  }
+
+  it('fits within the cap even when the notice alone would overflow it', () => {
+    const longPath = `/very/long/path/${'segment/'.repeat(20)}AGENTS.md`;
+    const result = capContent('a'.repeat(500), 40, longPath);
+
+    assert.ok(result.length <= 40, 'expected result to fit within the cap');
+  });
+});
+
+describe('getMaxChars', () => {
+  it('floors a configured value too small to leave room for content and the notice', () => {
+    const original = process.env.AGENTS_MD_MAX_CHARS;
+    process.env.AGENTS_MD_MAX_CHARS = '1';
+
+    try {
+      assert.ok(getMaxChars() >= 500, 'expected a floor above the pathological low value');
+    } finally {
+      if (original === undefined) {
+        delete process.env.AGENTS_MD_MAX_CHARS;
+      } else {
+        process.env.AGENTS_MD_MAX_CHARS = original;
+      }
+    }
+  });
+});