--- a/src/agent/memoryGit.ts
+++ b/src/agent/memoryGit.ts
@@ -308,6 +308,45 @@ export function isGitRepo(agentId: string): boolean {
   return existsSync(join(getMemoryRepoDir(agentId), ".git"));
 }
 
+/**
+ * Initialize a local memory repository without remote.
+ * Used for self-hosted or Gitea backends where cloud git endpoint isn't available.
+ */
+export async function initLocalMemoryRepo(agentId: string): Promise<void> {
+  const dir = getMemoryRepoDir(agentId);
+  
+  debugLog("memfs-git", `Initializing local repo at ${dir}`);
+
+  if (!existsSync(dir)) {
+    mkdirSync(dir, { recursive: true });
+  }
+
+  // Initialize git repo
+  await runGit(dir, ["init"], undefined);
+  
+  // Configure user (required for commits)
+  await runGit(dir, ["config", "user.email", "ani@localhost"], undefined);
+  await runGit(dir, ["config", "user.name", "Ani"], undefined);
+
+  // Create initial structure
+  const systemDir = join(dir, "system");
+  if (!existsSync(systemDir)) {
+    mkdirSync(systemDir, { recursive: true });
+  }
+
+  // Install pre-commit hook
+  installPreCommitHook(dir);
+
+  debugLog("memfs-git", "Local memory repo initialized");
+}
+
 /**
  * Clone the agent's state repo into the memory directory.
  *
--- a/src/agent/memoryFilesystem.ts
+++ b/src/agent/memoryFilesystem.ts
@@ -250,13 +250,40 @@ export async function applyMemfsFlags(
   // 4. Add git tag + clone/pull repo.
   let pullSummary: string | undefined;
   if (isEnabled) {
-    const { addGitMemoryTag, isGitRepo, cloneMemoryRepo, pullMemory } =
+    const { addGitMemoryTag, isGitRepo, cloneMemoryRepo, pullMemory, initLocalMemoryRepo } =
       await import("./memoryGit");
     await addGitMemoryTag(
       agentId,
       options?.agentTags ? { tags: options.agentTags } : undefined,
     );
-    if (!isGitRepo(agentId) && (await isLettaCloud())) {
-      await cloneMemoryRepo(agentId);
+    
+    // E: Local-first initialization
+    // F: Configurable backend support
+    const memfsBackend = process.env.LETTABOT_MEMFS_BACKEND || "auto";
+    const isCloud = await isLettaCloud();
+    
+    if (!isGitRepo(agentId)) {
+      if (memfsBackend === "none" || memfsBackend === "local") {
+        // Local-only mode (self-hosted, Gitea, Codeberg)
+        await initLocalMemoryRepo(agentId);
+      } else if (memfsBackend === "cloud" || (memfsBackend === "auto" && isCloud)) {
+        // Cloud mode (Letta Cloud)
+        await cloneMemoryRepo(agentId);
+      } else {
+        // Auto mode, self-hosted detected - use local init
+        await initLocalMemoryRepo(agentId);
+      }
     } else if (options?.pullOnExistingRepo) {
-      const result = await pullMemory(agentId);
-      pullSummary = result.summary;
+      // Try to pull, but don't fail if remote unavailable
+      try {
+        const result = await pullMemory(agentId);
+        pullSummary = result.summary;
+      } catch (error) {
+        if (error.message?.includes("501") || error.message?.includes("404")) {
+          // Remote not available - continue with local
+          console.log("[memfs] Remote unavailable, using local state");
+        } else {
+          throw error;
+        }
+      }
     }
   }