diff --git a/src/tests/tools/overflow-integration.test.ts b/src/tests/tools/overflow-integration.test.ts
new file mode 100644
index 0000000..1ecaa98
--- /dev/null
+++ b/src/tests/tools/overflow-integration.test.ts
@@ -0,0 +1,117 @@
+import { afterEach, describe, expect, test } from "bun:test";
+import * as fs from "node:fs";
+import * as path from "node:path";
+import { bash } from "../../tools/impl/Bash";
+import { grep } from "../../tools/impl/Grep";
+import { getOverflowDirectory } from "../../tools/impl/overflow";
+
+describe("overflow integration tests", () => {
+  const testWorkingDir = process.cwd();
+  let overflowDir: string;
+
+  afterEach(() => {
+    overflowDir = getOverflowDirectory(testWorkingDir);
+    // Clean up test files
+    if (fs.existsSync(overflowDir)) {
+      const files = fs.readdirSync(overflowDir);
+      for (const file of files) {
+        fs.unlinkSync(path.join(overflowDir, file));
+      }
+    }
+  });
+
+  describe("Bash tool with overflow", () => {
+    test("creates overflow file for long output", async () => {
+      // Set USER_CWD for the test
+      process.env.USER_CWD = testWorkingDir;
+
+      // Generate a large output (more than 30K characters)
+      const command =
+        'for i in {1..2000}; do echo "Line $i with some padding text to make it longer"; done';
+
+      const result = await bash({ command });
+
+      // Check that output was truncated
+      expect(result.status).toBe("success");
+      expect(result.content[0]?.text).toContain("Output truncated");
+      expect(result.content[0]?.text).toContain("Full output written to:");
+
+      // Extract overflow path from the output
+      const match = result.content[0]?.text?.match(
+        /Full output written to: (.+\.txt)/,
+      );
+      expect(match).toBeDefined();
+
+      if (match?.[1]) {
+        const overflowPath = match[1];
+        expect(fs.existsSync(overflowPath)).toBe(true);
+
+        // Verify the overflow file contains the full output
+        const fullContent = fs.readFileSync(overflowPath, "utf-8");
+        expect(fullContent).toContain("Line 1 with some padding");
+        expect(fullContent).toContain("Line 2000 with some padding");
+        expect(fullContent.length).toBeGreaterThan(30_000);
+      }
+    });
+
+    test("no overflow file for short output", async () => {
+      process.env.USER_CWD = testWorkingDir;
+
+      const command = "echo 'Short output'";
+      const result = await bash({ command });
+
+      expect(result.status).toBe("success");
+      expect(result.content[0]?.text).not.toContain("Output truncated");
+      expect(result.content[0]?.text).not.toContain("Full output written to");
+    });
+  });
+
+  describe("Grep tool with overflow", () => {
+    test("creates overflow file for large search results", async () => {
+      process.env.USER_CWD = testWorkingDir;
+
+      // Search for a common pattern that will have many results
+      const result = await grep({
+        pattern: "test",
+        path: "src/tests",
+        output_mode: "files_with_matches",
+      });
+
+      // If we have enough results to trigger truncation
+      if (
+        result.output.includes("Output truncated") &&
+        result.output.includes("Full output written to")
+      ) {
+        const match = result.output.match(/Full output written to: (.+\.txt)/);
+        expect(match).toBeDefined();
+
+        if (match?.[1]) {
+          const overflowPath = match[1];
+          expect(fs.existsSync(overflowPath)).toBe(true);
+
+          const fullContent = fs.readFileSync(overflowPath, "utf-8");
+          expect(fullContent.length).toBeGreaterThan(0);
+        }
+      }
+    });
+  });
+
+  describe("Middle truncation verification", () => {
+    test("shows beginning and end of output", async () => {
+      process.env.USER_CWD = testWorkingDir;
+
+      // Generate output with distinctive beginning and end
+      const command =
+        'echo "START_MARKER"; for i in {1..1000}; do echo "Middle line $i"; done; echo "END_MARKER"';
+
+      const result = await bash({ command });
+
+      if (result.content[0]?.text?.includes("Output truncated")) {
+        // Should contain both START and END markers due to middle truncation
+        expect(result.content[0].text).toContain("START_MARKER");
+        expect(result.content[0].text).toContain("END_MARKER");
+        expect(result.content[0].text).toContain("characters omitted");
+      }
+    });
+  });
+});
diff --git a/src/tests/tools/overflow.test.ts b/src/tests/tools/overflow.test.ts
new file mode 100644
index 0000000..f39562d
--- /dev/null
+++ b/src/tests/tools/overflow.test.ts
@@ -0,0 +1,205 @@
+import { afterEach, beforeEach, describe, expect, test } from "bun:test";
+import * as fs from "node:fs";
+import * as os from "node:os";
+import * as path from "node:path";
+import {
+  cleanupOldOverflowFiles,
+  ensureOverflowDirectory,
+  getOverflowDirectory,
+  getOverflowStats,
+  OVERFLOW_CONFIG,
+  writeOverflowFile,
+} from "../../tools/impl/overflow";
+
+describe("overflow utilities", () => {
+  const testWorkingDir = "/test/project/path";
+  let overflowDir: string;
+
+  beforeEach(() => {
+    overflowDir = getOverflowDirectory(testWorkingDir);
+  });
+
+  afterEach(() => {
+    // Clean up test files
+    if (fs.existsSync(overflowDir)) {
+      const files = fs.readdirSync(overflowDir);
+      for (const file of files) {
+        fs.unlinkSync(path.join(overflowDir, file));
+      }
+      // Try to remove the directory (will fail if not empty)
+      try {
+        fs.rmdirSync(overflowDir);
+      } catch {
+        // Directory not empty, that's OK
+      }
+    }
+  });
+
+  describe("OVERFLOW_CONFIG", () => {
+    test("has expected default values", () => {
+      expect(OVERFLOW_CONFIG.ENABLED).toBeDefined();
+      expect(OVERFLOW_CONFIG.MIDDLE_TRUNCATE).toBeDefined();
+    });
+  });
+
+  describe("getOverflowDirectory", () => {
+    test("generates consistent directory path", () => {
+      const dir1 = getOverflowDirectory(testWorkingDir);
+      const dir2 = getOverflowDirectory(testWorkingDir);
+
+      expect(dir1).toBe(dir2);
+    });
+
+    test("creates path under ~/.letta", () => {
+      const dir = getOverflowDirectory(testWorkingDir);
+      const homeDir = os.homedir();
+
+      expect(dir).toContain(path.join(homeDir, ".letta"));
+    });
+
+    test("sanitizes working directory path", () => {
+      const dir = getOverflowDirectory("/path/with spaces/and:colons");
+
+      expect(dir).not.toContain(" ");
+      expect(dir).not.toContain(":");
+      expect(dir).toContain("path_with_spaces_and_colons");
+    });
+  });
+
+  describe("ensureOverflowDirectory", () => {
+    test("creates directory if it doesn't exist", () => {
+      const dir = ensureOverflowDirectory(testWorkingDir);
+
+      expect(fs.existsSync(dir)).toBe(true);
+      expect(fs.statSync(dir).isDirectory()).toBe(true);
+    });
+
+    test("returns existing directory without error", () => {
+      const dir1 = ensureOverflowDirectory(testWorkingDir);
+      const dir2 = ensureOverflowDirectory(testWorkingDir);
+
+      expect(dir1).toBe(dir2);
+      expect(fs.existsSync(dir1)).toBe(true);
+    });
+  });
+
+  describe("writeOverflowFile", () => {
+    test("writes content to a file", () => {
+      const content = "Test content for overflow file";
+      const filePath = writeOverflowFile(content, testWorkingDir, "TestTool");
+
+      expect(fs.existsSync(filePath)).toBe(true);
+      expect(fs.readFileSync(filePath, "utf-8")).toBe(content);
+    });
+
+    test("generates unique filenames", () => {
+      const content = "Test content";
+      const file1 = writeOverflowFile(content, testWorkingDir, "TestTool");
+      const file2 = writeOverflowFile(content, testWorkingDir, "TestTool");
+
+      expect(file1).not.toBe(file2);
+    });
+
+    test("includes tool name in filename", () => {
+      const content = "Test content";
+      const filePath = writeOverflowFile(
+        content,
+        testWorkingDir,
+        "MyCustomTool",
+      );
+
+      expect(path.basename(filePath)).toContain("mycustomtool");
+    });
+
+    test("handles large content", () => {
+      const largeContent = "x".repeat(100_000);
+      const filePath = writeOverflowFile(
+        largeContent,
+        testWorkingDir,
+        "TestTool",
+      );
+
+      expect(fs.existsSync(filePath)).toBe(true);
+      expect(fs.readFileSync(filePath, "utf-8")).toBe(largeContent);
+    });
+  });
+
+  describe("cleanupOldOverflowFiles", () => {
+    test("removes files older than specified age", async () => {
+      // Create a test file
+      const content = "Test content";
+      const filePath = writeOverflowFile(content, testWorkingDir, "TestTool");
+
+      // Manually set the file's mtime to be old
+      const oldTime = Date.now() - 48 * 60 * 60 * 1000; // 48 hours ago
+      fs.utimesSync(filePath, new Date(oldTime), new Date(oldTime));
+
+      // Clean up files older than 24 hours
+      const deletedCount = cleanupOldOverflowFiles(
+        testWorkingDir,
+        24 * 60 * 60 * 1000,
+      );
+
+      expect(deletedCount).toBe(1);
+      expect(fs.existsSync(filePath)).toBe(false);
+    });
+
+    test("preserves recent files", () => {
+      const content = "Test content";
+      const filePath = writeOverflowFile(content, testWorkingDir, "TestTool");
+
+      // Clean up files older than 24 hours (file is recent)
+      const deletedCount = cleanupOldOverflowFiles(
+        testWorkingDir,
+        24 * 60 * 60 * 1000,
+      );
+
+      expect(deletedCount).toBe(0);
+      expect(fs.existsSync(filePath)).toBe(true);
+    });
+
+    test("returns 0 if directory doesn't exist", () => {
+      const nonExistentDir = "/non/existent/directory";
+      const deletedCount = cleanupOldOverflowFiles(
+        nonExistentDir,
+        24 * 60 * 60 * 1000,
+      );
+
+      expect(deletedCount).toBe(0);
+    });
+  });
+
+  describe("getOverflowStats", () => {
+    test("returns correct stats for empty directory", () => {
+      ensureOverflowDirectory(testWorkingDir);
+      const stats = getOverflowStats(testWorkingDir);
+
+      expect(stats.exists).toBe(true);
+      expect(stats.fileCount).toBe(0);
+      expect(stats.totalSize).toBe(0);
+    });
+
+    test("returns correct stats for directory with files", () => {
+      const content1 = "Test content 1";
+      const content2 = "Test content 2 is longer";
+
+      writeOverflowFile(content1, testWorkingDir, "Tool1");
+      writeOverflowFile(content2, testWorkingDir, "Tool2");
+
+      const stats = getOverflowStats(testWorkingDir);
+
+      expect(stats.exists).toBe(true);
+      expect(stats.fileCount).toBe(2);
+      expect(stats.totalSize).toBeGreaterThan(0);
+    });
+
+    test("returns correct stats for non-existent directory", () => {
+      const nonExistentDir = "/non/existent/directory";
+      const stats = getOverflowStats(nonExistentDir);
+
+      expect(stats.exists).toBe(false);
+      expect(stats.fileCount).toBe(0);
+      expect(stats.totalSize).toBe(0);
+    });
+  });
+});
diff --git a/src/tests/tools/tool-truncation.test.ts b/src/tests/tools/tool-truncation.test.ts
index f6ce28e..862db04 100644
--- a/src/tests/tools/tool-truncation.test.ts
+++ b/src/tests/tools/tool-truncation.test.ts
@@ -41,7 +41,7 @@ describe("tool truncation integration tests", () => {
         });
 
         const output = result.content[0]?.text || "";
-        expect(output).toContain("[Output truncated after 30,000 characters");
+        expect(output).toContain("[Output truncated: showing 30,000");
         expect(output.length).toBeLessThan(35000); // Truncated + notice
       },
     );
@@ -64,7 +64,7 @@ describe("tool truncation integration tests", () => {
         });
 
         const output = result.content[0]?.text || "";
-        expect(output).toContain("[Output truncated after 30,000 characters");
+        expect(output).toContain("[Output truncated: showing 30,000");
         expect(result.status).toBe("error");
       },
     );
@@ -143,9 +143,7 @@ describe("tool truncation integration tests", () => {
       });
 
       expect(result.output.length).toBeLessThanOrEqual(15000); // 10K + notice
-      expect(result.output).toContain(
-        "[Output truncated after 10,000 characters",
-      );
+      expect(result.output).toContain("[Output truncated: showing 10,000");
     });
 
     test("truncates file list exceeding 10K characters", async () => {
@@ -165,9 +163,7 @@ describe("tool truncation integration tests", () => {
 
       expect(result.output.length).toBeLessThanOrEqual(15000);
       if (result.output.length > 10000) {
-        expect(result.output).toContain(
-          "[Output truncated after 10,000 characters",
-        );
+        expect(result.output).toContain("[Output truncated: showing 10,000");
       }
     });
 
@@ -196,15 +192,11 @@ describe("tool truncation integration tests", () => {
 
         const result = await glob({ pattern: "**/*.txt", path: testDir });
 
-        expect(result.files.length).toBeLessThanOrEqual(
-          LIMITS.GLOB_MAX_FILES + 1,
-        ); // +1 for notice
         expect(result.truncated).toBe(true);
         expect(result.totalFiles).toBe(2500);
-        // Last entry should be the truncation notice
-        expect(result.files[result.files.length - 1]).toContain(
-          "showing 2,000 of 2,500 files",
-        );
+        // Should contain the truncation notice
+        const filesString = result.files.join("\n");
+        expect(filesString).toContain("showing 2,000 of 2,500 files");
       },
       { timeout: 15000 },
     ); // Increased timeout for Windows CI where file creation is slower
@@ -286,7 +278,7 @@ describe("tool truncation integration tests", () => {
         expect(outputResult.message.length).toBeLessThan(35000); // 30K + notice
         if (outputResult.message.length > 30000) {
           expect(outputResult.message).toContain(
-            "[Output truncated after 30,000 characters",
+            "[Output truncated: showing 30,000",
           );
         }
       },
diff --git a/src/tests/tools/truncation-overflow.test.ts b/src/tests/tools/truncation-overflow.test.ts
new file mode 100644
index 0000000..888235a
--- /dev/null
+++ b/src/tests/tools/truncation-overflow.test.ts
@@ -0,0 +1,197 @@
+import { afterEach, beforeEach, describe, expect, test } from "bun:test";
+import * as fs from "node:fs";
+import * as path from "node:path";
+import { getOverflowDirectory } from "../../tools/impl/overflow";
+import {
+  truncateArray,
+  truncateByChars,
+  truncateByLines,
+} from "../../tools/impl/truncation";
+
+describe("truncation with overflow support", () => {
+  const testWorkingDir = "/test/truncation/path";
+  let overflowDir: string;
+
+  beforeEach(() => {
+    overflowDir = getOverflowDirectory(testWorkingDir);
+  });
+
+  afterEach(() => {
+    // Clean up test files
+    if (fs.existsSync(overflowDir)) {
+      const files = fs.readdirSync(overflowDir);
+      for (const file of files) {
+        fs.unlinkSync(path.join(overflowDir, file));
+      }
+    }
+  });
+
+  describe("truncateByChars with overflow", () => {
+    test("writes overflow file when content exceeds limit", () => {
+      const longText = "a".repeat(2000);
+      const result = truncateByChars(longText, 1000, "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.overflowPath).toBeDefined();
+
+      if (result.overflowPath) {
+        expect(fs.existsSync(result.overflowPath)).toBe(true);
+        expect(fs.readFileSync(result.overflowPath, "utf-8")).toBe(longText);
+      }
+    });
+
+    test("includes overflow path in truncation notice", () => {
+      const longText = "x".repeat(2000);
+      const result = truncateByChars(longText, 1000, "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.content).toContain("Full output written to:");
+      expect(result.content).toContain(result.overflowPath || "");
+    });
+
+    test("uses middle truncation when enabled", () => {
+      const text = `${"a".repeat(500)}MIDDLE${"b".repeat(500)}`;
+      const result = truncateByChars(text, 600, "TestTool", {
+        workingDirectory: testWorkingDir,
+        useMiddleTruncation: true,
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.content).toContain("a".repeat(300)); // beginning
+      expect(result.content).toContain("b".repeat(300)); // end
+      expect(result.content).toContain("characters omitted");
+      // "MIDDLE" should be omitted
+      expect(result.content.split("[")[0]).not.toContain("MIDDLE");
+    });
+
+    test("uses post truncation when middle truncation disabled", () => {
+      const text = `${"a".repeat(500)}END`;
+      const result = truncateByChars(text, 300, "TestTool", {
+        workingDirectory: testWorkingDir,
+        useMiddleTruncation: false,
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.content).toContain("a".repeat(300));
+      expect(result.content.split("[")[0]).not.toContain("END");
+    });
+
+    test("does not create overflow file when under limit", () => {
+      const shortText = "short text";
+      const result = truncateByChars(shortText, 1000, "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.wasTruncated).toBe(false);
+      expect(result.overflowPath).toBeUndefined();
+    });
+  });
+
+  describe("truncateByLines with overflow", () => {
+    test("writes overflow file when lines exceed limit", () => {
+      const lines = Array.from({ length: 100 }, (_, i) => `Line ${i + 1}`);
+      const text = lines.join("\n");
+
+      const result = truncateByLines(text, 50, undefined, "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.overflowPath).toBeDefined();
+
+      if (result.overflowPath) {
+        expect(fs.existsSync(result.overflowPath)).toBe(true);
+        expect(fs.readFileSync(result.overflowPath, "utf-8")).toBe(text);
+      }
+    });
+
+    test("uses middle truncation for lines when enabled", () => {
+      const lines = Array.from({ length: 100 }, (_, i) => `Line ${i + 1}`);
+      const text = lines.join("\n");
+
+      const result = truncateByLines(text, 50, undefined, "TestTool", {
+        workingDirectory: testWorkingDir,
+        useMiddleTruncation: true,
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.content).toContain("Line 1"); // beginning
+      expect(result.content).toContain("Line 25"); // end of first half
+      expect(result.content).toContain("Line 76"); // beginning of second half
+      expect(result.content).toContain("Line 100"); // end
+      expect(result.content).toContain("lines omitted");
+    });
+
+    test("includes overflow path in truncation notice", () => {
+      const lines = Array.from({ length: 100 }, (_, i) => `Line ${i + 1}`);
+      const text = lines.join("\n");
+
+      const result = truncateByLines(text, 50, undefined, "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.content).toContain("Full output written to:");
+      expect(result.content).toContain(result.overflowPath || "");
+    });
+  });
+
+  describe("truncateArray with overflow", () => {
+    test("writes overflow file when items exceed limit", () => {
+      const items = Array.from({ length: 100 }, (_, i) => `item${i + 1}`);
+      const formatter = (arr: string[]) => arr.join("\n");
+
+      const result = truncateArray(items, 50, formatter, "items", "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.overflowPath).toBeDefined();
+
+      if (result.overflowPath) {
+        expect(fs.existsSync(result.overflowPath)).toBe(true);
+        const savedContent = fs.readFileSync(result.overflowPath, "utf-8");
+        expect(savedContent).toContain("item1");
+        expect(savedContent).toContain("item100");
+      }
+    });
+
+    test("uses middle truncation for arrays when enabled", () => {
+      const items = Array.from({ length: 100 }, (_, i) => `item${i + 1}`);
+      const formatter = (arr: string[]) => arr.join("\n");
+
+      const result = truncateArray(items, 50, formatter, "items", "TestTool", {
+        workingDirectory: testWorkingDir,
+        useMiddleTruncation: true,
+      });
+
+      expect(result.wasTruncated).toBe(true);
+      expect(result.content).toContain("item1"); // beginning
+      expect(result.content).toContain("item25"); // end of first half
+      expect(result.content).toContain("item76"); // beginning of second half
+      expect(result.content).toContain("item100"); // end
+      expect(result.content).toContain("omitted from middle");
+    });
+
+    test("includes overflow path in truncation notice", () => {
+      const items = Array.from({ length: 100 }, (_, i) => `item${i + 1}`);
+      const formatter = (arr: string[]) => arr.join("\n");
+
+      const result = truncateArray(items, 50, formatter, "items", "TestTool", {
+        workingDirectory: testWorkingDir,
+        toolName: "TestTool",
+      });
+
+      expect(result.content).toContain("Full output written to:");
+      expect(result.content).toContain(result.overflowPath || "");
+    });
+  });
+});
diff --git a/src/tests/tools/truncation.test.ts b/src/tests/tools/truncation.test.ts
index 44ee4e5..b5cf0c5 100644
--- a/src/tests/tools/truncation.test.ts
+++ b/src/tests/tools/truncation.test.ts
@@ -21,9 +21,11 @@ describe("truncation utilities", () => {
       const result = truncateByChars(text, 500, "Test");
 
       expect(result.wasTruncated).toBe(true);
-      expect(result.content).toContain("a".repeat(500));
+      // With middle truncation, we should see beginning and end
+      expect(result.content).toContain("a".repeat(250)); // beginning
+      expect(result.content).toContain("characters omitted");
       expect(result.content).toContain(
-        "[Output truncated after 500 characters: exceeded limit.]",
+        "[Output truncated: showing 500 of 1,000 characters.]",
       );
       expect(result.content.length).toBeGreaterThan(500); // Due to notice
     });
@@ -62,10 +64,13 @@ describe("truncation utilities", () => {
 
       expect(result.wasTruncated).toBe(true);
       expect(result.originalLineCount).toBe(100);
-      expect(result.linesShown).toBe(50);
+      // With middle truncation, we get beginning + marker + end = 51 lines shown
+      expect(result.linesShown).toBe(51);
       expect(result.content).toContain("Line 1");
-      expect(result.content).toContain("Line 50");
-      expect(result.content).not.toContain("Line 51");
+      expect(result.content).toContain("Line 25"); // end of first half
+      expect(result.content).toContain("lines omitted");
+      expect(result.content).toContain("Line 76"); // beginning of second half
+      expect(result.content).toContain("Line 100");
       expect(result.content).toContain("showing 50 of 100 lines");
     });
 
@@ -92,7 +97,8 @@ describe("truncation utilities", () => {
 
       expect(result.wasTruncated).toBe(true);
       expect(result.originalLineCount).toBe(100);
-      expect(result.linesShown).toBe(50);
+      // With middle truncation, we get beginning + marker + end = 51 lines shown
+      expect(result.linesShown).toBe(51);
       expect(result.content).toContain("showing 50 of 100 lines");
       expect(result.content).toContain(
         "Some lines exceeded 1,000 characters and were truncated",
@@ -125,9 +131,12 @@ describe("truncation utilities", () => {
 
       expect(result.wasTruncated).toBe(true);
       expect(result.content).toContain("item1");
-      expect(result.content).toContain("item50");
-      expect(result.content).not.toContain("item51");
+      // With middle truncation, we show first 25 and last 25
+      expect(result.content).toContain("item25");
+      expect(result.content).toContain("item76");
+      expect(result.content).toContain("item100");
       expect(result.content).toContain("showing 50 of 100 items");
+      expect(result.content).toContain("omitted from middle");
     });
 
     test("exactly at limit does not truncate", () => {
diff --git a/src/tools/impl/Bash.ts b/src/tools/impl/Bash.ts
index 977b4e8..94a576b 100644
--- a/src/tools/impl/Bash.ts
+++ b/src/tools/impl/Bash.ts
@@ -324,6 +324,7 @@ export async function bash(args: BashArgs): Promise<BashResult> {
       output || "(Command completed with no output)",
       LIMITS.BASH_OUTPUT_CHARS,
       "Bash",
+      { workingDirectory: userCwd, toolName: "Bash" },
     );
 
     // Non-zero exit code is an error
@@ -376,6 +377,7 @@ export async function bash(args: BashArgs): Promise<BashResult> {
       errorMessage.trim() || "Command failed with unknown error",
       LIMITS.BASH_OUTPUT_CHARS,
       "Bash",
+      { workingDirectory: userCwd, toolName: "Bash" },
     );
 
     return {
diff --git a/src/tools/impl/BashOutput.ts b/src/tools/impl/BashOutput.ts
index 133bd6f..0f26f2e 100644
--- a/src/tools/impl/BashOutput.ts
+++ b/src/tools/impl/BashOutput.ts
@@ -29,11 +29,14 @@ export async function bash_output(
       .join("\n");
   }
 
+  const userCwd = process.env.USER_CWD || process.cwd();
+
   // Apply character limit to prevent excessive token usage (same as Bash)
   const { content: truncatedOutput } = truncateByChars(
     text || "(no output yet)",
     LIMITS.BASH_OUTPUT_CHARS,
     "BashOutput",
+    { workingDirectory: userCwd, toolName: "BashOutput" },
   );
 
   return { message: truncatedOutput };
diff --git a/src/tools/impl/Glob.ts b/src/tools/impl/Glob.ts
index c57b55c..d9f14f2 100644
--- a/src/tools/impl/Glob.ts
+++ b/src/tools/impl/Glob.ts
@@ -3,7 +3,7 @@ import { createRequire } from "node:module";
 import * as path from "node:path";
 import { fileURLToPath } from "node:url";
 import { promisify } from "node:util";
-import { LIMITS } from "./truncation.js";
+import { LIMITS, truncateArray } from "./truncation.js";
 import { validateRequiredParams } from "./validation.js";
 
 const execFileAsync = promisify(execFile);
@@ -32,20 +32,27 @@ interface GlobResult {
   totalFiles?: number;
 }
 
-function applyFileLimit(files: string[]): GlobResult {
+function applyFileLimit(files: string[], workingDirectory: string): GlobResult {
   const totalFiles = files.length;
   if (totalFiles <= LIMITS.GLOB_MAX_FILES) {
     return { files };
   }
 
-  const truncatedFiles = files.slice(0, LIMITS.GLOB_MAX_FILES);
-  truncatedFiles.push(
-    `\n[Output truncated: showing ${LIMITS.GLOB_MAX_FILES.toLocaleString()} of ${totalFiles.toLocaleString()} files.]`,
+  const { content, wasTruncated } = truncateArray(
+    files,
+    LIMITS.GLOB_MAX_FILES,
+    (items) => items.join("\n"),
+    "files",
+    "Glob",
+    { workingDirectory, toolName: "Glob" },
   );
 
+  // Split the content back into an array of file paths + notice
+  const resultFiles = content.split("\n");
+
   return {
-    files: truncatedFiles,
-    truncated: true,
+    files: resultFiles,
+    truncated: wasTruncated,
     totalFiles,
   };
 }
@@ -90,7 +97,7 @@ export async function glob(args: GlobArgs): Promise<GlobResult> {
 
     const files = stdout.trim().split("\n").filter(Boolean).sort();
 
-    return applyFileLimit(files);
+    return applyFileLimit(files, userCwd);
   } catch (error) {
     const err = error as Error & {
       stdout?: string;
@@ -105,7 +112,7 @@ export async function glob(args: GlobArgs): Promise<GlobResult> {
     // If stdout has content despite error, use it (partial results)
     if (err.stdout?.trim()) {
       const files = err.stdout.trim().split("\n").filter(Boolean).sort();
-      return applyFileLimit(files);
+      return applyFileLimit(files, userCwd);
     }
 
     throw new Error(`Glob failed: ${err.message || "Unknown error"}`);
diff --git a/src/tools/impl/Grep.ts b/src/tools/impl/Grep.ts
index e78e2ca..32e710c 100644
--- a/src/tools/impl/Grep.ts
+++ b/src/tools/impl/Grep.ts
@@ -118,6 +118,7 @@ export async function grep(args: GrepArgs): Promise<GrepResult> {
         fullOutput,
         LIMITS.GREP_OUTPUT_CHARS,
         "Grep",
+        { workingDirectory: userCwd, toolName: "Grep" },
       );
 
       return {
@@ -166,6 +167,7 @@ export async function grep(args: GrepArgs): Promise<GrepResult> {
         content,
         LIMITS.GREP_OUTPUT_CHARS,
         "Grep",
+        { workingDirectory: userCwd, toolName: "Grep" },
       );
 
       return {
diff --git a/src/tools/impl/Read.ts b/src/tools/impl/Read.ts
index ab2692b..72ffcf1 100644
--- a/src/tools/impl/Read.ts
+++ b/src/tools/impl/Read.ts
@@ -1,5 +1,6 @@
 import { promises as fs } from "node:fs";
 import * as path from "node:path";
+import { OVERFLOW_CONFIG, writeOverflowFile } from "./overflow.js";
 import { LIMITS } from "./truncation.js";
 import { validateRequiredParams } from "./validation.js";
 
@@ -52,6 +53,7 @@ function formatWithLineNumbers(
   content: string,
   offset?: number,
   limit?: number,
+  workingDirectory?: string,
 ): string {
   const lines = content.split("\n");
   const originalLineCount = lines.length;
@@ -88,6 +90,21 @@ function formatWithLineNumbers(
   const notices: string[] = [];
   const wasTruncatedByLineCount = actualEndLine < originalLineCount;
 
+  // Write to overflow file if content was truncated and overflow is enabled
+  let overflowPath: string | undefined;
+  if (
+    (wasTruncatedByLineCount || linesWereTruncatedInLength) &&
+    OVERFLOW_CONFIG.ENABLED &&
+    workingDirectory
+  ) {
+    try {
+      overflowPath = writeOverflowFile(content, workingDirectory, "Read");
+    } catch (error) {
+      // Silently fail if overflow file creation fails
+      console.error("Failed to write overflow file:", error);
+    }
+  }
+
   if (wasTruncatedByLineCount && !limit) {
     // Only show this notice if user didn't explicitly set a limit
     notices.push(
@@ -101,6 +118,10 @@ function formatWithLineNumbers(
     );
   }
 
+  if (overflowPath) {
+    notices.push(`\n\n[Full file content written to: ${overflowPath}]`);
+  }
+
   if (notices.length > 0) {
     result += notices.join("");
   }
@@ -132,7 +153,12 @@ export async function read(args: ReadArgs): Promise<ReadResult> {
         content: `<system-reminder>\nThe file ${resolvedPath} exists but has empty contents.\n</system-reminder>`,
       };
     }
-    const formattedContent = formatWithLineNumbers(content, offset, limit);
+    const formattedContent = formatWithLineNumbers(
+      content,
+      offset,
+      limit,
+      userCwd,
+    );
     return { content: formattedContent };
   } catch (error) {
     const err = error as NodeJS.ErrnoException;
diff --git a/src/tools/impl/overflow.ts b/src/tools/impl/overflow.ts
new file mode 100644
index 0000000..9c7959b
--- /dev/null
+++ b/src/tools/impl/overflow.ts
@@ -0,0 +1,171 @@
+/**
+ * Utilities for writing tool output overflow to files.
+ * When tool outputs exceed truncation limits, the full output is written to disk
+ * and a pointer is provided in the truncated output.
+ */
+
+import { randomUUID } from "node:crypto";
+import * as fs from "node:fs";
+import * as os from "node:os";
+import * as path from "node:path";
+
+/**
+ * Configuration options for tool output overflow behavior.
+ * Can be controlled via environment variables.
+ */
+export const OVERFLOW_CONFIG = {
+  /** Whether to write overflow to files (default: true) */
+  ENABLED: process.env.LETTA_TOOL_OVERFLOW_TO_FILE?.toLowerCase() !== "false",
+  /** Whether to use middle-truncation instead of post-truncation (default: true) */
+  MIDDLE_TRUNCATE:
+    process.env.LETTA_TOOL_MIDDLE_TRUNCATE?.toLowerCase() !== "false",
+} as const;
+
+/**
+ * Get the overflow directory for the current project.
+ * Pattern: ~/.letta/projects/<project-path>/agent-tools/
+ *
+ * @param workingDirectory - Current working directory (project root)
+ * @returns Absolute path to the overflow directory
+ */
+export function getOverflowDirectory(workingDirectory: string): string {
+  const homeDir = os.homedir();
+  const lettaDir = path.join(homeDir, ".letta");
+
+  // Normalize and sanitize the working directory path for use in the file system
+  const normalizedPath = path.normalize(workingDirectory);
+  // Remove leading slash and replace path separators with underscores
+  const sanitizedPath = normalizedPath
+    .replace(/^[/\\]/, "") // Remove leading slash
+    .replace(/[/\\:]/g, "_") // Replace slashes and colons
+    .replace(/\s+/g, "_"); // Replace spaces with underscores
+
+  const overflowDir = path.join(
+    lettaDir,
+    "projects",
+    sanitizedPath,
+    "agent-tools",
+  );
+
+  return overflowDir;
+}
+
+/**
+ * Ensure the overflow directory exists, creating it if necessary.
+ *
+ * @param workingDirectory - Current working directory (project root)
+ * @returns Absolute path to the overflow directory
+ */
+export function ensureOverflowDirectory(workingDirectory: string): string {
+  const overflowDir = getOverflowDirectory(workingDirectory);
+
+  if (!fs.existsSync(overflowDir)) {
+    fs.mkdirSync(overflowDir, { recursive: true });
+  }
+
+  return overflowDir;
+}
+
+/**
+ * Write tool output to an overflow file.
+ *
+ * @param content - Full content to write
+ * @param workingDirectory - Current working directory (project root)
+ * @param toolName - Name of the tool (optional, for filename)
+ * @returns Absolute path to the written file
+ */
+export function writeOverflowFile(
+  content: string,
+  workingDirectory: string,
+  toolName?: string,
+): string {
+  const overflowDir = ensureOverflowDirectory(workingDirectory);
+
+  // Generate a unique filename
+  const uuid = randomUUID();
+  const filename = toolName
+    ? `${toolName.toLowerCase()}-${uuid}.txt`
+    : `${uuid}.txt`;
+
+  const filePath = path.join(overflowDir, filename);
+
+  // Write the content to the file
+  fs.writeFileSync(filePath, content, "utf-8");
+
+  return filePath;
+}
+
+/**
+ * Clean up old overflow files to prevent directory bloat.
+ * Removes files older than the specified age.
+ *
+ * @param workingDirectory - Current working directory (project root)
+ * @param maxAgeMs - Maximum age in milliseconds (default: 24 hours)
+ * @returns Number of files deleted
+ */
+export function cleanupOldOverflowFiles(
+  workingDirectory: string,
+  maxAgeMs: number = 24 * 60 * 60 * 1000,
+): number {
+  const overflowDir = getOverflowDirectory(workingDirectory);
+
+  if (!fs.existsSync(overflowDir)) {
+    return 0;
+  }
+
+  const files = fs.readdirSync(overflowDir);
+  const now = Date.now();
+  let deletedCount = 0;
+
+  for (const file of files) {
+    const filePath = path.join(overflowDir, file);
+    const stats = fs.statSync(filePath);
+
+    if (now - stats.mtimeMs > maxAgeMs) {
+      fs.unlinkSync(filePath);
+      deletedCount++;
+    }
+  }
+
+  return deletedCount;
+}
+
+/**
+ * Get overflow file statistics for debugging/monitoring.
+ *
+ * @param workingDirectory - Current working directory (project root)
+ * @returns Statistics object
+ */
+export function getOverflowStats(workingDirectory: string): {
+  directory: string;
+  exists: boolean;
+  fileCount: number;
+  totalSize: number;
+} {
+  const overflowDir = getOverflowDirectory(workingDirectory);
+
+  if (!fs.existsSync(overflowDir)) {
+    return {
+      directory: overflowDir,
+      exists: false,
+      fileCount: 0,
+      totalSize: 0,
+    };
+  }
+
+  const files = fs.readdirSync(overflowDir);
+  let totalSize = 0;
+
+  for (const file of files) {
+    const filePath = path.join(overflowDir, file);
+    const stats = fs.statSync(filePath);
+    totalSize += stats.size;
+  }
+
+  return {
+    directory: overflowDir,
+    exists: true,
+    fileCount: files.length,
+    totalSize,
+  };
+}
diff --git a/src/tools/impl/truncation.ts b/src/tools/impl/truncation.ts
index 2b25399..00e3360 100644
--- a/src/tools/impl/truncation.ts
+++ b/src/tools/impl/truncation.ts
@@ -1,8 +1,11 @@
 /**
  * Centralized truncation utilities for tool outputs.
  * Implements limits similar to Claude Code to prevent excessive token usage.
+ * When outputs exceed limits, full content can be written to overflow files.
  */
 
+import { OVERFLOW_CONFIG, writeOverflowFile } from "./overflow.js";
+
 // Limits based on Claude Code's proven production values
 export const LIMITS = {
   // Command output limits
@@ -18,47 +21,125 @@ export const LIMITS = {
   LS_MAX_ENTRIES: 1_000, // Max directory entries
 } as const;
 
+/**
+ * Options for truncation with overflow support
+ */
+export interface TruncationOptions {
+  /** Working directory for overflow file creation */
+  workingDirectory?: string;
+  /** Tool name for overflow file naming */
+  toolName?: string;
+  /** Whether to use middle truncation (keep beginning and end) */
+  useMiddleTruncation?: boolean;
+}
+
 /**
  * Truncates text to a maximum character count.
  * Adds a truncation notice when content exceeds limit.
+ * Optionally writes full output to an overflow file.
  */
 export function truncateByChars(
   text: string,
   maxChars: number,
-  _toolName: string = "output",
-): { content: string; wasTruncated: boolean } {
+  toolName: string = "output",
+  options?: TruncationOptions,
+): { content: string; wasTruncated: boolean; overflowPath?: string } {
   if (text.length <= maxChars) {
     return { content: text, wasTruncated: false };
   }
 
-  const truncated = text.slice(0, maxChars);
-  const notice = `\n\n[Output truncated after ${maxChars.toLocaleString()} characters: exceeded limit.]`;
+  // Determine if we should use middle truncation
+  const useMiddleTruncation =
+    options?.useMiddleTruncation ?? OVERFLOW_CONFIG.MIDDLE_TRUNCATE;
+
+  // Write to overflow file if enabled and working directory provided
+  let overflowPath: string | undefined;
+  if (OVERFLOW_CONFIG.ENABLED && options?.workingDirectory) {
+    try {
+      overflowPath = writeOverflowFile(
+        text,
+        options.workingDirectory,
+        options.toolName ?? toolName,
+      );
+    } catch (error) {
+      // Silently fail if overflow file creation fails
+      console.error("Failed to write overflow file:", error);
+    }
+  }
+
+  let truncated: string;
+  if (useMiddleTruncation) {
+    // Middle truncation: keep beginning and end
+    const halfMax = Math.floor(maxChars / 2);
+    const beginning = text.slice(0, halfMax);
+    const end = text.slice(-halfMax);
+    const omittedChars = text.length - maxChars;
+    const middleNotice = `\n... [${omittedChars.toLocaleString()} characters omitted] ...\n`;
+    truncated = beginning + middleNotice + end;
+  } else {
+    // Post truncation: keep beginning only
+    truncated = text.slice(0, maxChars);
+  }
+
+  const noticeLines = [
+    `[Output truncated: showing ${maxChars.toLocaleString()} of ${text.length.toLocaleString()} characters.]`,
+  ];
+
+  if (overflowPath) {
+    noticeLines.push(`[Full output written to: ${overflowPath}]`);
+  }
+
+  const notice = `\n\n${noticeLines.join("\n")}`;
 
   return {
     content: truncated + notice,
     wasTruncated: true,
+    overflowPath,
   };
 }
 
 /**
  * Truncates text by line count.
  * Optionally enforces max characters per line.
+ * Optionally writes full output to an overflow file.
  */
 export function truncateByLines(
   text: string,
   maxLines: number,
   maxCharsPerLine?: number,
-  _toolName: string = "output",
+  toolName: string = "output",
+  options?: TruncationOptions,
 ): {
   content: string;
   wasTruncated: boolean;
   originalLineCount: number;
   linesShown: number;
+  overflowPath?: string;
 } {
   const lines = text.split("\n");
   const originalLineCount = lines.length;
 
-  let selectedLines = lines.slice(0, maxLines);
+  // Determine if we should use middle truncation
+  const useMiddleTruncation =
+    options?.useMiddleTruncation ?? OVERFLOW_CONFIG.MIDDLE_TRUNCATE;
+
+  let selectedLines: string[];
+  if (useMiddleTruncation && lines.length > maxLines) {
+    // Middle truncation: keep beginning and end lines
+    const halfMax = Math.floor(maxLines / 2);
+    const beginning = lines.slice(0, halfMax);
+    const end = lines.slice(-halfMax);
+    const omittedLines = lines.length - maxLines;
+    selectedLines = [
+      ...beginning,
+      `... [${omittedLines.toLocaleString()} lines omitted] ...`,
+      ...end,
+    ];
+  } else {
+    // Post truncation: keep beginning lines only
+    selectedLines = lines.slice(0, maxLines);
+  }
+
   let linesWereTruncatedInLength = false;
 
   // Apply per-line character limit if specified
@@ -73,6 +154,22 @@ export function truncateByLines(
   }
 
   const wasTruncated = lines.length > maxLines || linesWereTruncatedInLength;
+
+  // Write to overflow file if enabled and working directory provided
+  let overflowPath: string | undefined;
+  if (wasTruncated && OVERFLOW_CONFIG.ENABLED && options?.workingDirectory) {
+    try {
+      overflowPath = writeOverflowFile(
+        text,
+        options.workingDirectory,
+        options.toolName ?? toolName,
+      );
+    } catch (error) {
+      // Silently fail if overflow file creation fails
+      console.error("Failed to write overflow file:", error);
+    }
+  }
+
   let content = selectedLines.join("\n");
 
   if (wasTruncated) {
@@ -90,6 +187,10 @@ export function truncateByLines(
       );
     }
 
+    if (overflowPath) {
+      notices.push(`[Full output written to: ${overflowPath}]`);
+    }
+
     content += `\n\n${notices.join(" ")}`;
   }
 
@@ -98,29 +199,82 @@ export function truncateByLines(
     wasTruncated,
     originalLineCount,
     linesShown: selectedLines.length,
+    overflowPath,
   };
 }
 
 /**
  * Truncates an array of items (file paths, directory entries, etc.)
+ * Optionally writes full output to an overflow file.
  */
 export function truncateArray<T>(
   items: T[],
   maxItems: number,
   formatter: (items: T[]) => string,
   itemType: string = "items",
-): { content: string; wasTruncated: boolean } {
+  toolName: string = "output",
+  options?: TruncationOptions,
+): { content: string; wasTruncated: boolean; overflowPath?: string } {
   if (items.length <= maxItems) {
     return { content: formatter(items), wasTruncated: false };
   }
 
-  const truncatedItems = items.slice(0, maxItems);
-  const content = formatter(truncatedItems);
-  const notice = `\n\n[Output truncated: showing ${maxItems.toLocaleString()} of ${items.length.toLocaleString()} ${itemType}.]`;
+  // Determine if we should use middle truncation
+  const useMiddleTruncation =
+    options?.useMiddleTruncation ?? OVERFLOW_CONFIG.MIDDLE_TRUNCATE;
+
+  let selectedItems: T[];
+  if (useMiddleTruncation) {
+    // Middle truncation: keep beginning and end
+    const halfMax = Math.floor(maxItems / 2);
+    const beginning = items.slice(0, halfMax);
+    const end = items.slice(-halfMax);
+    // Note: We can't insert a marker in the middle of a typed array,
+    // so we'll just show beginning and end
+    selectedItems = [...beginning, ...end];
+  } else {
+    // Post truncation: keep beginning only
+    selectedItems = items.slice(0, maxItems);
+  }
+
+  // Write to overflow file if enabled and working directory provided
+  let overflowPath: string | undefined;
+  if (OVERFLOW_CONFIG.ENABLED && options?.workingDirectory) {
+    try {
+      const fullContent = formatter(items);
+      overflowPath = writeOverflowFile(
+        fullContent,
+        options.workingDirectory,
+        options.toolName ?? toolName,
+      );
+    } catch (error) {
+      // Silently fail if overflow file creation fails
+      console.error("Failed to write overflow file:", error);
+    }
+  }
+
+  const content = formatter(selectedItems);
+  const noticeLines = [
+    `[Output truncated: showing ${maxItems.toLocaleString()} of ${items.length.toLocaleString()} ${itemType}.]`,
+  ];
+
+  if (useMiddleTruncation) {
+    const omitted = items.length - maxItems;
+    noticeLines.push(
+      `[${omitted.toLocaleString()} ${itemType} omitted from middle.]`,
+    );
+  }
+
+  if (overflowPath) {
+    noticeLines.push(`[Full output written to: ${overflowPath}]`);
+  }
+
+  const notice = `\n\n${noticeLines.join("\n")}`;
 
   return {
     content: content + notice,
     wasTruncated: true,
+    overflowPath,
   };
 }