fix: honor local project routing and filter cloud watch cycles

Signed-off-by: phernandez <paul@basicmachines.co>

Author: phernandez

src/basic_memory/mcp/async_client.py

@@ -61,13 +61,18 @@ async def get_client(
        OAuth token. Honored even when FORCE_LOCAL is set, because the user
        explicitly declared this project as cloud.
 
-    3. **Force-local** (BASIC_MEMORY_FORCE_LOCAL env var):
+    3. **Per-project local mode** (project_name provided):
+       If the project's mode is LOCAL (or unspecified, default LOCAL), route
+       to local ASGI transport. This allows mixed local/cloud routing even when
+       global cloud mode is enabled.
+
+    4. **Force-local** (BASIC_MEMORY_FORCE_LOCAL env var):
        Routes to local ASGI transport, ignoring global cloud settings.
 
-    4. **Global cloud mode** (deprecated fallback):
+    5. **Global cloud mode** (deprecated fallback):
        When cloud_mode_enabled is True, uses OAuth JWT token.
 
-    5. **Local mode** (default):
+    6. **Local mode** (default):
        Use ASGI transport for in-process requests to local FastAPI app.
 
     Args:
@@ -134,6 +139,17 @@ async def get_client(
             ) as client:
                 yield client
 
+        # Trigger: project is not explicitly cloud (LOCAL is the default)
+        # Why: project-scoped routing should honor local mode even when global
+        #      cloud mode is enabled for backward compatibility
+        # Outcome: uses ASGI transport for in-process local API calls
+        elif project_name and config.get_project_mode(project_name) == ProjectMode.LOCAL:
+            logger.info(f"Project '{project_name}' is set to local mode - using ASGI transport")
+            async with AsyncClient(
+                transport=ASGITransport(app=fastapi_app), base_url="http://test", timeout=timeout
+            ) as client:
+                yield client
+
         # Trigger: BASIC_MEMORY_FORCE_LOCAL env var is set
         # Why: allows local MCP server and CLI commands to route locally
         #      even when cloud_mode_enabled is True

src/basic_memory/sync/watch_service.py

@@ -10,7 +10,7 @@
 if TYPE_CHECKING:
     from basic_memory.sync.sync_service import SyncService
 
-from basic_memory.config import BasicMemoryConfig, WATCH_STATUS_JSON
+from basic_memory.config import BasicMemoryConfig, ProjectMode, WATCH_STATUS_JSON
 from basic_memory.ignore_utils import load_gitignore_patterns, should_ignore_path
 from basic_memory.models import Project
 from basic_memory.repository import ProjectRepository
@@ -177,6 +177,22 @@ async def run(self):  # pragma: no cover
                 # Reload projects to catch any new/removed projects
                 projects = await self.project_repository.get_active_projects()
 
+                # Trigger: project is configured for cloud routing
+                # Why: cloud projects should not be watched/synced by local file watchers
+                # Outcome: watch cycle only observes local-mode projects
+                cloud_projects = [
+                    p.name
+                    for p in projects
+                    if self.app_config.get_project_mode(p.name) == ProjectMode.CLOUD
+                ]
+                if cloud_projects:
+                    projects = [
+                        p
+                        for p in projects
+                        if self.app_config.get_project_mode(p.name) != ProjectMode.CLOUD
+                    ]
+                    logger.info(f"Skipping cloud-mode projects in watch cycle: {cloud_projects}")
+
                 project_paths = [project.path for project in projects]
                 logger.debug(f"Starting watch cycle for directories: {project_paths}")
 

tests/mcp/test_async_client_modes.py

@@ -132,6 +132,21 @@ async def test_get_client_local_project_uses_asgi_transport(config_manager, conf
         assert isinstance(client._transport, httpx.ASGITransport)  # pyright: ignore[reportPrivateUsage]
 
 
+@pytest.mark.asyncio
+async def test_get_client_local_project_honored_with_global_cloud_enabled(config_manager, config_home):
+    """LOCAL project mode should take priority over global cloud mode fallback."""
+    cfg = config_manager.load_config()
+    cfg.cloud_mode = True
+    cfg.cloud_host = "https://cloud.example.test"
+    cfg.cloud_api_key = None
+    # "main" defaults to LOCAL since we didn't set_project_mode
+    config_manager.save_config(cfg)
+
+    # Should use ASGI transport without requiring OAuth token.
+    async with get_client(project_name="main") as client:
+        assert isinstance(client._transport, httpx.ASGITransport)  # pyright: ignore[reportPrivateUsage]
+
+
 @pytest.mark.asyncio
 async def test_get_client_no_project_name_uses_default_routing(config_manager, config_home):
     """Test that get_client without project_name falls through to default routing."""

tests/sync/test_watch_service_reload.py

@@ -12,7 +12,7 @@
 
 import pytest
 
-from basic_memory.config import BasicMemoryConfig
+from basic_memory.config import BasicMemoryConfig, ProjectMode
 from basic_memory.models.project import Project
 from basic_memory.sync.watch_service import WatchService
 
@@ -143,6 +143,43 @@ async def fake_write_status():
     assert cycle_count == 2
 
 
+@pytest.mark.asyncio
+async def test_run_filters_cloud_projects_each_cycle(monkeypatch, tmp_path):
+    config = BasicMemoryConfig(
+        watch_project_reload_interval=1,
+        project_modes={"cloud-project": ProjectMode.CLOUD},
+    )
+    repo = _Repo(
+        projects_return=[
+            Project(id=1, name="local-project", path=str(tmp_path / "local"), permalink="local"),
+            Project(
+                id=2,
+                name="cloud-project",
+                path=str(tmp_path / "cloud"),
+                permalink="cloud",
+            ),
+        ]
+    )
+    watch_service = WatchService(config, repo, quiet=True)
+
+    seen_project_names: list[list[str]] = []
+
+    async def watch_cycle_stub(projects, stop_event):
+        seen_project_names.append([p.name for p in projects])
+        watch_service.state.running = False
+        stop_event.set()
+
+    async def fake_write_status():
+        return None
+
+    monkeypatch.setattr(watch_service, "_watch_projects_cycle", watch_cycle_stub)
+    monkeypatch.setattr(watch_service, "write_status", fake_write_status)
+
+    await watch_service.run()
+
+    assert seen_project_names == [["local-project"]]
+
+
 @pytest.mark.asyncio
 async def test_run_continues_after_cycle_error(monkeypatch, tmp_path):
     config = BasicMemoryConfig()