diff --git a/README.md b/README.md
index b8f5ba0..f22129a 100644
--- a/README.md
+++ b/README.md
@@ -1,5 +1,9 @@
 # Egressor
 
+[![CI](https://github.com/ehsaniara/egressor/actions/workflows/ci.yml/badge.svg)](https://github.com/ehsaniara/egressor/actions/workflows/ci.yml)
+[![Go Report Card](https://goreportcard.com/badge/github.com/ehsaniara/egressor)](https://goreportcard.com/report/github.com/ehsaniara/egressor)
+[![License: MIT](https://img.shields.io/badge/License-MIT-yellow.svg)](https://opensource.org/licenses/MIT)
+
 **Local-first egress monitoring and control for developer tools**
 
 ---
@@ -10,6 +14,7 @@ Egressor is a local HTTPS proxy that intercepts outbound traffic from developer
 
 - **TLS interception** — decrypts and inspects HTTPS payloads via a local CA
 - **File detection** — identifies file paths and contents in API request bodies
+- **Directory scope enforcement** — blocks requests referencing files outside allowed project directories
 - **File blocking** — prevents sensitive files (`.env`, `.pem`, secrets) from being sent
 - **Desktop UI** — real-time session inspector with request/response viewer
 - **Audit logging** — structured JSON logs with automatic rotation
@@ -102,6 +107,11 @@ egressor --version
 listen_address: "127.0.0.1:8080"
 
 policy:
+  # Block requests that reference files outside these directories.
+  # If empty, no directory scope is enforced.
+  allowed_directories:
+    # - "~/Projects/my-app"
+
   deny_file_patterns:
     - "*.env"
     - "*.pem"
@@ -122,6 +132,15 @@ intercept:
   max_body_size: 1048576    # 1MB
 ```
 
+### Allowed directories
+
+When `allowed_directories` is set, any request containing file references outside those directories is blocked. This prevents LLM tools from accessing files beyond the intended project scope (e.g. `~/.ssh`, `/etc/passwd`, `~/.aws/credentials`).
+
+- Relative paths are resolved against the current working directory
+- Path traversals (`../`) are cleaned before evaluation
+- Multiple directories can be specified
+- Leave empty to allow all directories (default)
+
 ### Deny file patterns
 
 Glob patterns that block requests containing matching file references:
@@ -144,7 +163,7 @@ The default mode opens a native desktop window (built with Wails + React):
 
 - **Sessions tab** — live table of intercepted connections with method, host, status, file count
 - **Detail panel** — click a session to see full request/response headers, body (JSON-formatted), and detected files
-- **Policy tab** — edit deny file patterns, add/remove patterns, save to config
+- **Policy tab** — manage allowed directories and deny file patterns, save to config
 - **Bottom bar** — proxy start/stop, pause/resume policy, session stats
 
 Blocked requests are highlighted in red with the matching deny pattern shown.
@@ -165,9 +184,10 @@ Client ──TLS(egressor cert)──► Egressor ──TLS(real cert)──►
 4. Egressor opens its own TLS connection to the real server
 5. Sitting between two decrypted streams, it reads the plaintext HTTP request
 6. Extracts file references from the JSON payload
-7. Checks file paths against `deny_file_patterns`
-8. If blocked: returns `403`, logs the attempt, never forwards to the server
-9. If allowed: forwards the request, captures the response, logs everything
+7. Checks file paths against `allowed_directories` — blocks if out of scope
+8. Checks file paths against `deny_file_patterns` — blocks if matched
+9. If blocked: returns `403`, logs the attempt, never forwards to the server
+10. If allowed: forwards the request, captures the response, logs everything
 
 ### File detection
 
diff --git a/cmd/egressor/main.go b/cmd/egressor/main.go
index d97b48e..215653b 100644
--- a/cmd/egressor/main.go
+++ b/cmd/egressor/main.go
@@ -112,6 +112,11 @@ func fileExists(path string) bool {
 const defaultConfig = `listen_address: "127.0.0.1:8080"
 
 policy:
+  # Block requests that reference files outside these directories.
+  # If empty, no directory scope is enforced.
+  allowed_directories:
+    # - "~/Projects/my-app"
+
   deny_file_patterns:
     - "*.env"
     - "*.pem"
diff --git a/docs/design.md b/docs/design.md
index 0e6f9d1..b5f7644 100644
--- a/docs/design.md
+++ b/docs/design.md
@@ -26,6 +26,8 @@ Egressor is a local HTTPS intercepting proxy that monitors and controls outbound
 │  └────┬─────────┘                            │
 │       │                                      │
 │       ├──▶ Extract file references           │
+│       ├──▶ Check allowed_directories         │
+│       │     └─ OUT OF SCOPE → 403            │
 │       ├──▶ Check deny_file_patterns          │
 │       │     ├─ BLOCKED → 403 to client       │
 │       │     └─ ALLOWED → forward upstream    │
@@ -68,7 +70,8 @@ For each connection:
 3. HTTP/1.1 relay loop:
    - Read full request body into buffer
    - Extract file references from the body
-   - Evaluate file paths against `deny_file_patterns`
+   - Evaluate file paths against `allowed_directories` — block if out of scope
+   - Evaluate file paths against `deny_file_patterns` — block if matched
    - If blocked: send 403 back to client, log, stop
    - If allowed: forward request to upstream, relay response back
 4. Record exchange in session
@@ -87,11 +90,20 @@ Returns `[]FileRef{Path, Source}` where Source is `"json_field"` or `"text_patte
 
 ### Policy Engine (`internal/policy/policy.go`)
 
-File-pattern-based policy enforcement:
+Two-layer policy enforcement:
 
-- `EvaluateFiles(paths []string) Decision` — checks paths against `deny_file_patterns`
+**Directory scope** — `EvaluateScope(paths []string) Decision`:
+- Checks if file paths fall within `allowed_directories`
+- Resolves relative paths against cwd, cleans `../` traversals
+- If no directories configured, all paths are allowed (default)
+- Runtime mutation: `GetAllowedDirectories()`, `SetAllowedDirectories()`
+
+**File pattern deny** — `EvaluateFiles(paths []string) Decision`:
+- Checks paths against `deny_file_patterns`
 - Pattern matching: `filepath.Match` for globs, `**/` prefix for recursive matching, basename fallback
 - Runtime mutation: `GetDenyPatterns()`, `SetDenyPatterns()`, `AddDenyPattern()`, `RemoveDenyPattern()`
+
+Both layers:
 - Pause/bypass via atomic bool (for UI toggle)
 - Thread-safe with `sync.RWMutex`
 
@@ -138,7 +150,7 @@ File-pattern-based policy enforcement:
 **React frontend** (`internal/ui/frontend/`):
 - Sessions tab: live table with real-time updates via `EventsOn("session:new")`
 - Detail panel: request/response inspector with JSON viewer, detected files, blocked indicator
-- Policy tab: editable deny patterns with save-to-config
+- Policy tab: allowed directories and deny patterns with save-to-config
 - Bottom bar: proxy controls, policy pause/resume, stats
 
 ### Configuration (`internal/config/config.go`)
@@ -160,11 +172,12 @@ File-pattern-based policy enforcement:
 5. Interceptor: TLS handshake with upstream (real cert)
 6. Interceptor: read HTTP request, buffer body
 7. Extract: scan body → detected_files: ["src/main.go"]
-8. Policy: EvaluateFiles(["src/main.go"]) → allowed
-9. Interceptor: forward request to upstream
-10. Interceptor: read response, forward to client
-11. Logger: write session JSON to audit.log
-12. Store: add session, emit "session:new" event → UI
+8. Policy: EvaluateScope(["src/main.go"]) → in scope
+9. Policy: EvaluateFiles(["src/main.go"]) → allowed
+10. Interceptor: forward request to upstream
+11. Interceptor: read response, forward to client
+12. Logger: write session JSON to audit.log
+13. Store: add session, emit "session:new" event → UI
 ```
 
 ### Blocked request
@@ -172,10 +185,11 @@ File-pattern-based policy enforcement:
 ```
 1-6. Same as above
 7. Extract: scan body → detected_files: [".env"]
-8. Policy: EvaluateFiles([".env"]) → denied (matches "*.env")
-9. Interceptor: send 403 back to client over TLS
-10. Logger: write session with blocked=true, block_reason
-11. Store: add session → UI shows red row
+8. Policy: EvaluateScope([".env"]) → in scope (or blocked if outside allowed dirs)
+9. Policy: EvaluateFiles([".env"]) → denied (matches "*.env")
+10. Interceptor: send 403 back to client over TLS
+11. Logger: write session with blocked=true, block_reason
+12. Store: add session → UI shows red row
 ```
 
 ## Security Considerations
@@ -195,7 +209,7 @@ internal/
     proxy.go                          TCP listener, CONNECT handler, lifecycle
     intercept.go                      TLS MITM, HTTP relay, file extraction, blocking
   policy/
-    policy.go                         deny_file_patterns matching engine
+    policy.go                         Directory scope + deny pattern engine
   audit/
     session.go                        Session, InterceptedExchange, FileRef models
     logger.go                         JSON file logger with rotation
@@ -220,7 +234,7 @@ internal/
           SessionDetail.tsx           Exchange inspector
           RequestPane.tsx             Request headers + body + files
           ResponsePane.tsx            Response headers + body
-          PolicyEditor.tsx            Deny pattern CRUD
+          PolicyEditor.tsx            Allowed dirs + deny pattern CRUD
           ProxyControls.tsx           Start/stop/pause + stats
           JsonViewer.tsx              Formatted JSON display
         hooks/
diff --git a/internal/audit/logger.go b/internal/audit/logger.go
index 91dc849..091511d 100644
--- a/internal/audit/logger.go
+++ b/internal/audit/logger.go
@@ -4,6 +4,7 @@ import (
 	"encoding/json"
 	"fmt"
 	"io"
+	"log/slog"
 	"os"
 	"path/filepath"
 	"sync"
@@ -54,6 +55,7 @@ func NewLogger(format, file string, maxSize int64) (*Logger, error) {
 func (l *Logger) Log(s *Session) {
 	data, err := json.Marshal(s)
 	if err != nil {
+		slog.Error("failed to marshal session", "err", err)
 		return
 	}
 	data = append(data, '\n')
@@ -74,7 +76,9 @@ func (l *Logger) rotate() {
 
 	// Rename current log to audit.log.<unix_epoch>
 	rotated := fmt.Sprintf("%s.%d", l.file, time.Now().Unix())
-	os.Rename(l.file, rotated)
+	if err := os.Rename(l.file, rotated); err != nil {
+		slog.Error("failed to rotate log file", "err", err)
+	}
 
 	f, err := os.OpenFile(l.file, os.O_CREATE|os.O_WRONLY|os.O_APPEND, 0o644)
 	if err != nil {
diff --git a/internal/audit/session.go b/internal/audit/session.go
index 66190c3..4c61b75 100644
--- a/internal/audit/session.go
+++ b/internal/audit/session.go
@@ -1,3 +1,5 @@
+// Package audit provides session logging, storage, and observation
+// for intercepted proxy traffic.
 package audit
 
 import (
diff --git a/internal/config/config.go b/internal/config/config.go
index a8b8885..d6a5f3c 100644
--- a/internal/config/config.go
+++ b/internal/config/config.go
@@ -1,3 +1,4 @@
+// Package config handles YAML configuration loading, defaults, and persistence.
 package config
 
 import (
diff --git a/internal/extract/files.go b/internal/extract/files.go
index 5bfcbc1..d822f51 100644
--- a/internal/extract/files.go
+++ b/internal/extract/files.go
@@ -1,3 +1,5 @@
+// Package extract detects file references in HTTP request bodies
+// sent to LLM APIs.
 package extract
 
 import (
diff --git a/internal/policy/policy.go b/internal/policy/policy.go
index bc32d54..c665cae 100644
--- a/internal/policy/policy.go
+++ b/internal/policy/policy.go
@@ -1,3 +1,5 @@
+// Package policy implements directory scope and file pattern enforcement
+// for intercepted requests.
 package policy
 
 import (
@@ -106,7 +108,8 @@ func (e *Engine) EvaluateScope(paths []string) Decision {
 	}
 
 	e.mu.RLock()
-	allowedDirs := e.cfg.AllowedDirectories
+	allowedDirs := make([]string, len(e.cfg.AllowedDirectories))
+	copy(allowedDirs, e.cfg.AllowedDirectories)
 	e.mu.RUnlock()
 
 	if len(allowedDirs) == 0 {
@@ -160,7 +163,8 @@ func (e *Engine) EvaluateFiles(paths []string) Decision {
 	}
 
 	e.mu.RLock()
-	patterns := e.cfg.DenyFilePatterns
+	patterns := make([]string, len(e.cfg.DenyFilePatterns))
+	copy(patterns, e.cfg.DenyFilePatterns)
 	e.mu.RUnlock()
 
 	if len(patterns) == 0 {
diff --git a/internal/proxy/proxy.go b/internal/proxy/proxy.go
index 0e3367e..71c9327 100644
--- a/internal/proxy/proxy.go
+++ b/internal/proxy/proxy.go
@@ -1,3 +1,5 @@
+// Package proxy implements an HTTPS intercepting proxy with TLS MITM
+// for monitoring and controlling outbound traffic.
 package proxy
 
 import (