diff --git a/src/basic_memory/services/initialization.py b/src/basic_memory/services/initialization.py
index 7038f8fd..b491a6ad 100644
--- a/src/basic_memory/services/initialization.py
+++ b/src/basic_memory/services/initialization.py
@@ -5,6 +5,7 @@
 """
 
 import asyncio
+import os
 from pathlib import Path
 
 from loguru import logger
@@ -101,6 +102,12 @@ async def initialize_file_sync(
     # Get active projects
     active_projects = await project_repository.get_active_projects()
 
+    # Filter to constrained project if MCP server was started with --project
+    constrained_project = os.environ.get("BASIC_MEMORY_MCP_PROJECT")
+    if constrained_project:
+        active_projects = [p for p in active_projects if p.name == constrained_project]
+        logger.info(f"Background sync constrained to project: {constrained_project}")
+
     # Start sync for all projects as background tasks (non-blocking)
     async def sync_project_background(project):
         """Sync a single project in the background."""
diff --git a/tests/services/test_initialization.py b/tests/services/test_initialization.py
index 1e7bb873..fbbac703 100644
--- a/tests/services/test_initialization.py
+++ b/tests/services/test_initialization.py
@@ -178,3 +178,71 @@ async def test_initialize_file_sync_background_tasks(
 
         # Watch service should still be started
         mock_watch_service.run.assert_called_once()
+
+
+@pytest.mark.asyncio
+@patch("basic_memory.services.initialization.db.get_or_create_db")
+@patch("basic_memory.cli.commands.sync.get_sync_service")
+@patch("basic_memory.sync.WatchService")
+@patch("basic_memory.services.initialization.asyncio.create_task")
+@patch.dict("os.environ", {"BASIC_MEMORY_MCP_PROJECT": "project1"})
+async def test_initialize_file_sync_respects_project_constraint(
+    mock_create_task, mock_watch_service_class, mock_get_sync_service, mock_get_db, app_config
+):
+    """Test that file sync only syncs the constrained project when BASIC_MEMORY_MCP_PROJECT is set."""
+    # Setup mocks
+    mock_session_maker = AsyncMock()
+    mock_get_db.return_value = (None, mock_session_maker)
+
+    mock_watch_service = AsyncMock()
+    mock_watch_service.run = AsyncMock()
+    mock_watch_service_class.return_value = mock_watch_service
+
+    mock_repository = AsyncMock()
+    mock_project1 = MagicMock()
+    mock_project1.name = "project1"
+    mock_project1.path = "/path/to/project1"
+    mock_project1.id = 1
+
+    mock_project2 = MagicMock()
+    mock_project2.name = "project2"
+    mock_project2.path = "/path/to/project2"
+    mock_project2.id = 2
+
+    mock_project3 = MagicMock()
+    mock_project3.name = "project3"
+    mock_project3.path = "/path/to/project3"
+    mock_project3.id = 3
+
+    mock_sync_service = AsyncMock()
+    mock_sync_service.sync = AsyncMock()
+    mock_get_sync_service.return_value = mock_sync_service
+
+    # Mock background tasks
+    mock_task = MagicMock()
+    mock_create_task.return_value = mock_task
+
+    # Mock the repository
+    with patch("basic_memory.services.initialization.ProjectRepository") as mock_repo_class:
+        mock_repo_class.return_value = mock_repository
+        # Return all 3 projects from get_active_projects
+        mock_repository.get_active_projects.return_value = [
+            mock_project1,
+            mock_project2,
+            mock_project3,
+        ]
+
+        # Run the function
+        result = await initialize_file_sync(app_config)
+
+        # Assertions
+        mock_repository.get_active_projects.assert_called_once()
+
+        # Should only create 1 background task for project1 (the constrained project)
+        assert mock_create_task.call_count == 1
+
+        # Verify the function returns None
+        assert result is None
+
+        # Watch service should still be started
+        mock_watch_service.run.assert_called_once()