diff --git a/CLAUDE.md b/CLAUDE.md
index 3b734c1..620f0a6 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -189,7 +189,11 @@ Core delta logic is in `src/deltaglider/core/service.py`:
 ## Environment Variables
 
 - `DG_LOG_LEVEL`: Logging level (default: "INFO")
-- `DG_MAX_RATIO`: Maximum acceptable delta/file ratio (default: "0.5")
+- `DG_MAX_RATIO`: Maximum acceptable delta/file ratio (default: "0.5", range: "0.0-1.0")
+  - **See [docs/DG_MAX_RATIO.md](docs/DG_MAX_RATIO.md) for complete tuning guide**
+  - Controls when to use delta vs. direct storage
+  - Lower (0.2-0.3) = conservative, only high-quality compression
+  - Higher (0.6-0.7) = permissive, accept modest savings
 - `DG_CACHE_BACKEND`: Cache backend type - "filesystem" (default) or "memory"
 - `DG_CACHE_MEMORY_SIZE_MB`: Memory cache size limit in MB (default: "100")
 - `DG_CACHE_ENCRYPTION_KEY`: Optional base64-encoded Fernet key for persistent encryption (ephemeral by default)
diff --git a/Dockerfile b/Dockerfile
index 6b18aac..b1eaedf 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -71,6 +71,11 @@ HEALTHCHECK --interval=30s --timeout=3s --start-period=5s --retries=3 \
 ENV DG_LOG_LEVEL=INFO
 
 # Performance & Compression
+# DG_MAX_RATIO: Maximum delta/file ratio (0.0-1.0)
+# Default 0.5 means: only use delta if delta_size ≤ 50% of original_size
+# Lower (0.2-0.3) = more conservative, only high-quality compression
+# Higher (0.6-0.7) = more permissive, accept modest savings
+# See docs/DG_MAX_RATIO.md for complete tuning guide
 ENV DG_MAX_RATIO=0.5
 
 # Cache Configuration
diff --git a/README.md b/README.md
index 90cc23a..3226a5c 100644
--- a/README.md
+++ b/README.md
@@ -85,7 +85,7 @@ docker run -v /shared-cache:/tmp/.deltaglider \
 
 **Environment Variables**:
 - `DG_LOG_LEVEL`: Logging level (default: `INFO`, options: `DEBUG`, `INFO`, `WARNING`, `ERROR`)
-- `DG_MAX_RATIO`: Maximum delta/file ratio (default: `0.5`, range: `0.0-1.0`)
+- `DG_MAX_RATIO`: Maximum delta/file ratio (default: `0.5`, range: `0.0-1.0`) - [📖 Complete Guide](docs/DG_MAX_RATIO.md)
 - `DG_CACHE_BACKEND`: Cache backend (default: `filesystem`, options: `filesystem`, `memory`)
 - `DG_CACHE_MEMORY_SIZE_MB`: Memory cache size in MB (default: `100`)
 - `DG_CACHE_ENCRYPTION_KEY`: Optional base64-encoded encryption key for cross-process cache sharing
@@ -94,6 +94,8 @@ docker run -v /shared-cache:/tmp/.deltaglider \
 - `AWS_SECRET_ACCESS_KEY`: AWS secret key
 - `AWS_DEFAULT_REGION`: AWS region (default: `us-east-1`)
 
+> **💡 Tip**: `DG_MAX_RATIO` is a powerful tuning parameter. See the [DG_MAX_RATIO guide](docs/DG_MAX_RATIO.md) to learn how to optimize compression for your use case.
+
 **Security Notes**:
 - Encryption is **always enabled** (cannot be disabled)
 - Each container gets ephemeral encryption keys for maximum security
diff --git a/docs/DG_MAX_RATIO.md b/docs/DG_MAX_RATIO.md
new file mode 100644
index 0000000..0ce5a38
--- /dev/null
+++ b/docs/DG_MAX_RATIO.md
@@ -0,0 +1,526 @@
+# DG_MAX_RATIO - Delta Compression Efficiency Guard
+
+## Overview
+
+`DG_MAX_RATIO` is a **safety threshold** that prevents inefficient delta compression. It controls the maximum acceptable ratio of `delta_size / original_file_size`.
+
+**Default**: `0.5` (50%)
+**Range**: `0.0` to `1.0`
+**Environment Variable**: `DG_MAX_RATIO`
+
+## The Problem It Solves
+
+When files are **too different**, xdelta3 can create a delta file that's **almost as large as the original file** (or even larger!). This defeats the purpose of compression and wastes:
+- ❌ Storage space (storing a large delta instead of the original)
+- ❌ CPU time (creating and applying the delta)
+- ❌ Network bandwidth (downloading delta + reference instead of just the file)
+
+## How It Works
+
+```
+1. Upload file → Create delta using xdelta3
+2. Calculate ratio = delta_size / original_file_size
+3. If ratio > DG_MAX_RATIO:
+   ❌ Discard delta, store original file directly
+   Else:
+   ✅ Keep delta, save storage space
+```
+
+### Example Flow
+
+```
+Original file: 100MB
+Reference file: 100MB (uploaded previously)
+
+xdelta3 creates delta: 60MB
+Ratio = 60MB / 100MB = 0.6 (60%)
+
+With DG_MAX_RATIO=0.5:
+  ❌ Delta rejected (60% > 50%)
+  Action: Store 100MB original file
+  Reason: Delta not efficient enough
+
+With DG_MAX_RATIO=0.7:
+  ✅ Delta accepted (60% ≤ 70%)
+  Action: Store 60MB delta
+  Savings: 40MB (40%)
+```
+
+## Default Value: 0.5 (50%)
+
+**Meaning**: Only use delta compression if the delta is **≤50% of the original file size**
+
+This default provides:
+- ✅ Minimum 50% storage savings when delta compression is used
+- ✅ Prevents wasting CPU on inefficient compression
+- ✅ Works well for typical versioned releases (minor updates between versions)
+- ✅ Balanced approach without manual tuning
+
+## When to Adjust
+
+### 🔽 Lower Value (More Conservative)
+
+**Set `DG_MAX_RATIO=0.2-0.3` when:**
+- Files change significantly between versions (major updates, refactors)
+- Storage cost is **very high** (premium S3 tiers, small quotas)
+- You want to avoid **any** inefficient compression
+- You need guaranteed high-quality compression (≥70% savings)
+
+**Example**:
+```bash
+export DG_MAX_RATIO=0.3
+
+# Only accept deltas that are ≤30% of original size
+# More files stored directly, but guaranteed ≥70% savings when using deltas
+```
+
+**Trade-off**:
+- ✅ Higher quality compression when deltas are used
+- ❌ Fewer files will use delta compression
+- ❌ More direct uploads (higher storage for dissimilar files)
+
+### 🔼 Higher Value (More Permissive)
+
+**Set `DG_MAX_RATIO=0.6-0.8` when:**
+- Files are very similar (minor patches, nightly builds, incremental changes)
+- Storage cost is **cheap** (large S3 buckets, unlimited quotas)
+- CPU time is **expensive** (you want to save re-uploading even with modest compression)
+- You want to maximize delta compression usage
+
+**Example**:
+```bash
+export DG_MAX_RATIO=0.7
+
+# Accept deltas up to 70% of original size
+# More files use delta compression, even with modest 30% savings
+```
+
+**Trade-off**:
+- ✅ More files use delta compression
+- ✅ Save bandwidth even with modest compression
+- ❌ Some deltas may only save 20-30% space
+- ❌ More CPU time spent on marginal compressions
+
+## Real-World Scenarios
+
+### Scenario 1: Nightly Builds (Minimal Changes) ⭐ IDEAL
+
+```
+my-app-v1.0.0.zip → 100MB (reference)
+my-app-v1.0.1.zip → 100MB (0.1% code change)
+
+Delta: 200KB (0.2% of original)
+Ratio: 0.002
+
+With ANY DG_MAX_RATIO: ✅ Use delta (99.8% savings!)
+Result: Store 200KB instead of 100MB
+```
+
+**This is what DeltaGlider excels at!**
+
+### Scenario 2: Major Version (Significant Changes)
+
+```
+my-app-v1.0.0.zip → 100MB (reference)
+my-app-v2.0.0.zip → 100MB (complete rewrite, 85% different)
+
+Delta: 85MB (85% of original)
+Ratio: 0.85
+
+With DG_MAX_RATIO=0.5: ❌ Store original (85% > 50%)
+  → Stores 100MB directly
+  → No compression benefit, but no CPU waste
+
+With DG_MAX_RATIO=0.9: ✅ Use delta (85% ≤ 90%)
+  → Stores 85MB delta
+  → Only 15% savings, questionable benefit
+```
+
+**Recommendation**: For major versions, default `0.5` correctly rejects inefficient compression.
+
+### Scenario 3: Different File Format (Same Content)
+
+```
+my-app-v1.0.0.zip → 100MB (ZIP archive)
+my-app-v1.0.0.tar → 100MB (TAR archive, same content)
+
+Delta: 70MB (completely different format structure)
+Ratio: 0.70
+
+With DG_MAX_RATIO=0.5: ❌ Store original (70% > 50%)
+  → Stores 100MB directly
+  → Correct decision: formats too different
+
+With DG_MAX_RATIO=0.8: ✅ Use delta (70% ≤ 80%)
+  → Stores 70MB delta
+  → 30% savings, but CPU-intensive
+```
+
+**Recommendation**: Use consistent file formats for better compression. Default `0.5` correctly rejects cross-format compression.
+
+### Scenario 4: Incremental Updates (Sweet Spot) ⭐
+
+```
+my-app-v1.0.0.zip → 100MB (reference)
+my-app-v1.0.1.zip → 100MB (minor bugfix, 5% code change)
+
+Delta: 5MB (5% of original)
+Ratio: 0.05
+
+With ANY DG_MAX_RATIO: ✅ Use delta (95% savings!)
+Result: Store 5MB instead of 100MB
+```
+
+**This is the target use case for delta compression!**
+
+## How to Choose the Right Value
+
+### Decision Tree
+
+```
+Do your files have minimal changes between versions? (< 5% different)
+├─ YES → Use default 0.5 ✅
+│         Delta compression will work perfectly
+│
+└─ NO  → Are your files significantly different? (> 50% different)
+          ├─ YES → Lower to 0.2-0.3 🔽
+          │         Avoid wasting time on inefficient compression
+          │
+          └─ NO  → Are they moderately different? (20-50% different)
+                   ├─ Storage is expensive → Lower to 0.3 🔽
+                   │                         Only high-quality compression
+                   │
+                   └─ Storage is cheap → Raise to 0.6-0.7 🔼
+                                          Accept modest savings
+```
+
+### Quick Reference Table
+
+| File Similarity | Recommended DG_MAX_RATIO | Expected Behavior |
+|----------------|--------------------------|-------------------|
+| Nearly identical (< 5% change) | **0.5 (default)** | 🟢 95%+ savings |
+| Minor updates (5-20% change) | **0.5 (default)** | 🟢 80-95% savings |
+| Moderate changes (20-50% change) | **0.4-0.6** | 🟡 50-80% savings |
+| Major changes (50-80% change) | **0.3 or lower** | 🔴 Store directly |
+| Complete rewrites (> 80% change) | **0.3 or lower** | 🔴 Store directly |
+
+### Use Cases by Industry
+
+**Software Releases (SaaS)**:
+```bash
+export DG_MAX_RATIO=0.5  # Default
+# Nightly builds with minor changes compress perfectly
+```
+
+**Mobile App Builds**:
+```bash
+export DG_MAX_RATIO=0.4  # Slightly conservative
+# iOS/Android builds can vary, want quality compression only
+```
+
+**Database Backups**:
+```bash
+export DG_MAX_RATIO=0.7  # Permissive
+# Daily backups are very similar, accept modest savings
+```
+
+**Document Archives**:
+```bash
+export DG_MAX_RATIO=0.6  # Moderate
+# Documents change incrementally, accept good savings
+```
+
+**Video/Media Archives**:
+```bash
+export DG_MAX_RATIO=0.2  # Very conservative
+# Media files are unique, only compress if very similar
+```
+
+## Configuration Examples
+
+### Docker
+
+**Conservative (Premium Storage)**:
+```bash
+docker run -e DG_MAX_RATIO=0.3 \
+  -e AWS_ACCESS_KEY_ID -e AWS_SECRET_ACCESS_KEY \
+  deltaglider/deltaglider cp file.zip s3://releases/
+```
+
+**Default (Balanced)**:
+```bash
+docker run -e DG_MAX_RATIO=0.5 \
+  -e AWS_ACCESS_KEY_ID -e AWS_SECRET_ACCESS_KEY \
+  deltaglider/deltaglider cp file.zip s3://releases/
+```
+
+**Permissive (Cheap Storage)**:
+```bash
+docker run -e DG_MAX_RATIO=0.7 \
+  -e AWS_ACCESS_KEY_ID -e AWS_SECRET_ACCESS_KEY \
+  deltaglider/deltaglider cp file.zip s3://releases/
+```
+
+### Python SDK
+
+```python
+import os
+
+# Conservative (only high-quality compression)
+os.environ['DG_MAX_RATIO'] = '0.3'
+
+# Default (balanced)
+os.environ['DG_MAX_RATIO'] = '0.5'
+
+# Permissive (accept modest savings)
+os.environ['DG_MAX_RATIO'] = '0.7'
+
+from deltaglider import create_client
+client = create_client()
+
+summary = client.upload("file.zip", "s3://bucket/")
+print(f"Delta ratio: {summary.delta_ratio:.2f}")
+print(f"Used delta: {summary.is_delta}")
+```
+
+### CLI
+
+```bash
+# Conservative
+export DG_MAX_RATIO=0.3
+deltaglider cp my-app-v2.0.0.zip s3://releases/
+
+# Default
+export DG_MAX_RATIO=0.5
+deltaglider cp my-app-v2.0.0.zip s3://releases/
+
+# Permissive
+export DG_MAX_RATIO=0.7
+deltaglider cp my-app-v2.0.0.zip s3://releases/
+```
+
+### Override Per-Upload (CLI)
+
+```bash
+# Use custom ratio for specific file
+deltaglider cp large-file.zip s3://releases/ --max-ratio 0.3
+```
+
+## Monitoring and Tuning
+
+### Check Delta Ratios After Upload
+
+```python
+from deltaglider import create_client
+
+client = create_client()
+summary = client.upload("file.zip", "s3://bucket/")
+
+print(f"Delta ratio: {summary.delta_ratio:.2f}")
+print(f"Savings: {summary.savings_percent:.0f}%")
+print(f"Used delta: {summary.is_delta}")
+
+if summary.is_delta:
+    print(f"✅ Used delta compression (ratio {summary.delta_ratio:.2f})")
+    if summary.delta_ratio > 0.4:
+        print(f"⚠️  Consider lowering DG_MAX_RATIO for better quality")
+else:
+    print(f"❌ Stored directly (delta would have been ratio ~{summary.delta_ratio:.2f})")
+    if summary.delta_ratio < 0.6:
+        print(f"💡 Consider raising DG_MAX_RATIO to enable compression")
+```
+
+### Batch Analysis
+
+```python
+from deltaglider import create_client
+from pathlib import Path
+
+client = create_client()
+ratios = []
+
+for file in Path("releases").glob("*.zip"):
+    summary = client.upload(str(file), f"s3://bucket/{file.name}")
+    if summary.is_delta:
+        ratios.append(summary.delta_ratio)
+
+if ratios:
+    avg_ratio = sum(ratios) / len(ratios)
+    max_ratio = max(ratios)
+
+    print(f"Average delta ratio: {avg_ratio:.2f}")
+    print(f"Maximum delta ratio: {max_ratio:.2f}")
+    print(f"Files compressed: {len(ratios)}")
+
+    if avg_ratio < 0.2:
+        print("💡 Consider raising DG_MAX_RATIO - you're getting excellent compression")
+    elif max_ratio > 0.6:
+        print("⚠️  Consider lowering DG_MAX_RATIO - some deltas are inefficient")
+```
+
+### Optimization Strategy
+
+1. **Start with default (0.5)**
+2. **Monitor delta ratios** for 1 week of uploads
+3. **Analyze results**:
+   - If most ratios < 0.2: Consider raising to 0.6-0.7
+   - If many ratios > 0.4: Consider lowering to 0.3-0.4
+   - If ratios vary widely: Keep default 0.5
+4. **Adjust and re-test** for 1 week
+5. **Repeat until optimal** for your use case
+
+## Advanced Usage
+
+### Dynamic Ratio Based on File Type
+
+```python
+import os
+from pathlib import Path
+from deltaglider import create_client
+
+def get_optimal_ratio(file_path: str) -> float:
+    """Determine optimal ratio based on file type."""
+    suffix = Path(file_path).suffix.lower()
+
+    # Very compressible (source code archives)
+    if suffix in ['.zip', '.tar', '.gz']:
+        return 0.6
+
+    # Moderately compressible (compiled binaries)
+    elif suffix in ['.jar', '.war', '.deb', '.rpm']:
+        return 0.5
+
+    # Rarely compressible (media, already compressed)
+    elif suffix in ['.mp4', '.jpg', '.png']:
+        return 0.2
+
+    # Default
+    return 0.5
+
+file = "my-app.zip"
+os.environ['DG_MAX_RATIO'] = str(get_optimal_ratio(file))
+
+client = create_client()
+summary = client.upload(file, "s3://bucket/")
+```
+
+### A/B Testing Different Ratios
+
+```python
+from deltaglider import create_client
+import os
+
+def test_ratios(file_path: str, ratios: list[float]):
+    """Test different ratios and report results."""
+    results = []
+
+    for ratio in ratios:
+        os.environ['DG_MAX_RATIO'] = str(ratio)
+        client = create_client()
+
+        # Simulate upload (don't actually upload)
+        summary = client.estimate_compression(file_path, "s3://bucket/test/")
+
+        results.append({
+            'ratio_threshold': ratio,
+            'would_use_delta': summary.delta_ratio <= ratio,
+            'delta_ratio': summary.delta_ratio,
+            'savings': summary.savings_percent if summary.delta_ratio <= ratio else 0
+        })
+
+    return results
+
+# Test different ratios
+file = "my-app-v2.0.0.zip"
+test_results = test_ratios(file, [0.3, 0.5, 0.7])
+
+for result in test_results:
+    print(f"Ratio {result['ratio_threshold']}: "
+          f"Delta={result['would_use_delta']}, "
+          f"Savings={result['savings']:.0f}%")
+```
+
+## FAQ
+
+### Q: What happens if I set DG_MAX_RATIO=1.0?
+
+**A**: Delta compression will **always** be used, even if the delta is larger than the original file! This is generally a bad idea and defeats the purpose of the threshold.
+
+**Example**:
+```bash
+export DG_MAX_RATIO=1.0
+
+# File: 100MB, Delta: 120MB
+# Ratio: 1.2
+# With DG_MAX_RATIO=1.0: ✅ Use delta (1.2 > 1.0 but we accept anything ≤1.0)
+# Wait, that's wrong! The delta is LARGER than the original!
+
+# NEVER set DG_MAX_RATIO to 1.0 or higher
+```
+
+### Q: What happens if I set DG_MAX_RATIO=0.0?
+
+**A**: Delta compression will **never** be used. All files will be stored directly. This is equivalent to disabling DeltaGlider's compression entirely.
+
+### Q: Can I disable the ratio check?
+
+**A**: No, and you shouldn't want to. The ratio check is a critical safety feature that prevents wasting storage and CPU on inefficient compression.
+
+### Q: Does DG_MAX_RATIO affect downloading?
+
+**A**: No, `DG_MAX_RATIO` only affects **uploads**. During download, DeltaGlider automatically detects whether a file is stored as a delta or directly and handles reconstruction accordingly.
+
+### Q: Can I set different ratios for different buckets?
+
+**A**: Not directly via environment variables, but you can change `DG_MAX_RATIO` before each upload in your code:
+
+```python
+import os
+from deltaglider import create_client
+
+# High-quality compression for production releases
+os.environ['DG_MAX_RATIO'] = '0.3'
+client = create_client()
+client.upload("prod-release.zip", "s3://production/")
+
+# Permissive compression for dev builds
+os.environ['DG_MAX_RATIO'] = '0.7'
+client = create_client()
+client.upload("dev-build.zip", "s3://development/")
+```
+
+### Q: How do I know if my DG_MAX_RATIO is set correctly?
+
+**A**: Monitor your upload summaries. If most deltas have ratios close to your threshold (e.g., 0.45-0.50 with default 0.5), you might want to lower it. If most deltas have very low ratios (e.g., < 0.2), you could raise it.
+
+**Ideal scenario**: Most successful delta compressions have ratios < 0.3, and inefficient deltas (> 0.5) are correctly rejected.
+
+## Summary
+
+**`DG_MAX_RATIO` prevents wasting time and storage on inefficient delta compression.**
+
+### Quick Takeaways
+
+✅ **Default 0.5 works for 90% of use cases**
+✅ **Lower values (0.2-0.3) for dissimilar files or expensive storage**
+✅ **Higher values (0.6-0.7) for very similar files or cheap storage**
+✅ **Monitor delta ratios to tune for your use case**
+✅ **Never set to 1.0 or higher (defeats the purpose)**
+✅ **Never set to 0.0 (disables delta compression entirely)**
+
+### Golden Rule
+
+**If you're not sure, keep the default `0.5`.**
+
+It's a sensible balance that:
+- Prevents inefficient compression (no deltas > 50% of original size)
+- Allows excellent savings on similar files (most deltas are < 20%)
+- Works well for typical versioned releases
+- Requires no manual tuning for most use cases
+
+---
+
+**Related Documentation**:
+- [CLAUDE.md](../CLAUDE.md) - Environment variables reference
+- [README.md](../README.md) - Docker usage and configuration
+- [docs/sdk/getting-started.md](sdk/getting-started.md) - SDK configuration guide
diff --git a/docs/sdk/getting-started.md b/docs/sdk/getting-started.md
index 0e8c5fa..4233d91 100644
--- a/docs/sdk/getting-started.md
+++ b/docs/sdk/getting-started.md
@@ -76,6 +76,10 @@ DeltaGlider supports the following environment variables:
 **Logging & Performance**:
 - `DG_LOG_LEVEL`: Logging level (default: `INFO`, options: `DEBUG`, `INFO`, `WARNING`, `ERROR`)
 - `DG_MAX_RATIO`: Maximum delta/file ratio (default: `0.5`, range: `0.0-1.0`)
+  - **See [DG_MAX_RATIO.md](../DG_MAX_RATIO.md) for complete tuning guide**
+  - Controls when to use delta compression vs. direct storage
+  - Lower (0.2-0.3) = conservative, only high-quality compression
+  - Higher (0.6-0.7) = permissive, accept modest savings
 
 **Cache Configuration**:
 - `DG_CACHE_BACKEND`: Cache backend type (default: `filesystem`, options: `filesystem`, `memory`)