diff --git a/README.md b/README.md
index 7314618..0c69377 100644
--- a/README.md
+++ b/README.md
@@ -181,6 +181,54 @@ DWN records ──> JWE encrypted at rest (user's DID keys)
 
 The sidecar never leaves the device. The DWN records are the portable, sovereign data.
 
+## Search Setup
+
+memoryd uses **hybrid search** that combines vector similarity (sqlite-vec) with full-text keyword matching (FTS5) via reciprocal rank fusion. The quality of vector search depends on the configured embedding provider.
+
+Three embedding providers are available, configured via the `MEMORYD_EMBEDDING_PROVIDER` environment variable:
+
+### `noop` (default)
+
+No external dependencies required. Only keyword (FTS5) search produces meaningful results. Vector/semantic search returns arbitrary results because all embeddings are zero vectors.
+
+This is the default so that `memoryd init && memoryd serve` works out of the box without any extra setup, but you will want to switch to a real provider for full hybrid search.
+
+### `ollama` — free, local, private
+
+Requires [Ollama](https://ollama.com) running locally with an embedding model pulled:
+
+```sh
+# Install Ollama: https://ollama.com
+ollama pull nomic-embed-text
+export MEMORYD_EMBEDDING_PROVIDER=ollama
+memoryd serve
+```
+
+The default model is `nomic-embed-text` (768 dimensions). You can override with:
+
+```sh
+export MEMORYD_EMBEDDING_MODEL=<model-name>
+export MEMORYD_EMBEDDING_URL=http://localhost:11434   # default
+export MEMORYD_EMBEDDING_DIMENSIONS=768               # default
+```
+
+### `openai` — cloud-based
+
+Requires an OpenAI API key:
+
+```sh
+export MEMORYD_EMBEDDING_PROVIDER=openai
+export OPENAI_API_KEY=sk-...
+memoryd serve
+```
+
+The default model is `text-embedding-3-small` (1536 dimensions). You can override with:
+
+```sh
+export MEMORYD_EMBEDDING_MODEL=text-embedding-3-large
+export MEMORYD_EMBEDDING_DIMENSIONS=3072
+```
+
 ## Configuration
 
 ```jsonc
diff --git a/src/cli/commands/init.ts b/src/cli/commands/init.ts
index 6c429b7..90b8fe7 100644
--- a/src/cli/commands/init.ts
+++ b/src/cli/commands/init.ts
@@ -3,6 +3,7 @@
 import type { AgentContext } from '../agent.js';
 
 import { bootstrapSidecar } from '../agent.js';
+import { resolveConfig } from '../../config.js';
 
 export async function initCommand(ctx: AgentContext, _args: string[]): Promise<void> {
   console.log('Initializing memoryd...');
@@ -46,4 +47,11 @@ export async function initCommand(ctx: AgentContext, _args: string[]): Promise<v
   }
 
   console.log('memoryd is ready.');
+
+  const cfg = resolveConfig();
+  if (cfg.embedding.provider === 'noop') {
+    console.log('');
+    console.log('Warning: Using noop embedding provider — semantic search is disabled.');
+    console.log('  Set MEMORYD_EMBEDDING_PROVIDER=ollama or =openai for full hybrid search.');
+  }
 }
diff --git a/src/cli/commands/serve.ts b/src/cli/commands/serve.ts
index 11ac07a..fb68fec 100644
--- a/src/cli/commands/serve.ts
+++ b/src/cli/commands/serve.ts
@@ -2,6 +2,7 @@
 
 import type { AgentContext } from '../agent.js';
 
+import { resolveConfig } from '../../config.js';
 import { flagValue, hasFlag, parsePort } from '../flags.js';
 
 export async function serveCommand(ctx: AgentContext, args: string[]): Promise<void> {
@@ -42,11 +43,23 @@ export async function serveCommand(ctx: AgentContext, args: string[]): Promise<v
 
   if (useStdio) {
     await server.startStdio();
+    printNoopWarning();
     // stdio transport blocks until the client disconnects.
   } else {
     const { port: actualPort } = await server.startHttp();
     console.log(`memoryd MCP server listening on http://localhost:${actualPort}`);
     console.log(`DID: ${ctx.did}`);
     console.log('Press Ctrl+C to stop.');
+    printNoopWarning();
+  }
+}
+
+/** Print a warning when the noop embedding provider is active. */
+function printNoopWarning(): void {
+  const cfg = resolveConfig();
+  if (cfg.embedding.provider === 'noop') {
+    console.log('');
+    console.log('Warning: Using noop embedding provider — semantic search is disabled.');
+    console.log('  Set MEMORYD_EMBEDDING_PROVIDER=ollama or =openai for full hybrid search.');
   }
 }
diff --git a/tests/cli/cli.spec.ts b/tests/cli/cli.spec.ts
index 3054ca5..b99811a 100644
--- a/tests/cli/cli.spec.ts
+++ b/tests/cli/cli.spec.ts
@@ -159,6 +159,23 @@ describe('CLI commands', () => {
       expect(lines.some(l => l.includes('memoryd is ready'))).toBe(true);
       expect(lines.some(l => l.includes('DID:'))).toBe(true);
     });
+
+    it('prints noop embedding warning when provider is noop', async () => {
+      const savedProvider = process.env.MEMORYD_EMBEDDING_PROVIDER;
+      delete process.env.MEMORYD_EMBEDDING_PROVIDER;
+      try {
+        const { initCommand } = await import('../../src/cli/commands/init.js');
+        const lines = await captureLog(() => initCommand(ctx, []));
+        expect(lines.some(l => l.includes('noop embedding provider'))).toBe(true);
+        expect(lines.some(l => l.includes('MEMORYD_EMBEDDING_PROVIDER'))).toBe(true);
+      } finally {
+        if (savedProvider !== undefined) {
+          process.env.MEMORYD_EMBEDDING_PROVIDER = savedProvider;
+        } else {
+          delete process.env.MEMORYD_EMBEDDING_PROVIDER;
+        }
+      }
+    });
   });
 
   // -------------------------------------------------------------------------
diff --git a/tests/config.spec.ts b/tests/config.spec.ts
index efa082e..0632300 100644
--- a/tests/config.spec.ts
+++ b/tests/config.spec.ts
@@ -42,6 +42,12 @@ describe('resolveConfig', () => {
     expect(config.port).toBe(3200);
   });
 
+  it('defaults to noop embedding provider for warning detection', () => {
+    const config = resolveConfig();
+    expect(config.embedding.provider).toBe('noop');
+    // This is the value checked by CLI commands to print the noop warning.
+  });
+
   it('reads sidecar path from env', () => {
     process.env.MEMORYD_SIDECAR_PATH = '/tmp/test.db';
     const config = resolveConfig();