diff --git a/cmd/f3/observer.go b/cmd/f3/observer.go
index c2eca8f6..948622c5 100644
--- a/cmd/f3/observer.go
+++ b/cmd/f3/observer.go
@@ -66,6 +66,11 @@ var observerCmd = cli.Command{
 			Usage: "The maximum length of time to keep the rotated files.",
 			Value: 2 * 7 * 24 * time.Hour,
 		},
+		&cli.Uint64Flag{
+			Name:  "retentionSize",
+			Usage: "The maximum size of the rotated files in megabytes. If not set, no limit is applied.",
+			Value: 0,
+		},
 		&cli.StringFlag{
 			Name:        "dataSourceName",
 			Usage:       "The observer database DSN",
@@ -144,7 +149,9 @@ var observerCmd = cli.Command{
 			observer.WithMaxBatchSize(cctx.Int("maxBatchSize")),
 			observer.WithMaxBatchDelay(cctx.Duration("maxBatchDelay")),
 			observer.WithChainExchangeMaxMessageAge(cctx.Duration("chainExchangeMaxMessageAge")),
+			observer.WithMaxRetentionSize(cctx.Uint64("retentionSize") * 1024 * 1024),
 		}
+
 		var identity crypto.PrivKey
 		if cctx.IsSet("identity") {
 			marshaledKey, err := os.ReadFile(cctx.String("identity"))
diff --git a/observer/observer.go b/observer/observer.go
index c10df2ab..2dcbeff2 100644
--- a/observer/observer.go
+++ b/observer/observer.go
@@ -8,10 +8,12 @@ import (
 	"encoding/json"
 	"errors"
 	"fmt"
+	"io/fs"
 	"net/http"
 	"os"
 	"path"
 	"path/filepath"
+	"sort"
 	"sync"
 	"time"
 
@@ -527,7 +529,8 @@ func (o *Observer) rotateMessages(ctx context.Context) error {
 	if err != nil {
 		return err
 	}
-	var foundAtLeastOneParquet bool
+	retainedSize := int64(0)
+	var retained []fs.FileInfo
 	for _, entry := range dir {
 		if !entry.IsDir() && filepath.Ext(entry.Name()) == ".parquet" {
 			info, err := entry.Info()
@@ -538,15 +541,42 @@ func (o *Observer) rotateMessages(ctx context.Context) error {
 				if err := os.Remove(filepath.Join(o.rotatePath, entry.Name())); err != nil {
 					logger.Errorw("Failed to remove retention policy for file", "file", entry.Name(), "err", err)
 				} else {
-					logger.Infow("Removed old file", "olderThan", o.retention, "file", entry.Name())
+					logger.Infow("Removed file due to time retention policy", "olderThan", o.retention, "file", entry.Name())
 				}
 			} else {
-				foundAtLeastOneParquet = true
+				retainedSize += info.Size()
+				retained = append(retained, info)
 			}
 		}
 	}
 
-	return o.createOrReplaceMessagesView(ctx, foundAtLeastOneParquet)
+	logger.Infow("Retention size", "retainedSize", retainedSize, "maxRetentionSize", o.maxRetentionSize)
+
+	if o.maxRetentionSize > 0 && retainedSize > o.maxRetentionSize {
+		logger.Infow("Retention size exceeded, deleting oldest files", "retainedSize", retainedSize, "maxRetentionSize", o.maxRetentionSize)
+		// sort retained by modification time, oldest last
+		sort.Slice(retained, func(i, j int) bool {
+			return retained[i].ModTime().After(retained[j].ModTime())
+		})
+		// iterate in reverse order to delete oldest first
+		for i := len(retained) - 1; i >= 0; i-- {
+			fi := retained[i]
+			if retainedSize < o.maxRetentionSize {
+				break
+			}
+			if err := os.Remove(filepath.Join(o.rotatePath, fi.Name())); err != nil {
+				logger.Errorw("Failed to remove retention policy for file",
+					"file", fi.Name(), "err", err)
+			} else {
+				logger.Infow("Removed file due to size retention policy",
+					"size", fi.Size(), "file", fi.Name())
+				retainedSize -= fi.Size()
+				retained = retained[:i]
+			}
+		}
+	}
+
+	return o.createOrReplaceMessagesView(ctx, len(retained) > 0)
 }
 
 func (o *Observer) listenAndServeQueries() error {
diff --git a/observer/options.go b/observer/options.go
index 9302d3f9..680d24c3 100644
--- a/observer/options.go
+++ b/observer/options.go
@@ -3,6 +3,7 @@ package observer
 import (
 	"context"
 	"fmt"
+	"math"
 	"time"
 
 	"github.com/filecoin-project/go-f3/blssig"
@@ -13,7 +14,7 @@ import (
 	"github.com/libp2p/go-libp2p/core/host"
 	"github.com/libp2p/go-libp2p/core/peer"
 	"github.com/multiformats/go-multiaddr"
-	"github.com/multiformats/go-multiaddr-dns"
+	madns "github.com/multiformats/go-multiaddr-dns"
 )
 
 type Option func(*options) error
@@ -35,9 +36,10 @@ type options struct {
 	queryServerListenAddress string
 	queryServerReadTimeout   time.Duration
 
-	rotatePath     string
-	rotateInterval time.Duration
-	retention      time.Duration
+	rotatePath       string
+	rotateInterval   time.Duration
+	retention        time.Duration
+	maxRetentionSize int64
 
 	pubSub                  *pubsub.PubSub
 	pubSubValidatorDisabled bool
@@ -81,6 +83,7 @@ func newOptions(opts ...Option) (*options, error) {
 		finalityCertsMaxPollInterval:      2 * time.Minute,
 		chainExchangeBufferSize:           1000,
 		chainExchangeMaxMessageAge:        3 * time.Minute,
+		maxRetentionSize:                  0,
 	}
 	for _, apply := range opts {
 		if err := apply(&opt); err != nil {
@@ -270,6 +273,20 @@ func WithRetention(retention time.Duration) Option {
 	}
 }
 
+// WithMaxRetentionSize sets the maximum size of the retention directory.
+// This is weakly enforced, and the directory may grow larger than this
+// size. If the directory grows larger than this size, the oldest files
+// will be deleted until the directory size is below this size.
+func WithMaxRetentionSize(size uint64) Option {
+	return func(o *options) error {
+		if size > math.MaxInt64 {
+			return fmt.Errorf("max retention size must be less than or equal to %d", math.MaxInt64)
+		}
+		o.maxRetentionSize = int64(size)
+		return nil
+	}
+}
+
 func WithDataSourceName(dataSourceName string) Option {
 	return func(o *options) error {
 		o.dataSourceName = dataSourceName