diff --git a/CHANGELOG.md b/CHANGELOG.md
index 85e427d..e966ac8 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -36,6 +36,13 @@ a decision with visible consequences.
   a `link` receipt), and recovery replay of an `entity` receipt removes the same set from a
   restored backup.
 
+- **An observation cap of zero no longer breaks observation create.** `PUT /config/{agent}`
+  accepted any `max_observations`, so 0 or less made every create answer 500 (`max()` of an
+  empty list). The config now takes 1..100000 and thresholds 0..1 (422 otherwise), and a cap
+  below one already stored counts as one. Lowering the cap archives enough of the most-exposed
+  unconfirmed observations in one call (it used to archive one per create), inside the create's
+  own transaction.
+
 - **The 600-line check covers the dashboard.** `scripts/check_file_sizes.py` skipped `.jsx`
   (the dashboard's own files) and missed a last line with no newline; the one file over the
   limit, the Entities screen (662), is split (its three dialogs moved to
diff --git a/services/api/app/schemas/agent_config.py b/services/api/app/schemas/agent_config.py
index 0252464..755c603 100644
--- a/services/api/app/schemas/agent_config.py
+++ b/services/api/app/schemas/agent_config.py
@@ -1,8 +1,8 @@
-from pydantic import BaseModel
+from pydantic import BaseModel, Field
 
 
 class AgentConfigUpdateRequest(BaseModel):
-    novelty_threshold: float | None = None
-    value_threshold: float | None = None
-    max_observations: int | None = None
+    novelty_threshold: float | None = Field(default=None, ge=0, le=1)
+    value_threshold: float | None = Field(default=None, ge=0, le=1)
+    max_observations: int | None = Field(default=None, ge=1, le=100_000)
     signal_filter_enabled: bool | None = None
diff --git a/services/api/app/services/observation_lifecycle.py b/services/api/app/services/observation_lifecycle.py
index fb70b1d..5389668 100644
--- a/services/api/app/services/observation_lifecycle.py
+++ b/services/api/app/services/observation_lifecycle.py
@@ -28,6 +28,12 @@ def find_duplicate(agent_id: str, signal_type: str, description: str) -> tuple[d
 
 
 def enforce_budget(db, agent_id: str, max_observations: int) -> None:
+    """Archive the most-exposed unconfirmed observations until one more fits under the cap.
+
+    A cap below one (an old stored value) counts as one. Runs inside the caller's transaction:
+    the archive is committed together with the observation being created, or not at all.
+    """
+    cap = max(1, max_observations)
     active = db.execute(
         select(Observation).where(
             Observation.agent_id == agent_id,
@@ -35,14 +41,16 @@ def enforce_budget(db, agent_id: str, max_observations: int) -> None:
         )
     ).scalars().all()
 
-    if len(active) < max_observations:
+    excess = len(active) - cap + 1
+    if excess <= 0:
         return
 
-    victim = max(active, key=lambda o: o.exposure_count)
-    victim.status = "archived"
-    victim.archived_at = datetime.now(UTC)
-    victim.archive_reason = "max active observations reached; archived to make room"
-    db.commit()
+    now = datetime.now(UTC)
+    for victim in sorted(active, key=lambda o: o.exposure_count, reverse=True)[:excess]:
+        victim.status = "archived"
+        victim.archived_at = now
+        victim.archive_reason = "max active observations reached; archived to make room"
+    db.flush()
 
 
 def apply_session_context(db, agent_id: str, session_context: str) -> dict:
diff --git a/services/api/tests/test_observation_budget.py b/services/api/tests/test_observation_budget.py
index c0d458e..6924c80 100644
--- a/services/api/tests/test_observation_budget.py
+++ b/services/api/tests/test_observation_budget.py
@@ -164,3 +164,34 @@ def test_empty_trigger_context_another_agent_and_archived_rows_are_untouched(db)
     assert untouched.exposure_count == 4
     assert db.get(Observation, other_agent.id).exposure_count == 0
     assert db.get(Observation, already.id).exposure_count == 0
+
+
+# --- A cap of zero or less, and a cap lowered below what is stored -----------------
+
+
+@pytest.mark.parametrize("cap", [0, -5])
+def test_a_cap_below_one_does_not_crash_with_nothing_to_archive(db, cap):
+    observation_lifecycle.enforce_budget(db, "owner", cap)  # used to raise on max([])
+
+    assert statuses_by_id(db) == {}
+
+
+def test_a_lowered_cap_archives_enough_to_make_room_in_one_call(db):
+    rows = [observe(db, exposure_count=n) for n in range(6)]
+
+    observation_lifecycle.enforce_budget(db, "owner", 3)
+
+    statuses = statuses_by_id(db)
+    # Room for one more under a cap of 3: the four most exposed go, the two least stay.
+    assert [statuses[row.id] for row in rows] == ["unconfirmed"] * 2 + ["archived"] * 4
+
+
+def test_the_config_route_refuses_numbers_out_of_range():
+    from app.schemas.agent_config import AgentConfigUpdateRequest
+    from pydantic import ValidationError
+
+    for bad in ({"max_observations": 0}, {"max_observations": -1}, {"value_threshold": 1.5},
+                {"novelty_threshold": -0.1}):
+        with pytest.raises(ValidationError):
+            AgentConfigUpdateRequest(**bad)
+    assert AgentConfigUpdateRequest(max_observations=1, value_threshold=0, novelty_threshold=1)