diff --git a/CLAUDE.md b/CLAUDE.md
index 1c65dde..0bc8f6c 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -139,7 +139,7 @@ User runs /setup
 | Module | Purpose |
 |--------|---------|
 | `skills/readiness/SKILL.md` | Harness Readiness Report |
-| `skills/setup/SKILL.md` | Setup Report |
+| `skills/setup/SKILL.md` | If the current directory is empty, scaffold in place: |
 | `skills/setup/scripts/generate-claude-md.js` | Generate tailored CLAUDE.md files for a project from templates. |
 | `skills/setup/scripts/init-project.js` | Project scaffolding script for Node/TypeScript projects. |
 | `skills/setup/scripts/install-enforcement.js` | Copies enforcement tooling into a target project. |
@@ -200,7 +200,6 @@ Before merging:
 - **Setup has two code paths**: Node/TS uses the "fast path" (scripts do the work). All other stacks use the "adaptive path" (Claude creates files). The eval uses `conversation_must_not_mention` to catch cross-contamination (e.g., Python setup mentioning npm).
 - **Squash merges leave branches dirty**: After squash-merging a PR, the branch still shows unmerged commits. Always create a fresh branch from main for follow-up work — don't reuse the old branch.
 - **CLAUDE.md auto-updates on commit**: The pre-commit hook runs `repo-generate-docs.js` to regenerate AUTO markers. Don't manually edit content between `<!-- AUTO:tree -->` and `<!-- AUTO:modules -->` markers — it will be overwritten.
-- **Eval prompts must say "in the current directory"**: `init-project.js --name=X` creates a subdirectory. Eval fixtures run in temp dirs, so the grader checks the temp dir root. If the prompt says "call it myapp", Claude creates `myapp/` and the grader finds nothing.
 
 ---
 
@@ -212,4 +211,3 @@ Before merging:
 | Enforcement script patterns | `skills/setup/references/enforcement-scripts.md` |
 | Node/TypeScript stack reference | `skills/setup/references/stack-node-typescript.md` |
 | Eval suite documentation | `tests/evals/README.md` |
-| Unit test documentation | `tests/scripts/README.md` |
diff --git a/skills/setup/SKILL.md b/skills/setup/SKILL.md
index d2ccba2..389cf20 100644
--- a/skills/setup/SKILL.md
+++ b/skills/setup/SKILL.md
@@ -69,9 +69,15 @@ Skip this phase entirely for existing projects.
 **Node/TypeScript path (fast path — script does the work):**
 
 ```bash
+# If the current directory is empty, scaffold in place:
+node $SCRIPTS_DIR/init-project.js --name=<name> --framework=<framework> --in-place
+
+# If the user wants a new subdirectory (rare — only when explicitly requested):
 node $SCRIPTS_DIR/init-project.js --name=<name> --framework=<framework>
 ```
 
+Default to `--in-place` unless the user explicitly asks to create a new directory.
+
 **All other stacks (adaptive path — Claude does the work):**
 
 1. `git init`
diff --git a/skills/setup/scripts/init-project.js b/skills/setup/scripts/init-project.js
index b83cde4..587ec33 100644
--- a/skills/setup/scripts/init-project.js
+++ b/skills/setup/scripts/init-project.js
@@ -20,11 +20,12 @@ const childProcess = require('node:child_process');
 const VALID_FRAMEWORKS = ['vite', 'nextjs', 'express', 'fastify', 'none'];
 
 function parseArgs(argv) {
-  const flags = { name: null, framework: 'none', skipInstall: false };
+  const flags = { name: null, framework: 'none', skipInstall: false, inPlace: false };
   for (const arg of argv.slice(2)) {
     if (arg.startsWith('--name=')) flags.name = arg.slice('--name='.length);
     else if (arg.startsWith('--framework=')) flags.framework = arg.slice('--framework='.length);
     else if (arg === '--skip-install') flags.skipInstall = true;
+    else if (arg === '--in-place') flags.inPlace = true;
   }
   if (!VALID_FRAMEWORKS.includes(flags.framework)) {
     console.error('Unknown framework "' + flags.framework + '". Must be one of: ' + VALID_FRAMEWORKS.join(', '));
@@ -86,12 +87,12 @@ function main() {
 
   // Resolve working directory
   let projectDir = process.cwd();
-  if (flags.name) {
+  if (flags.name && !flags.inPlace) {
     projectDir = path.join(process.cwd(), flags.name);
     fs.mkdirSync(projectDir, { recursive: true });
   }
 
-  const projectName = path.basename(projectDir);
+  const projectName = flags.name || path.basename(projectDir);
 
   // Git init if needed
   if (!fs.existsSync(path.join(projectDir, '.git'))) {
diff --git a/tests/scripts/init-project.test.js b/tests/scripts/init-project.test.js
index 71484c8..7eef544 100644
--- a/tests/scripts/init-project.test.js
+++ b/tests/scripts/init-project.test.js
@@ -59,6 +59,26 @@ describe('--name flag', () => {
   });
 });
 
+// ---------------------------------------------------------------------------
+// --in-place: uses name for package.json but stays in current directory
+// ---------------------------------------------------------------------------
+describe('--in-place flag', () => {
+  it('scaffolds in current directory, not a subdirectory', () => {
+    runScript(['--name=myapp', '--framework=none', '--skip-install', '--in-place'], tmpDir);
+
+    expect(fs.existsSync(path.join(tmpDir, 'package.json'))).toBe(true);
+    expect(fs.existsSync(path.join(tmpDir, 'src'))).toBe(true);
+    expect(fs.existsSync(path.join(tmpDir, 'myapp'))).toBe(false);
+  });
+
+  it('uses the --name value in package.json', () => {
+    runScript(['--name=myapp', '--framework=none', '--skip-install', '--in-place'], tmpDir);
+
+    const pkg = JSON.parse(fs.readFileSync(path.join(tmpDir, 'package.json'), 'utf8'));
+    expect(pkg.name).toBe('myapp');
+  });
+});
+
 // ---------------------------------------------------------------------------
 // No --name: initializes in current directory
 // ---------------------------------------------------------------------------