diff --git a/internal/beads/beads.go b/internal/beads/beads.go
index 87e976bf86..21b3518638 100644
--- a/internal/beads/beads.go
+++ b/internal/beads/beads.go
@@ -563,6 +563,21 @@ func FindBeadsDir() string {
 		}
 	}
 
+	// 1b. Check cwd for .beads/ before git-worktree resolution.
+	// When cwd is a subdirectory (e.g. a rig) that has its own .beads/
+	// inside a git worktree that also has .beads/ at its root, step 2b
+	// would grab the worktree root's .beads/ first. This check ensures
+	// the most-local .beads/ wins. (GH#XXXX)
+	if cwd, err := os.Getwd(); err == nil {
+		cwdBeadsDir := filepath.Join(cwd, ".beads")
+		if info, err := os.Stat(cwdBeadsDir); err == nil && info.IsDir() {
+			cwdBeadsDir = FollowRedirect(cwdBeadsDir)
+			if hasBeadsProjectFiles(cwdBeadsDir) {
+				return cwdBeadsDir
+			}
+		}
+	}
+
 	// 2. For worktrees, check worktree-local redirect first, then own .beads, then main repo
 	var mainRepoRoot string
 	if git.IsWorktree() {
@@ -735,6 +750,19 @@ func findDatabaseInTree() string {
 		dir = resolvedDir
 	}
 
+	// Check cwd first — a subdirectory with its own .beads/ takes priority
+	// over the git worktree root's .beads/. Same rationale as FindBeadsDir
+	// step 1b. (GH#XXXX)
+	{
+		cwdBeadsDir := filepath.Join(dir, ".beads")
+		if info, err := os.Stat(cwdBeadsDir); err == nil && info.IsDir() {
+			cwdBeadsDir = FollowRedirect(cwdBeadsDir)
+			if dbPath := findDatabaseInBeadsDir(cwdBeadsDir, true); dbPath != "" {
+				return dbPath
+			}
+		}
+	}
+
 	// Check if we're in a git worktree
 	var mainRepoRoot string
 	if git.IsWorktree() {
diff --git a/internal/beads/cwd_priority_test.go b/internal/beads/cwd_priority_test.go
new file mode 100644
index 0000000000..51b6a8a1d1
--- /dev/null
+++ b/internal/beads/cwd_priority_test.go
@@ -0,0 +1,354 @@
+package beads
+
+import (
+	"os"
+	"os/exec"
+	"path/filepath"
+	"testing"
+)
+
+// TestFindBeadsDir_CwdPriority verifies that a .beads/ directory in cwd takes
+// priority over a .beads/ directory at the git worktree root.
+//
+// Scenario: A "rig" subdirectory has its own .beads/ inside a git worktree
+// that also has .beads/ at its root. Before this fix, step 2b
+// (git.GetRepoRoot → check .beads/) fired before the cwd walk, grabbing
+// the worktree root's .beads/ instead of the rig's local one.
+func TestFindBeadsDir_CwdPriority(t *testing.T) {
+	// Save and restore env
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+	})
+	os.Unsetenv("BEADS_DIR")
+
+	tmpDir := t.TempDir()
+
+	// Create a git repo (simulating the worktree root)
+	cmd := exec.Command("git", "init", tmpDir)
+	if err := cmd.Run(); err != nil {
+		t.Skipf("git not available: %v", err)
+	}
+
+	// Create root-level .beads/ with project files (the "wrong" one)
+	rootBeadsDir := filepath.Join(tmpDir, ".beads")
+	if err := os.MkdirAll(rootBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"root_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "config.yaml"), []byte("issue_prefix: root\n"), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create a rig subdirectory with its own .beads/ (the "right" one)
+	rigDir := filepath.Join(tmpDir, "my-rig")
+	rigBeadsDir := filepath.Join(rigDir, ".beads")
+	if err := os.MkdirAll(rigBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rigBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"rig_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rigBeadsDir, "config.yaml"), []byte("issue_prefix: rig\n"), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// cd into the rig directory
+	t.Chdir(rigDir)
+
+	result := FindBeadsDir()
+
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	expectedResolved, _ := filepath.EvalSymlinks(rigBeadsDir)
+	if resultResolved != expectedResolved {
+		t.Errorf("FindBeadsDir() = %q, want %q (rig's .beads should win over root's)", result, rigBeadsDir)
+	}
+}
+
+// TestFindDatabasePath_CwdPriority verifies FindDatabasePath (the database
+// discovery path) also prefers cwd's .beads/ over the git worktree root's.
+func TestFindDatabasePath_CwdPriority(t *testing.T) {
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	origBeadsDB := os.Getenv("BEADS_DB")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+		if origBeadsDB != "" {
+			os.Setenv("BEADS_DB", origBeadsDB)
+		} else {
+			os.Unsetenv("BEADS_DB")
+		}
+	})
+	os.Unsetenv("BEADS_DIR")
+	os.Unsetenv("BEADS_DB")
+
+	tmpDir := t.TempDir()
+
+	// Create a git repo
+	cmd := exec.Command("git", "init", tmpDir)
+	if err := cmd.Run(); err != nil {
+		t.Skipf("git not available: %v", err)
+	}
+
+	// Create root-level .beads/ with a dolt dir (the "wrong" one)
+	rootBeadsDir := filepath.Join(tmpDir, ".beads")
+	rootDoltDir := filepath.Join(rootBeadsDir, "dolt")
+	if err := os.MkdirAll(rootDoltDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"root_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create rig subdirectory with its own .beads/ and dolt dir
+	rigDir := filepath.Join(tmpDir, "my-rig")
+	rigBeadsDir := filepath.Join(rigDir, ".beads")
+	rigDoltDir := filepath.Join(rigBeadsDir, "dolt")
+	if err := os.MkdirAll(rigDoltDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rigBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"rig_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// cd into the rig directory
+	t.Chdir(rigDir)
+
+	result := FindDatabasePath()
+
+	// The database path should be under the rig's .beads/, not the root's
+	if result == "" {
+		t.Fatal("FindDatabasePath() returned empty, expected rig's database path")
+	}
+
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	if !isUnder(resultResolved, rigDir) {
+		t.Errorf("FindDatabasePath() = %q, want path under %q (rig's .beads should win)", result, rigDir)
+	}
+	if isUnder(resultResolved, rootBeadsDir) {
+		t.Errorf("FindDatabasePath() = %q, should NOT be under root's .beads %q", result, rootBeadsDir)
+	}
+}
+
+// TestFindBeadsDir_CwdWithoutBeads_FallsBackToWalk verifies that when cwd
+// has no .beads/, the normal walk-up behavior still works.
+func TestFindBeadsDir_CwdWithoutBeads_FallsBackToWalk(t *testing.T) {
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+	})
+	os.Unsetenv("BEADS_DIR")
+
+	tmpDir := t.TempDir()
+
+	// Create a git repo
+	cmd := exec.Command("git", "init", tmpDir)
+	if err := cmd.Run(); err != nil {
+		t.Skipf("git not available: %v", err)
+	}
+
+	// Create root-level .beads/ only (no rig-level .beads/)
+	rootBeadsDir := filepath.Join(tmpDir, ".beads")
+	if err := os.MkdirAll(rootBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "metadata.json"), []byte(`{"backend":"dolt"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create a subdirectory WITHOUT .beads/
+	subDir := filepath.Join(tmpDir, "some", "deep", "subdir")
+	if err := os.MkdirAll(subDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+
+	t.Chdir(subDir)
+
+	result := FindBeadsDir()
+
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	expectedResolved, _ := filepath.EvalSymlinks(rootBeadsDir)
+	if resultResolved != expectedResolved {
+		t.Errorf("FindBeadsDir() = %q, want %q (should fall back to root when cwd has no .beads/)", result, rootBeadsDir)
+	}
+}
+
+// TestFindBeadsDir_CwdBeadsDirWithRedirect verifies that cwd's .beads/
+// redirect is followed when the cwd check fires.
+func TestFindBeadsDir_CwdBeadsDirWithRedirect(t *testing.T) {
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+	})
+	os.Unsetenv("BEADS_DIR")
+
+	tmpDir := t.TempDir()
+
+	// Create a git repo
+	cmd := exec.Command("git", "init", tmpDir)
+	if err := cmd.Run(); err != nil {
+		t.Skipf("git not available: %v", err)
+	}
+
+	// Create root-level .beads/
+	rootBeadsDir := filepath.Join(tmpDir, ".beads")
+	if err := os.MkdirAll(rootBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"root_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create a redirect target
+	targetBeadsDir := filepath.Join(tmpDir, "shared-beads")
+	if err := os.MkdirAll(targetBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(targetBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"shared_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create rig subdirectory with .beads/ that has a redirect
+	rigDir := filepath.Join(tmpDir, "my-rig")
+	rigBeadsDir := filepath.Join(rigDir, ".beads")
+	if err := os.MkdirAll(rigBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	// Write redirect file pointing to the shared target
+	if err := os.WriteFile(filepath.Join(rigBeadsDir, "redirect"), []byte(targetBeadsDir), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	t.Chdir(rigDir)
+
+	result := FindBeadsDir()
+
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	expectedResolved, _ := filepath.EvalSymlinks(targetBeadsDir)
+	if resultResolved != expectedResolved {
+		t.Errorf("FindBeadsDir() = %q, want %q (cwd .beads/ redirect should be followed)", result, targetBeadsDir)
+	}
+}
+
+// TestFindBeadsDir_BEADS_DIR_StillTakesPriority verifies that BEADS_DIR env
+// var still takes priority over the cwd check.
+func TestFindBeadsDir_BEADS_DIR_StillTakesPriority(t *testing.T) {
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+	})
+
+	tmpDir := t.TempDir()
+
+	// Create an explicit BEADS_DIR target
+	explicitBeadsDir := filepath.Join(tmpDir, "explicit-beads")
+	if err := os.MkdirAll(explicitBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(explicitBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"explicit_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+	os.Setenv("BEADS_DIR", explicitBeadsDir)
+
+	// Create cwd with its own .beads/
+	cwdDir := filepath.Join(tmpDir, "cwd-project")
+	cwdBeadsDir := filepath.Join(cwdDir, ".beads")
+	if err := os.MkdirAll(cwdBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(cwdBeadsDir, "metadata.json"), []byte(`{"backend":"dolt","dolt_database":"cwd_db"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	t.Chdir(cwdDir)
+
+	result := FindBeadsDir()
+
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	expectedResolved, _ := filepath.EvalSymlinks(explicitBeadsDir)
+	if resultResolved != expectedResolved {
+		t.Errorf("FindBeadsDir() = %q, want %q (BEADS_DIR should still take priority over cwd)", result, explicitBeadsDir)
+	}
+}
+
+// TestFindBeadsDir_CwdEmptyBeadsDir_SkipsToCwdWalk verifies that when cwd
+// has a .beads/ directory without any project files, it's skipped and the
+// normal walk-up behavior continues.
+func TestFindBeadsDir_CwdEmptyBeadsDir_SkipsToCwdWalk(t *testing.T) {
+	origBeadsDir := os.Getenv("BEADS_DIR")
+	t.Cleanup(func() {
+		if origBeadsDir != "" {
+			os.Setenv("BEADS_DIR", origBeadsDir)
+		} else {
+			os.Unsetenv("BEADS_DIR")
+		}
+	})
+	os.Unsetenv("BEADS_DIR")
+
+	tmpDir := t.TempDir()
+
+	// Create a git repo
+	cmd := exec.Command("git", "init", tmpDir)
+	if err := cmd.Run(); err != nil {
+		t.Skipf("git not available: %v", err)
+	}
+
+	// Create root-level .beads/ with project files
+	rootBeadsDir := filepath.Join(tmpDir, ".beads")
+	if err := os.MkdirAll(rootBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(rootBeadsDir, "metadata.json"), []byte(`{"backend":"dolt"}`), 0o644); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create rig with empty .beads/ (no project files)
+	rigDir := filepath.Join(tmpDir, "empty-rig")
+	rigBeadsDir := filepath.Join(rigDir, ".beads")
+	if err := os.MkdirAll(rigBeadsDir, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	// No metadata.json, no config.yaml, no dolt/ — empty dir
+
+	t.Chdir(rigDir)
+
+	result := FindBeadsDir()
+
+	// Should fall through to the root's .beads/ since rig's is empty
+	resultResolved, _ := filepath.EvalSymlinks(result)
+	expectedResolved, _ := filepath.EvalSymlinks(rootBeadsDir)
+	if resultResolved != expectedResolved {
+		t.Errorf("FindBeadsDir() = %q, want %q (empty cwd .beads/ should be skipped)", result, rootBeadsDir)
+	}
+}
+
+// isUnder returns true if child is under parent in the directory tree.
+func isUnder(child, parent string) bool {
+	rel, err := filepath.Rel(parent, child)
+	if err != nil {
+		return false
+	}
+	// rel should not start with ".." (going up) and should not be absolute
+	return !filepath.IsAbs(rel) && (rel == "." || (len(rel) >= 2 && rel[:2] != ".."))
+}