diff --git a/cmd/bd/autoimport.go b/cmd/bd/autoimport.go
index 4e873f84..c0775d0a 100644
--- a/cmd/bd/autoimport.go
+++ b/cmd/bd/autoimport.go
@@ -118,6 +118,13 @@ func checkGitForIssues() (int, string, string) {
 		return 0, "", ""
 	}
 
+	// GH#896: Reject beadsDir that is outside the git repository.
+	// This prevents bd init from inheriting issues from a parent hub
+	// when initializing a new project in a subdirectory.
+	if strings.HasPrefix(relBeads, "..") {
+		return 0, "", ""
+	}
+
 	// Determine which branch to read from (bd-0is fix)
 	// If sync-branch is configured in local config.yaml, use it; otherwise fall back to HEAD
 	// We read sync-branch directly from local config file rather than using cached global config
diff --git a/cmd/bd/autoimport_test.go b/cmd/bd/autoimport_test.go
index d255e98b..8d2b69b5 100644
--- a/cmd/bd/autoimport_test.go
+++ b/cmd/bd/autoimport_test.go
@@ -4,10 +4,12 @@ import (
 	"context"
 	"encoding/json"
 	"os"
+	"os/exec"
 	"path/filepath"
 	"testing"
 
 	"github.com/steveyegge/beads/internal/beads"
+	"github.com/steveyegge/beads/internal/git"
 	"github.com/steveyegge/beads/internal/storage/sqlite"
 	"github.com/steveyegge/beads/internal/types"
 )
@@ -282,6 +284,59 @@ func TestCheckGitForIssues_NoBeadsDir(t *testing.T) {
 	}
 }
 
+// TestCheckGitForIssues_ParentHubNotInherited tests the GH#896 fix: when running
+// bd init in a subdirectory of a hub, the parent hub's .beads should NOT be used
+// for importing issues. This prevents contamination from parent hub issues.
+func TestCheckGitForIssues_ParentHubNotInherited(t *testing.T) {
+	// Create a structure simulating the bug scenario:
+	// tmpDir/
+	//   .beads/            <- parent hub (NOT a git repo)
+	//     issues.jsonl
+	//     config.yaml
+	//   newproject/        <- new project (IS a git repo)
+	//     .git/
+	tmpDir := t.TempDir()
+
+	// Create parent hub's .beads with issues
+	parentBeadsDir := filepath.Join(tmpDir, ".beads")
+	if err := os.MkdirAll(parentBeadsDir, 0755); err != nil {
+		t.Fatalf("Failed to create parent .beads: %v", err)
+	}
+	if err := os.WriteFile(filepath.Join(parentBeadsDir, "config.yaml"), []byte("prefix: hub\n"), 0644); err != nil {
+		t.Fatalf("Failed to create parent config.yaml: %v", err)
+	}
+	if err := os.WriteFile(filepath.Join(parentBeadsDir, "issues.jsonl"), []byte(`{"id":"hub-001","title":"Parent Issue"}`+"\n"), 0644); err != nil {
+		t.Fatalf("Failed to create parent issues.jsonl: %v", err)
+	}
+
+	// Create newproject as a git repo
+	newProject := filepath.Join(tmpDir, "newproject")
+	if err := os.MkdirAll(newProject, 0755); err != nil {
+		t.Fatalf("Failed to create newproject: %v", err)
+	}
+
+	// Initialize git repo in newproject
+	t.Chdir(newProject)
+	cmd := exec.Command("git", "init")
+	if err := cmd.Run(); err != nil {
+		t.Fatalf("Failed to git init: %v", err)
+	}
+
+	// Reset git context cache (important for test isolation)
+	git.ResetCaches()
+
+	// Now checkGitForIssues should NOT find the parent hub's issues
+	// because the parent .beads is outside the git root (newproject)
+	count, path, _ := checkGitForIssues()
+
+	if count != 0 {
+		t.Errorf("GH#896: checkGitForIssues found %d issues from parent hub (should be 0)", count)
+	}
+	if path != "" {
+		t.Errorf("GH#896: checkGitForIssues returned path %q (should be empty)", path)
+	}
+}
+
 func TestBoolToFlag(t *testing.T) {
 	t.Parallel()
 	tests := []struct {