diff --git a/src/filesystem/README.md b/src/filesystem/README.md
index 499fca5ad6..75236aaa9c 100644
--- a/src/filesystem/README.md
+++ b/src/filesystem/README.md
@@ -15,6 +15,20 @@ Node.js server implementing Model Context Protocol (MCP) for filesystem operatio
 
 The server uses a flexible directory access control system. Directories can be specified via command-line arguments or dynamically via [Roots](https://modelcontextprotocol.io/docs/learn/client-concepts#roots).
 
+### Hidden Files and Directories
+
+By default, the filesystem server **ignores dot-prefixed files and directories** (like `.git`, `.env`, `.terraform`, etc.) to:
+- Reduce token usage (especially from large directories like `.git`)
+- Enhance security by avoiding exposure of potentially sensitive hidden files
+- Follow the convention that dot-prefixed items are typically "hidden" for good reason
+
+To include hidden files and directories, set the environment variable:
+```bash
+export MCP_FILESYSTEM_INCLUDE_HIDDEN=true
+```
+
+This affects the following operations: `list_directory`, `list_directory_with_sizes`, `directory_tree`, and `search_files`.
+
 ### Method 1: Command-line Arguments
 Specify Allowed directories when starting the server:
 ```bash
diff --git a/src/filesystem/__tests__/lib.test.ts b/src/filesystem/__tests__/lib.test.ts
index cc13ef0353..9f25c7ce75 100644
--- a/src/filesystem/__tests__/lib.test.ts
+++ b/src/filesystem/__tests__/lib.test.ts
@@ -18,6 +18,9 @@ import {
   searchFilesWithValidation,
   // File editing functions
   applyFileEdits,
+  // Hidden files filtering functions
+  shouldIncludeHidden,
+  shouldFilterHiddenEntry,
   tailFile,
   headFile
 } from '../lib.js';
@@ -699,3 +702,84 @@ describe('Lib Functions', () => {
     });
   });
 });
+
+describe('Hidden Files Filtering', () => {
+  describe('shouldIncludeHidden', () => {
+    const originalEnv = process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+
+    afterEach(() => {
+      // Restore original environment variable
+      if (originalEnv === undefined) {
+        delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      } else {
+        process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = originalEnv;
+      }
+    });
+
+    it('should return false by default (when env var not set)', () => {
+      delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      expect(shouldIncludeHidden()).toBe(false);
+    });
+
+    it('should return false when env var is set to "false"', () => {
+      process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = 'false';
+      expect(shouldIncludeHidden()).toBe(false);
+    });
+
+    it('should return true when env var is set to "true"', () => {
+      process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = 'true';
+      expect(shouldIncludeHidden()).toBe(true);
+    });
+
+    it('should return false for any other value', () => {
+      process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = 'yes';
+      expect(shouldIncludeHidden()).toBe(false);
+    });
+  });
+
+  describe('shouldFilterHiddenEntry', () => {
+    const originalEnv = process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+
+    afterEach(() => {
+      // Restore original environment variable
+      if (originalEnv === undefined) {
+        delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      } else {
+        process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = originalEnv;
+      }
+    });
+
+    it('should filter dot-prefixed names by default', () => {
+      delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      expect(shouldFilterHiddenEntry('.git')).toBe(true);
+      expect(shouldFilterHiddenEntry('.env')).toBe(true);
+      expect(shouldFilterHiddenEntry('.terraform')).toBe(true);
+      expect(shouldFilterHiddenEntry('.vscode')).toBe(true);
+    });
+
+    it('should not filter regular names by default', () => {
+      delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      expect(shouldFilterHiddenEntry('README.md')).toBe(false);
+      expect(shouldFilterHiddenEntry('package.json')).toBe(false);
+      expect(shouldFilterHiddenEntry('src')).toBe(false);
+      expect(shouldFilterHiddenEntry('test.txt')).toBe(false);
+    });
+
+    it('should not filter any names when hidden files are included', () => {
+      process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN = 'true';
+      expect(shouldFilterHiddenEntry('.git')).toBe(false);
+      expect(shouldFilterHiddenEntry('.env')).toBe(false);
+      expect(shouldFilterHiddenEntry('README.md')).toBe(false);
+      expect(shouldFilterHiddenEntry('package.json')).toBe(false);
+    });
+
+    it('should handle edge cases correctly', () => {
+      delete process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN;
+      expect(shouldFilterHiddenEntry('')).toBe(false); // empty string
+      expect(shouldFilterHiddenEntry('.')).toBe(true); // single dot
+      expect(shouldFilterHiddenEntry('..')).toBe(true); // double dot
+      expect(shouldFilterHiddenEntry('name.')).toBe(false); // dot at end
+      expect(shouldFilterHiddenEntry('name.with.dots')).toBe(false); // dots in middle
+    });
+  });
+});
diff --git a/src/filesystem/index.ts b/src/filesystem/index.ts
index 7888196285..1529fd1760 100644
--- a/src/filesystem/index.ts
+++ b/src/filesystem/index.ts
@@ -29,6 +29,7 @@ import {
   tailFile,
   headFile,
   setAllowedDirectories,
+  shouldFilterHiddenEntry,
 } from './lib.js';
 
 // Command line argument parsing
@@ -449,6 +450,7 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
         const validPath = await validatePath(parsed.data.path);
         const entries = await fs.readdir(validPath, { withFileTypes: true });
         const formatted = entries
+          .filter((entry) => !shouldFilterHiddenEntry(entry.name))
           .map((entry) => `${entry.isDirectory() ? "[DIR]" : "[FILE]"} ${entry.name}`)
           .join("\n");
         return {
@@ -464,27 +466,29 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
         const validPath = await validatePath(parsed.data.path);
         const entries = await fs.readdir(validPath, { withFileTypes: true });
 
-        // Get detailed information for each entry
+        // Get detailed information for each entry (excluding hidden entries)
         const detailedEntries = await Promise.all(
-          entries.map(async (entry) => {
-            const entryPath = path.join(validPath, entry.name);
-            try {
-              const stats = await fs.stat(entryPath);
-              return {
-                name: entry.name,
-                isDirectory: entry.isDirectory(),
-                size: stats.size,
-                mtime: stats.mtime
-              };
-            } catch (error) {
-              return {
-                name: entry.name,
-                isDirectory: entry.isDirectory(),
-                size: 0,
-                mtime: new Date(0)
-              };
-            }
-          })
+          entries
+            .filter((entry) => !shouldFilterHiddenEntry(entry.name))
+            .map(async (entry) => {
+              const entryPath = path.join(validPath, entry.name);
+              try {
+                const stats = await fs.stat(entryPath);
+                return {
+                  name: entry.name,
+                  isDirectory: entry.isDirectory(),
+                  size: stats.size,
+                  mtime: stats.mtime
+                };
+              } catch (error) {
+                return {
+                  name: entry.name,
+                  isDirectory: entry.isDirectory(),
+                  size: 0,
+                  mtime: new Date(0)
+                };
+              }
+            })
         );
 
         // Sort entries based on sortBy parameter
@@ -541,6 +545,9 @@ server.setRequestHandler(CallToolRequestSchema, async (request) => {
             const result: TreeEntry[] = [];
 
             for (const entry of entries) {
+                // Skip hidden files/directories unless explicitly enabled
+                if (shouldFilterHiddenEntry(entry.name)) continue;
+
                 const relativePath = path.relative(rootPath, path.join(currentPath, entry.name));
                 const shouldExclude = excludePatterns.some(pattern => {
                     if (pattern.includes('*')) {
diff --git a/src/filesystem/lib.ts b/src/filesystem/lib.ts
index 240ca0d476..697db77773 100644
--- a/src/filesystem/lib.ts
+++ b/src/filesystem/lib.ts
@@ -40,6 +40,17 @@ export interface SearchResult {
   isDirectory: boolean;
 }
 
+// Check if hidden files/directories should be included
+// Environment variable MCP_FILESYSTEM_INCLUDE_HIDDEN controls this (default: false)
+export function shouldIncludeHidden(): boolean {
+  return process.env.MCP_FILESYSTEM_INCLUDE_HIDDEN === 'true';
+}
+
+// Check if a file/directory name should be filtered out (dot-prefixed items)
+export function shouldFilterHiddenEntry(name: string): boolean {
+  return !shouldIncludeHidden() && name.startsWith('.');
+}
+
 // Pure Utility Functions
 export function formatSize(bytes: number): string {
   const units = ['B', 'KB', 'MB', 'GB', 'TB'];
@@ -361,6 +372,9 @@ export async function searchFilesWithValidation(
     const entries = await fs.readdir(currentPath, { withFileTypes: true });
 
     for (const entry of entries) {
+      // Skip hidden files/directories unless explicitly enabled
+      if (shouldFilterHiddenEntry(entry.name)) continue;
+
       const fullPath = path.join(currentPath, entry.name);
 
       try {