diff --git a/src/services/llm/embeddings/chunking.ts b/src/services/llm/embeddings/chunking.ts
index 01773ae61..a0540f0dc 100644
--- a/src/services/llm/embeddings/chunking.ts
+++ b/src/services/llm/embeddings/chunking.ts
@@ -26,6 +26,15 @@ const ERROR_CATEGORIES = {
     }
 };
 
+// Maximum time (in milliseconds) allowed for the entire chunking process
+const MAX_TOTAL_PROCESSING_TIME = 5 * 60 * 1000; // 5 minutes
+
+// Maximum number of retry attempts per chunk
+const MAX_CHUNK_RETRY_ATTEMPTS = 2;
+
+// Maximum time per chunk processing (to prevent individual chunks from hanging)
+const MAX_CHUNK_PROCESSING_TIME = 60 * 1000; // 1 minute
+
 /**
  * Categorize an error as temporary or permanent based on its message
  * @param errorMessage - The error message to categorize
@@ -52,6 +61,28 @@ function categorizeError(errorMessage: string): 'temporary' | 'permanent' | 'unk
     return 'unknown';
 }
 
+/**
+ * Process a chunk with a timeout to prevent hanging
+ * @param provider - The embedding provider
+ * @param chunk - The chunk to process
+ * @param timeoutMs - Timeout in milliseconds
+ * @returns The generated embedding
+ */
+async function processChunkWithTimeout(provider: any, chunk: any, timeoutMs: number): Promise<any> {
+    // Create a promise that rejects after the timeout
+    const timeoutPromise = new Promise((_, reject) => {
+        setTimeout(() => {
+            reject(new Error(`Chunk processing timed out after ${timeoutMs}ms`));
+        }, timeoutMs);
+    });
+
+    // Create the actual processing promise
+    const processingPromise = provider.generateEmbeddings(chunk.content);
+
+    // Race the two promises - whichever completes/rejects first wins
+    return Promise.race([processingPromise, timeoutPromise]);
+}
+
 /**
  * Process a large note by breaking it into chunks and creating embeddings for each chunk
  * This provides more detailed and focused embeddings for different parts of large notes
@@ -65,6 +96,9 @@ export async function processNoteWithChunking(
     provider: any,
     context: NoteEmbeddingContext
 ): Promise<void> {
+    // Track the overall start time
+    const startTime = Date.now();
+
     try {
         // Get the context extractor dynamically to avoid circular dependencies
         const { ContextExtractor } = await import('../context/index.js');
@@ -127,17 +161,37 @@ export async function processNoteWithChunking(
             attempts: number
         }[] = [];
 
-        // Maximum number of retry attempts per chunk
-        const MAX_CHUNK_RETRY_ATTEMPTS = 2;
-
         log.info(`Processing ${chunks.length} chunks for note ${noteId} (${note.title})`);
 
         // Process each chunk with a delay based on provider to avoid rate limits
         for (let i = 0; i < chunks.length; i++) {
+            // Check if we've exceeded the overall time limit
+            if (Date.now() - startTime > MAX_TOTAL_PROCESSING_TIME) {
+                log.info(`Exceeded maximum processing time (${MAX_TOTAL_PROCESSING_TIME}ms) for note ${noteId}, stopping after ${i} chunks`);
+
+                // Mark remaining chunks as failed due to timeout
+                for (let j = i; j < chunks.length; j++) {
+                    failedChunks++;
+                    failedChunkDetails.push({
+                        index: j + 1,
+                        error: "Processing timeout - exceeded total allowed time",
+                        category: 'temporary',
+                        attempts: 1
+                    });
+                }
+
+                // Break the loop, we'll handle this as partial success if some chunks succeeded
+                break;
+            }
+
             const chunk = chunks[i];
             try {
-                // Generate embedding for this chunk's content
-                const embedding = await provider.generateEmbeddings(chunk.content);
+                // Generate embedding for this chunk's content with a timeout
+                const embedding = await processChunkWithTimeout(
+                    provider,
+                    chunk,
+                    MAX_CHUNK_PROCESSING_TIME
+                );
 
                 // Store with chunk information in a unique ID format
                 const chunkIdSuffix = `${i + 1}_of_${chunks.length}`;
@@ -183,11 +237,21 @@ export async function processNoteWithChunking(
             }
         }
 
+        // Set a time limit for the retry phase
+        const retryStartTime = Date.now();
+        const MAX_RETRY_TIME = 2 * 60 * 1000; // 2 minutes for all retries
+
         // Retry failed chunks with exponential backoff, but only those that aren't permanent errors
         if (retryQueue.length > 0 && retryQueue.length < chunks.length) {
             log.info(`Retrying ${retryQueue.length} failed chunks for note ${noteId}`);
 
             for (let j = 0; j < retryQueue.length; j++) {
+                // Check if we've exceeded the retry time limit
+                if (Date.now() - retryStartTime > MAX_RETRY_TIME) {
+                    log.info(`Exceeded maximum retry time (${MAX_RETRY_TIME}ms) for note ${noteId}, stopping after ${j} retries`);
+                    break;
+                }
+
                 const item = retryQueue[j];
 
                 // Skip if we've already reached the max retry attempts for this chunk
@@ -200,8 +264,12 @@ export async function processNoteWithChunking(
                     // Wait longer for retries with exponential backoff
                     await new Promise(resolve => setTimeout(resolve, 1000 * Math.pow(1.5, j)));
 
-                    // Retry the embedding
-                    const embedding = await provider.generateEmbeddings(item.chunk.content);
+                    // Retry the embedding with timeout
+                    const embedding = await processChunkWithTimeout(
+                        provider,
+                        item.chunk,
+                        MAX_CHUNK_PROCESSING_TIME
+                    );
 
                     // Store with unique ID that indicates it was a retry
                     const chunkIdSuffix = `${item.index + 1}_of_${chunks.length}`;
@@ -237,8 +305,15 @@ export async function processNoteWithChunking(
 
                     log.error(`Retry failed for chunk ${item.index + 1} of note ${noteId} (${errorCategory} error): ${errorMessage}`);
 
+                    // For timeout errors, mark as permanent to avoid further retries
+                    if (errorMessage.includes('timed out')) {
+                        if (detailIndex >= 0) {
+                            failedChunkDetails[detailIndex].category = 'permanent';
+                        }
+                        log.info(`Chunk ${item.index + 1} for note ${noteId} timed out, marking as permanent failure`);
+                    }
                     // Add to retry queue again only if it's not a permanent error and hasn't reached the max attempts
-                    if (errorCategory !== 'permanent' && item.attempts + 1 < MAX_CHUNK_RETRY_ATTEMPTS) {
+                    else if (errorCategory !== 'permanent' && item.attempts + 1 < MAX_CHUNK_RETRY_ATTEMPTS) {
                         // If we're still below MAX_CHUNK_RETRY_ATTEMPTS, we'll try again in the next cycle
                         item.attempts++;
                     } else if (errorCategory === 'permanent') {
@@ -265,17 +340,26 @@ export async function processNoteWithChunking(
                     `Permanent: ${permanentErrors}, Temporary: ${temporaryErrors}, Unknown: ${unknownErrors}`);
         }
 
-        // If no chunks were successfully processed, throw an error
-        // This will keep the note in the queue for another attempt
-        if (successfulChunks === 0 && failedChunks > 0) {
+        // Calculate the failure ratio
+        const failureRatio = failedChunks / totalChunks;
+
+        // If no chunks were successfully processed, or if more than 50% failed, mark the entire note as failed
+        if (successfulChunks === 0 || failureRatio > 0.5) {
             // Check if all failures are permanent
             const allPermanent = failedChunkDetails.every(d => d.category === 'permanent');
+            const errorType = allPermanent ? 'permanent' : (failureRatio > 0.5 ? 'too_many_failures' : 'all_failed');
 
-            if (allPermanent) {
-                throw new Error(`All ${failedChunks} chunks failed with permanent errors for note ${noteId}. First error: ${failedChunkDetails[0]?.error}`);
-            } else {
-                throw new Error(`All ${failedChunks} chunks failed for note ${noteId}. First error: ${failedChunkDetails[0]?.error}`);
-            }
+            // Mark this note as failed in the embedding_queue table with a permanent error status
+            const now = dateUtils.utcNowDateTime();
+            const errorSummary = `Note embedding failed: ${failedChunks}/${totalChunks} chunks failed (${errorType}). First error: ${failedChunkDetails[0]?.error}`;
+
+            await sql.execute(`
+                UPDATE embedding_queue
+                SET error = ?, lastAttempt = ?, attempts = 999
+                WHERE noteId = ?
+            `, [errorSummary, now, noteId]);
+
+            throw new Error(errorSummary);
         }
 
         // If some chunks failed but others succeeded, log a warning but consider the processing complete
@@ -300,6 +384,10 @@ export async function processNoteWithChunking(
             `, [errorSummary, now, noteId]);
         }
 
+        // Track total processing time
+        const totalTime = Date.now() - startTime;
+        log.info(`Total processing time for note ${noteId}: ${totalTime}ms`);
+
     } catch (error: any) {
         log.error(`Error in chunked embedding process for note ${noteId}: ${error.message || 'Unknown error'}`);
         throw error;
diff --git a/src/services/llm/embeddings/queue.ts b/src/services/llm/embeddings/queue.ts
index 5218f06dd..ff7ffcfff 100644
--- a/src/services/llm/embeddings/queue.ts
+++ b/src/services/llm/embeddings/queue.ts
@@ -289,6 +289,13 @@ export async function processEmbeddingQueue() {
             // This allows manual retries later
             if (noteData.attempts + 1 >= 3) {
                 log.error(`Marked note ${noteData.noteId} as permanently failed after multiple embedding attempts`);
+                
+                // Update the attempts to a very high number to indicate permanent failure
+                await sql.execute(`
+                    UPDATE embedding_queue 
+                    SET attempts = 999
+                    WHERE noteId = ?
+                `, [noteData.noteId]);
             }
         }
     }