diff --git a/packages/db/src/backup-lib.test.ts b/packages/db/src/backup-lib.test.ts
index dcdc87c5..2367d26d 100644
--- a/packages/db/src/backup-lib.test.ts
+++ b/packages/db/src/backup-lib.test.ts
@@ -129,8 +129,8 @@ describeEmbeddedPostgres("runDatabaseBackup", () => {
           filenamePrefix: "paperclip-test",
         });
 
-        expect(result.backupFile).toMatch(/paperclip-test-.*\.sql$/);
-        expect(result.sizeBytes).toBeGreaterThan(1024 * 1024);
+        expect(result.backupFile).toMatch(/paperclip-test-.*\.sql\.gz$/);
+        expect(result.sizeBytes).toBeGreaterThan(0);
         expect(fs.existsSync(result.backupFile)).toBe(true);
 
         await runDatabaseRestore({
diff --git a/packages/db/src/backup-lib.ts b/packages/db/src/backup-lib.ts
index ea76a2b6..36b5ee98 100644
--- a/packages/db/src/backup-lib.ts
+++ b/packages/db/src/backup-lib.ts
@@ -1,6 +1,8 @@
 import { createReadStream, createWriteStream, existsSync, mkdirSync, readdirSync, statSync, unlinkSync } from "node:fs";
 import { basename, resolve } from "node:path";
 import { createInterface } from "node:readline";
+import { pipeline } from "node:stream/promises";
+import { createGunzip, createGzip } from "node:zlib";
 import postgres from "postgres";
 
 export type RunDatabaseBackupOptions = {
@@ -82,7 +84,8 @@ function pruneOldBackups(backupDir: string, retentionDays: number, filenamePrefi
   let pruned = 0;
 
   for (const name of readdirSync(backupDir)) {
-    if (!name.startsWith(`${filenamePrefix}-`) || !name.endsWith(".sql")) continue;
+    if (!name.startsWith(`${filenamePrefix}-`)) continue;
+    if (!name.endsWith(".sql") && !name.endsWith(".sql.gz")) continue;
     const fullPath = resolve(backupDir, name);
     const stat = statSync(fullPath);
     if (stat.mtimeMs < cutoff) {
@@ -148,7 +151,9 @@ function tableKey(schemaName: string, tableName: string): string {
 }
 
 async function* readRestoreStatements(backupFile: string): AsyncGenerator<string> {
-  const stream = createReadStream(backupFile, { encoding: "utf8" });
+  const raw = createReadStream(backupFile);
+  const stream = backupFile.endsWith(".gz") ? raw.pipe(createGunzip()) : raw;
+  stream.setEncoding("utf8");
   const reader = createInterface({
     input: stream,
     crlfDelay: Infinity,
@@ -180,6 +185,7 @@ async function* readRestoreStatements(backupFile: string): AsyncGenerator<string
   } finally {
     reader.close();
     stream.destroy();
+    raw.destroy();
   }
 }
 
@@ -288,8 +294,9 @@ export async function runDatabaseBackup(opts: RunDatabaseBackupOptions): Promise
   const nullifiedColumnsByTable = normalizeNullifyColumnMap(opts.nullifyColumns);
   const sql = postgres(opts.connectionString, { max: 1, connect_timeout: connectTimeout });
   mkdirSync(opts.backupDir, { recursive: true });
-  const backupFile = resolve(opts.backupDir, `${filenamePrefix}-${timestamp()}.sql`);
-  const writer = createBufferedTextFileWriter(backupFile);
+  const sqlFile = resolve(opts.backupDir, `${filenamePrefix}-${timestamp()}.sql`);
+  const backupFile = `${sqlFile}.gz`;
+  const writer = createBufferedTextFileWriter(sqlFile);
 
   try {
     await sql`SELECT 1`;
@@ -664,6 +671,12 @@ export async function runDatabaseBackup(opts: RunDatabaseBackupOptions): Promise
 
     await writer.close();
 
+    // Compress the SQL file with gzip
+    const sqlReadStream = createReadStream(sqlFile);
+    const gzWriteStream = createWriteStream(backupFile);
+    await pipeline(sqlReadStream, createGzip(), gzWriteStream);
+    unlinkSync(sqlFile);
+
     const sizeBytes = statSync(backupFile).size;
     const prunedCount = pruneOldBackups(opts.backupDir, retentionDays, filenamePrefix);
 
@@ -674,6 +687,9 @@ export async function runDatabaseBackup(opts: RunDatabaseBackupOptions): Promise
     };
   } catch (error) {
     await writer.abort();
+    if (existsSync(backupFile)) {
+      try { unlinkSync(backupFile); } catch { /* ignore */ }
+    }
     throw error;
   } finally {
     await sql.end();
diff --git a/packages/shared/src/config-schema.ts b/packages/shared/src/config-schema.ts
index 48687878..2399ceae 100644
--- a/packages/shared/src/config-schema.ts
+++ b/packages/shared/src/config-schema.ts
@@ -21,7 +21,7 @@ export const llmConfigSchema = z.object({
 export const databaseBackupConfigSchema = z.object({
   enabled: z.boolean().default(true),
   intervalMinutes: z.number().int().min(1).max(7 * 24 * 60).default(60),
-  retentionDays: z.number().int().min(1).max(3650).default(30),
+  retentionDays: z.number().int().min(1).max(3650).default(7),
   dir: z.string().default("~/.paperclip/instances/default/data/backups"),
 });
 
@@ -33,7 +33,7 @@ export const databaseConfigSchema = z.object({
   backup: databaseBackupConfigSchema.default({
     enabled: true,
     intervalMinutes: 60,
-    retentionDays: 30,
+    retentionDays: 7,
     dir: "~/.paperclip/instances/default/data/backups",
   }),
 });
diff --git a/packages/shared/src/index.ts b/packages/shared/src/index.ts
index a5a01b36..ef9ce5ba 100644
--- a/packages/shared/src/index.ts
+++ b/packages/shared/src/index.ts
@@ -189,6 +189,7 @@ export type {
   InstanceExperimentalSettings,
   InstanceGeneralSettings,
   InstanceSettings,
+  BackupRetentionDays,
   Agent,
   AgentAccessState,
   AgentChainOfCommandEntry,
@@ -369,6 +370,11 @@ export {
   DEFAULT_FEEDBACK_DATA_SHARING_TERMS_VERSION,
 } from "./types/feedback.js";
 
+export {
+  BACKUP_RETENTION_PRESETS,
+  DEFAULT_BACKUP_RETENTION_DAYS,
+} from "./types/instance.js";
+
 export {
   getClosedIsolatedExecutionWorkspaceMessage,
   isClosedIsolatedExecutionWorkspace,
diff --git a/packages/shared/src/types/index.ts b/packages/shared/src/types/index.ts
index 17570116..20d38a7a 100644
--- a/packages/shared/src/types/index.ts
+++ b/packages/shared/src/types/index.ts
@@ -11,7 +11,8 @@ export type {
   FeedbackTraceBundleFile,
   FeedbackTraceBundle,
 } from "./feedback.js";
-export type { InstanceExperimentalSettings, InstanceGeneralSettings, InstanceSettings } from "./instance.js";
+export type { InstanceExperimentalSettings, InstanceGeneralSettings, InstanceSettings, BackupRetentionDays } from "./instance.js";
+export { BACKUP_RETENTION_PRESETS, DEFAULT_BACKUP_RETENTION_DAYS } from "./instance.js";
 export type {
   CompanySkillSourceType,
   CompanySkillTrustLevel,
diff --git a/packages/shared/src/types/instance.ts b/packages/shared/src/types/instance.ts
index 70599868..30f07f7d 100644
--- a/packages/shared/src/types/instance.ts
+++ b/packages/shared/src/types/instance.ts
@@ -1,9 +1,14 @@
 import type { FeedbackDataSharingPreference } from "./feedback.js";
 
+export const BACKUP_RETENTION_PRESETS = [7, 14, 30] as const;
+export type BackupRetentionDays = (typeof BACKUP_RETENTION_PRESETS)[number];
+export const DEFAULT_BACKUP_RETENTION_DAYS: BackupRetentionDays = 7;
+
 export interface InstanceGeneralSettings {
   censorUsernameInLogs: boolean;
   keyboardShortcuts: boolean;
   feedbackDataSharingPreference: FeedbackDataSharingPreference;
+  backupRetentionDays: BackupRetentionDays;
 }
 
 export interface InstanceExperimentalSettings {
diff --git a/packages/shared/src/validators/instance.ts b/packages/shared/src/validators/instance.ts
index 5634c8f6..a62f1996 100644
--- a/packages/shared/src/validators/instance.ts
+++ b/packages/shared/src/validators/instance.ts
@@ -1,13 +1,21 @@
 import { z } from "zod";
 import { DEFAULT_FEEDBACK_DATA_SHARING_PREFERENCE } from "../types/feedback.js";
+import { BACKUP_RETENTION_PRESETS, DEFAULT_BACKUP_RETENTION_DAYS } from "../types/instance.js";
 import { feedbackDataSharingPreferenceSchema } from "./feedback.js";
 
+export const backupRetentionDaysSchema = z.number().refine(
+  (v): v is (typeof BACKUP_RETENTION_PRESETS)[number] =>
+    (BACKUP_RETENTION_PRESETS as readonly number[]).includes(v),
+  { message: `Must be one of: ${BACKUP_RETENTION_PRESETS.join(", ")}` },
+);
+
 export const instanceGeneralSettingsSchema = z.object({
   censorUsernameInLogs: z.boolean().default(false),
   keyboardShortcuts: z.boolean().default(false),
   feedbackDataSharingPreference: feedbackDataSharingPreferenceSchema.default(
     DEFAULT_FEEDBACK_DATA_SHARING_PREFERENCE,
   ),
+  backupRetentionDays: backupRetentionDaysSchema.default(DEFAULT_BACKUP_RETENTION_DAYS),
 }).strict();
 
 export const patchInstanceGeneralSettingsSchema = instanceGeneralSettingsSchema.partial();
diff --git a/server/src/config.ts b/server/src/config.ts
index 71084cc0..5ae50400 100644
--- a/server/src/config.ts
+++ b/server/src/config.ts
@@ -216,7 +216,7 @@ export function loadConfig(): Config {
     1,
     Number(process.env.PAPERCLIP_DB_BACKUP_RETENTION_DAYS) ||
       fileDatabaseBackup?.retentionDays ||
-      30,
+      7,
   );
   const databaseBackupDir = resolveHomeAwarePath(
     process.env.PAPERCLIP_DB_BACKUP_DIR ??
diff --git a/server/src/index.ts b/server/src/index.ts
index a384342f..768d1fd6 100644
--- a/server/src/index.ts
+++ b/server/src/index.ts
@@ -31,6 +31,7 @@ import { setupLiveEventsWebSocketServer } from "./realtime/live-events-ws.js";
 import {
   feedbackService,
   heartbeatService,
+  instanceSettingsService,
   reconcilePersistedRuntimeServicesOnStartup,
   routineService,
 } from "./services/index.js";
@@ -628,20 +629,25 @@ export async function startServer(): Promise<StartedServer> {
   
   if (config.databaseBackupEnabled) {
     const backupIntervalMs = config.databaseBackupIntervalMinutes * 60 * 1000;
+    const settingsSvc = instanceSettingsService(db);
     let backupInFlight = false;
-  
+
     const runScheduledBackup = async () => {
       if (backupInFlight) {
         logger.warn("Skipping scheduled database backup because a previous backup is still running");
         return;
       }
-  
+
       backupInFlight = true;
       try {
+        // Read retention from Instance Settings (DB) so changes take effect without restart
+        const generalSettings = await settingsSvc.getGeneral();
+        const retentionDays = generalSettings.backupRetentionDays;
+
         const result = await runDatabaseBackup({
           connectionString: activeDatabaseConnectionString,
           backupDir: config.databaseBackupDir,
-          retentionDays: config.databaseBackupRetentionDays,
+          retentionDays,
           filenamePrefix: "paperclip",
         });
         logger.info(
@@ -650,7 +656,7 @@ export async function startServer(): Promise<StartedServer> {
             sizeBytes: result.sizeBytes,
             prunedCount: result.prunedCount,
             backupDir: config.databaseBackupDir,
-            retentionDays: config.databaseBackupRetentionDays,
+            retentionDays,
           },
           `Automatic database backup complete: ${formatDatabaseBackupResult(result)}`,
         );
@@ -660,7 +666,7 @@ export async function startServer(): Promise<StartedServer> {
         backupInFlight = false;
       }
     };
-  
+
     logger.info(
       {
         intervalMinutes: config.databaseBackupIntervalMinutes,
diff --git a/server/src/services/instance-settings.ts b/server/src/services/instance-settings.ts
index 7856591d..5c7db61d 100644
--- a/server/src/services/instance-settings.ts
+++ b/server/src/services/instance-settings.ts
@@ -2,6 +2,7 @@ import type { Db } from "@paperclipai/db";
 import { companies, instanceSettings } from "@paperclipai/db";
 import {
   DEFAULT_FEEDBACK_DATA_SHARING_PREFERENCE,
+  DEFAULT_BACKUP_RETENTION_DAYS,
   instanceGeneralSettingsSchema,
   type InstanceGeneralSettings,
   instanceExperimentalSettingsSchema,
@@ -22,12 +23,14 @@ function normalizeGeneralSettings(raw: unknown): InstanceGeneralSettings {
       keyboardShortcuts: parsed.data.keyboardShortcuts ?? false,
       feedbackDataSharingPreference:
         parsed.data.feedbackDataSharingPreference ?? DEFAULT_FEEDBACK_DATA_SHARING_PREFERENCE,
+      backupRetentionDays: parsed.data.backupRetentionDays ?? DEFAULT_BACKUP_RETENTION_DAYS,
     };
   }
   return {
     censorUsernameInLogs: false,
     keyboardShortcuts: false,
     feedbackDataSharingPreference: DEFAULT_FEEDBACK_DATA_SHARING_PREFERENCE,
+    backupRetentionDays: DEFAULT_BACKUP_RETENTION_DAYS,
   };
 }
 
diff --git a/ui/src/pages/InstanceGeneralSettings.tsx b/ui/src/pages/InstanceGeneralSettings.tsx
index 28e00b29..9004e418 100644
--- a/ui/src/pages/InstanceGeneralSettings.tsx
+++ b/ui/src/pages/InstanceGeneralSettings.tsx
@@ -1,7 +1,8 @@
 import { useEffect, useState } from "react";
 import { useMutation, useQuery, useQueryClient } from "@tanstack/react-query";
-import type { PatchInstanceGeneralSettings } from "@paperclipai/shared";
-import { LogOut, SlidersHorizontal } from "lucide-react";
+import type { PatchInstanceGeneralSettings, BackupRetentionDays } from "@paperclipai/shared";
+import { BACKUP_RETENTION_PRESETS, DEFAULT_BACKUP_RETENTION_DAYS } from "@paperclipai/shared";
+import { Database, LogOut, SlidersHorizontal } from "lucide-react";
 import { authApi } from "@/api/auth";
 import { instanceSettingsApi } from "@/api/instanceSettings";
 import { Button } from "../components/ui/button";
@@ -67,6 +68,7 @@ export function InstanceGeneralSettings() {
   const censorUsernameInLogs = generalQuery.data?.censorUsernameInLogs === true;
   const keyboardShortcuts = generalQuery.data?.keyboardShortcuts === true;
   const feedbackDataSharingPreference = generalQuery.data?.feedbackDataSharingPreference ?? "prompt";
+  const backupRetentionDays: BackupRetentionDays = generalQuery.data?.backupRetentionDays ?? DEFAULT_BACKUP_RETENTION_DAYS;
 
   return (
     <div className="max-w-4xl space-y-6">
@@ -123,6 +125,49 @@ export function InstanceGeneralSettings() {
         </div>
       </section>
 
+      <section className="rounded-xl border border-border bg-card p-5">
+        <div className="space-y-4">
+          <div className="flex items-center gap-2">
+            <Database className="h-4 w-4 text-muted-foreground" />
+            <div className="space-y-1.5">
+              <h2 className="text-sm font-semibold">Backup retention</h2>
+              <p className="max-w-2xl text-sm text-muted-foreground">
+                How long to keep automatic database backups before pruning. Backups are compressed
+                with gzip to minimize disk usage.
+              </p>
+            </div>
+          </div>
+          <div className="flex flex-wrap gap-2">
+            {BACKUP_RETENTION_PRESETS.map((days) => {
+              const active = backupRetentionDays === days;
+              const label =
+                days === 7 ? "7 days" : days === 14 ? "2 weeks" : "1 month";
+              return (
+                <button
+                  key={days}
+                  type="button"
+                  disabled={updateGeneralMutation.isPending}
+                  className={cn(
+                    "rounded-lg border px-3 py-2 text-left transition-colors disabled:cursor-not-allowed disabled:opacity-60",
+                    active
+                      ? "border-foreground bg-accent text-foreground"
+                      : "border-border bg-background hover:bg-accent/50",
+                  )}
+                  onClick={() =>
+                    updateGeneralMutation.mutate({ backupRetentionDays: days })
+                  }
+                >
+                  <div className="text-sm font-medium">{label}</div>
+                  <div className="text-xs text-muted-foreground">
+                    Keep backups for {days} days
+                  </div>
+                </button>
+              );
+            })}
+          </div>
+        </div>
+      </section>
+
       <section className="rounded-xl border border-border bg-card p-5">
         <div className="space-y-4">
           <div className="space-y-1.5">