diff --git a/CHANGELOG.md b/CHANGELOG.md
index f15ac91..49ad3a8 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -72,6 +72,17 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
   `handshake.rs:1114` is unchanged. Introduces a shared
   `Node::outbound_admission_check()` helper so the invariant is
   grep-able and unit-testable.
+- Inbound `handle_msg1` now silent-drops at `node.limits.max_peers`
+  saturation *before* building/sending Msg2, instead of replying with
+  Msg2 and then rejecting at `promote_connection`. Adds an early cap
+  check positioned after identity verification (so the
+  reconnect / cross-connection bypass for known peers still fires) and
+  before index allocation + Msg2 wire send. The late cap check inside
+  `promote_connection` is intentionally retained as
+  defense-in-depth. Wire savings observed in a 45 s ops tcpdump at
+  saturation: ~3.6 cap-denials/s × Msg2 (~104 B + AEAD compute) each.
+  Bigger win is cleaner peer-side semantics — no fake-completed
+  handshake whose subsequent data frames fail decryption on this side.
 - Mesh-size estimator (`compute_mesh_size`) no longer double-counts the
   parent's bloom cardinality during the transient cache window after a
   local parent-switch. Symptom: `fipsctl show status` / fipstop displayed
diff --git a/src/node/handlers/handshake.rs b/src/node/handlers/handshake.rs
index ae2cc45..0f4dc26 100644
--- a/src/node/handlers/handshake.rs
+++ b/src/node/handlers/handshake.rs
@@ -207,6 +207,35 @@ impl Node {
             possible_restart = true;
         }
 
+        // Early cap check: at max_peers and this is a net-new identity?
+        // Bypass for known peers (reconnect / cross-connection) — admitting
+        // them doesn't grow peers.len(). This silent-drops the Msg1 before
+        // the Msg2 build/send and index allocation, avoiding wasted wire
+        // bytes and giving the peer cleaner semantics (no fake-completed
+        // handshake whose data frames subsequently fail decryption here).
+        // The late cap check inside promote_connection() is intentionally
+        // left in place as defense-in-depth.
+        if self.max_peers > 0 && self.peers.len() >= self.max_peers {
+            let is_known_active = self.peers.contains_key(&peer_node_addr);
+            let is_pending_outbound = self.connections.iter().any(|(_, conn)| {
+                conn.expected_identity()
+                    .map(|id| *id.node_addr() == peer_node_addr)
+                    .unwrap_or(false)
+            });
+            if !is_known_active && !is_pending_outbound {
+                debug!(
+                    peer = %self.peer_display_name(&peer_node_addr),
+                    max = self.max_peers,
+                    "Silent-dropping Msg1 at max_peers cap (early gate; no Msg2 sent)"
+                );
+                // `link_id` was allocated above but `conn` is still a local
+                // (not yet inserted into self.connections / self.links /
+                // self.addr_to_link), so the local drop suffices.
+                self.msg1_rate_limiter.complete_handshake();
+                return;
+            }
+        }
+
         // Epoch-based restart detection and duplicate msg1 handling.
         //
         // If we fell through from the addr_to_link check above with
diff --git a/src/node/tests/unit.rs b/src/node/tests/unit.rs
index 7822727..4671625 100644
--- a/src/node/tests/unit.rs
+++ b/src/node/tests/unit.rs
@@ -1497,3 +1497,227 @@ fn nostr_discovery_outbound_admission_atomic_roundtrip() {
         "after recovery store: traversal initiator/responder must see true"
     );
 }
+
+/// Sender-side helper: build a wire-format Msg1 from a fresh peer
+/// identity targeting `node_b`, *and* send it on the wire over `socket_a`
+/// to `addr_b`. Returns the sender's NodeAddr so the test can assert on
+/// identity-keyed maps.
+///
+/// Uses the same outbound-PeerConnection->Noise IK pattern as the
+/// integration handshake tests, but inlined and unit-scoped.
+async fn craft_and_send_msg1(
+    node_b: &Node,
+    sender_identity: &Identity,
+    socket_a: &tokio::net::UdpSocket,
+    addr_b: std::net::SocketAddr,
+    timestamp_ms: u64,
+) -> NodeAddr {
+    use crate::node::wire::build_msg1;
+    use crate::utils::index::SessionIndex;
+
+    let peer_b_identity = PeerIdentity::from_pubkey_full(node_b.identity.pubkey_full());
+    let sender_pubkey_id = PeerIdentity::from_pubkey_full(sender_identity.pubkey_full());
+    let sender_node_addr = *sender_pubkey_id.node_addr();
+
+    let link_id = LinkId::new(0xDEAD_BEEF);
+    let mut conn = PeerConnection::outbound(link_id, peer_b_identity, timestamp_ms);
+
+    let sender_keypair = sender_identity.keypair();
+    let mut startup_epoch = [0u8; 8];
+    rand::Rng::fill_bytes(&mut rand::rng(), &mut startup_epoch);
+    let noise_msg1 = conn
+        .start_handshake(sender_keypair, startup_epoch, timestamp_ms)
+        .expect("start_handshake should produce noise msg1");
+
+    let sender_index = SessionIndex::new(0x5151);
+    let wire_msg1 = build_msg1(sender_index, &noise_msg1);
+
+    socket_a
+        .send_to(&wire_msg1, addr_b)
+        .await
+        .expect("sender_socket.send_to");
+    sender_node_addr
+}
+
+/// Helper: deliver a packet from `node`'s registered UDP transport to
+/// `node.handle_msg1`. Returns Ok(()) on success or Err if the packet
+/// was not received within `timeout`.
+async fn pump_one_msg1_into_node(
+    node: &mut Node,
+    packet_rx: &mut crate::transport::PacketRx,
+    timeout_ms: u64,
+) -> Result<(), &'static str> {
+    use tokio::time::{Duration, timeout};
+    let packet = timeout(Duration::from_millis(timeout_ms), packet_rx.recv())
+        .await
+        .map_err(|_| "timed out waiting for msg1 on packet_rx")?
+        .ok_or("packet channel closed")?;
+    node.handle_msg1(packet).await;
+    Ok(())
+}
+
+/// Verifies the early max_peers cap check in `handle_msg1` silent-drops
+/// a Msg1 from a brand-new identity at saturation: no peer is admitted,
+/// no Msg2 response goes back on the wire, and the msg1 rate-limiter
+/// pending_count returns to baseline.
+///
+/// Wire-observable Msg2 absence is the load-bearing discriminator. With
+/// the early cap gate removed (stash-verify), the late gate inside
+/// `promote_connection` still rejects the new identity — but only
+/// *after* `handle_msg1` has already built the Msg2 frame and
+/// `transport.send(...wire_msg2)` has put it on the wire. The
+/// post-call wire-side poll catches that Msg2 (FAIL pre-fix; the
+/// silent timeout is the PASS post-fix).
+#[tokio::test]
+async fn handle_msg1_silent_drops_at_cap_for_new_peer() {
+    use crate::config::UdpConfig;
+    use tokio::time::{Duration, timeout};
+
+    let mut node = make_node();
+    node.set_max_peers(2);
+    inject_dummy_peers(&mut node, 2);
+    assert_eq!(node.peer_count(), 2, "precondition: at cap");
+
+    // === UDP transport setup for node_b (the unit under test) ===
+    let transport_id_b = TransportId::new(1);
+    let udp_config = UdpConfig {
+        bind_addr: Some("127.0.0.1:0".to_string()),
+        mtu: Some(1280),
+        ..Default::default()
+    };
+    let (packet_tx_b, mut packet_rx_b) = packet_channel(64);
+    let mut transport_b = UdpTransport::new(transport_id_b, None, udp_config, packet_tx_b);
+    transport_b.start_async().await.unwrap();
+    let addr_b = transport_b.local_addr().unwrap();
+    node.transports
+        .insert(transport_id_b, TransportHandle::Udp(transport_b));
+
+    // === Sender-side socket ===
+    let socket_a = tokio::net::UdpSocket::bind("127.0.0.1:0")
+        .await
+        .expect("bind sender socket");
+
+    let before_peers = node.peer_count();
+    let before_pending = node.msg1_rate_limiter.pending_count();
+
+    // Fresh sender identity — never seen by `node`.
+    let sender = Identity::generate();
+    let sender_node_addr = craft_and_send_msg1(&node, &sender, &socket_a, addr_b, 1000).await;
+
+    // Sanity: new identity is not currently a peer.
+    assert!(
+        !node.peers.contains_key(&sender_node_addr),
+        "precondition: new sender not yet a peer"
+    );
+
+    // Pump the wire-arrived Msg1 into the node's handler.
+    pump_one_msg1_into_node(&mut node, &mut packet_rx_b, 1000)
+        .await
+        .expect("msg1 must reach packet_rx_b");
+
+    // Post-call state checks.
+    assert_eq!(
+        node.peer_count(),
+        before_peers,
+        "early cap gate must not adopt a new peer at saturation"
+    );
+    assert!(
+        !node.peers.contains_key(&sender_node_addr),
+        "new sender must not appear in peers map"
+    );
+    assert_eq!(
+        node.msg1_rate_limiter.pending_count(),
+        before_pending,
+        "rate limiter must rebalance: start_handshake() then \
+         complete_handshake() before silent-drop return"
+    );
+
+    // Wire-observable discriminator: with the early gate in place, no
+    // Msg2 should come back. With the gate removed, Msg2 IS sent
+    // before promote_connection rejects.
+    let mut buf = [0u8; 2048];
+    let recv = timeout(Duration::from_millis(300), socket_a.recv_from(&mut buf)).await;
+    let received_bytes = recv.ok().and_then(|inner| inner.ok()).map(|(n, _)| n);
+    assert!(
+        received_bytes.is_none(),
+        "Msg2 must NOT be sent in response when at max_peers cap; \
+         observed {received_bytes:?} wire bytes — the fingerprint of \
+         the late-gate path replying with Msg2 before rejecting"
+    );
+}
+
+/// Verifies the bypass: at saturation, an inbound Msg1 from an
+/// *existing* peer's identity is not silent-dropped by the early cap
+/// check (the gate would otherwise wedge legitimate
+/// reconnect/restart/rekey traffic against an at-cap node).
+///
+/// The cap-gate's `is_known_active = self.peers.contains_key(&peer_node_addr)`
+/// branch admits this case; the downstream handling (restart-detect or
+/// duplicate-msg1 resend) then runs per existing semantics. The
+/// observable assertion here is the existing peer's continued
+/// presence — the rate-limiter rebalance is the same in
+/// bypass-admit and silent-drop, so this test isn't a discriminator
+/// against the no-gate (stash) build; it's a regression check that the
+/// gate doesn't accidentally evict known peers.
+#[tokio::test]
+async fn handle_msg1_admits_existing_peer_at_cap() {
+    use crate::config::UdpConfig;
+
+    let mut node = make_node();
+    node.set_max_peers(2);
+
+    inject_dummy_peers(&mut node, 1);
+
+    let existing_sender = Identity::generate();
+    let existing_pid = PeerIdentity::from_pubkey_full(existing_sender.pubkey_full());
+    let existing_node_addr = *existing_pid.node_addr();
+    let existing_link_id = LinkId::new(7777);
+    {
+        use crate::peer::ActivePeer;
+        let peer = ActivePeer::new(existing_pid, existing_link_id, 0);
+        node.peers.insert(existing_node_addr, peer);
+    }
+    assert_eq!(node.peer_count(), 2, "precondition: at cap");
+
+    let transport_id_b = TransportId::new(1);
+    let udp_config = UdpConfig {
+        bind_addr: Some("127.0.0.1:0".to_string()),
+        mtu: Some(1280),
+        ..Default::default()
+    };
+    let (packet_tx_b, mut packet_rx_b) = packet_channel(64);
+    let mut transport_b = UdpTransport::new(transport_id_b, None, udp_config, packet_tx_b);
+    transport_b.start_async().await.unwrap();
+    let addr_b = transport_b.local_addr().unwrap();
+    node.transports
+        .insert(transport_id_b, TransportHandle::Udp(transport_b));
+
+    let socket_a = tokio::net::UdpSocket::bind("127.0.0.1:0")
+        .await
+        .expect("bind sender socket");
+
+    let before_pending = node.msg1_rate_limiter.pending_count();
+
+    let sender_node_addr =
+        craft_and_send_msg1(&node, &existing_sender, &socket_a, addr_b, 2000).await;
+    assert_eq!(
+        sender_node_addr, existing_node_addr,
+        "sanity: crafted msg1 carries the existing peer's NodeAddr"
+    );
+
+    pump_one_msg1_into_node(&mut node, &mut packet_rx_b, 1000)
+        .await
+        .expect("msg1 must reach packet_rx_b");
+
+    // Bypass must not evict the existing peer or grow peer count.
+    assert_eq!(node.peer_count(), 2, "peer count unchanged");
+    assert!(
+        node.peers.contains_key(&existing_node_addr),
+        "existing peer must still be present after bypass-admitted msg1"
+    );
+    assert_eq!(
+        node.msg1_rate_limiter.pending_count(),
+        before_pending,
+        "rate limiter must rebalance after the (bypass-admitted) handler returns"
+    );
+}