diff --git a/README.md b/README.md
index b794c09..dbff99f 100644
--- a/README.md
+++ b/README.md
@@ -126,7 +126,14 @@ ENABLE_RERANKING=False
 
 ## Development
 
-### Setup
+### First-Time Setup
+
+👉 **New to the project?** See [SETUP.md](./SETUP.md) for a complete step-by-step guide, including:
+- Prerequisites (Docker, Node.js, Git)
+- Installation instructions for Mac (Apple Silicon optimized)
+- Troubleshooting common issues
+
+### Quick Start
 ```bash
 # Start services
 docker-compose up -d
@@ -185,6 +192,7 @@ See [AGENTS.md](./AGENTS.md) for coding guidelines.
 
 ## Documentation
 
+- **[SETUP.md](./SETUP.md)** - 🆕 First-time setup guide (Mac/Apple Silicon)
 - **[RESUME.md](./RESUME.md)** - Quick resume guide, commands, status
 - **[PROGRESS.md](./PROGRESS.md)** - Recent changes, technical details
 - **[AGENTS.md](./AGENTS.md)** - Development guidelines, conventions
diff --git a/SETUP.md b/SETUP.md
new file mode 100644
index 0000000..4f84978
--- /dev/null
+++ b/SETUP.md
@@ -0,0 +1,386 @@
+# Developer Setup Guide
+
+Step-by-step guide for setting up the RAG Transcript System on a new machine (optimized for MacBook with Apple Silicon).
+
+---
+
+## Table of Contents
+
+1. [Prerequisites](#prerequisites)
+2. [Clone the Repository](#clone-the-repository)
+3. [Backend Setup](#backend-setup)
+4. [Frontend Setup](#frontend-setup)
+5. [Verify Installation](#verify-installation)
+6. [Optional: Local LLM with Ollama](#optional-local-llm-with-ollama)
+7. [Troubleshooting](#troubleshooting)
+
+---
+
+## Prerequisites
+
+### 1. Install Homebrew (Package Manager)
+
+Open Terminal and run:
+
+```bash
+/bin/bash -c "$(curl -fsSL https://raw.githubusercontent.com/Homebrew/install/HEAD/install.sh)"
+```
+
+After installation, follow the on-screen instructions to add Homebrew to your PATH. Typically:
+
+```bash
+echo 'eval "$(/opt/homebrew/bin/brew shellenv)"' >> ~/.zprofile
+eval "$(/opt/homebrew/bin/brew shellenv)"
+```
+
+### 2. Install Git
+
+```bash
+brew install git
+```
+
+Verify installation:
+
+```bash
+git --version
+# Should output: git version 2.x.x
+```
+
+### 3. Install Docker Desktop for Mac
+
+Download and install Docker Desktop from: https://www.docker.com/products/docker-desktop/
+
+**Important for Apple Silicon (M1/M2/M3/M4 and later):**
+- Download the "Apple Silicon" version (not Intel)
+- After installation, open Docker Desktop and wait for it to start
+- Go to Settings → Resources → Advanced and allocate at least:
+  - **CPUs**: 4+
+  - **Memory**: 8GB+ (16GB recommended for Whisper transcription)
+  - **Swap**: 2GB+
+  - **Disk**: 60GB+
+
+Verify Docker is running:
+
+```bash
+docker --version
+# Should output: Docker version 24.x.x or higher
+
+docker compose version
+# Should output: Docker Compose version v2.x.x
+```
+
+### 4. Install Node.js (v18 or later)
+
+We recommend using `nvm` (Node Version Manager) for easier version management:
+
+```bash
+# Install nvm
+curl -o- https://raw.githubusercontent.com/nvm-sh/nvm/v0.39.7/install.sh | bash
+
+# Restart terminal or run:
+source ~/.zshrc
+
+# Install Node.js 18 LTS
+nvm install 18
+nvm use 18
+nvm alias default 18
+```
+
+Verify installation:
+
+```bash
+node --version
+# Should output: v18.x.x or higher
+
+npm --version
+# Should output: 9.x.x or higher
+```
+
+---
+
+## Clone the Repository
+
+```bash
+# Navigate to your projects directory
+cd ~/Projects  # or wherever you keep your code
+
+# Clone the repository (replace with your fork URL if applicable)
+git clone https://github.com/simoncht/rag-transcript.git
+
+# Enter the project directory
+cd rag-transcript
+```
+
+---
+
+## Backend Setup
+
+The backend uses Docker Compose to run 6 containers: PostgreSQL, Redis, Qdrant, FastAPI app, Celery worker, and Celery beat.
+
+### 1. Create Storage Directory
+
+```bash
+# Create local storage directories
+mkdir -p storage/audio storage/transcripts
+```
+
+### 2. Set Up Environment Variables
+
+```bash
+# Copy the example environment file
+cp backend/.env.example backend/.env
+```
+
+Edit `backend/.env` if needed (the defaults work for local development). Key settings:
+- `LLM_PROVIDER`: Set to `ollama` for local LLM or `openai`/`anthropic` for cloud
+- `OPENAI_API_KEY` or `ANTHROPIC_API_KEY`: Required if using cloud LLM providers
+
+### 3. Start Docker Services
+
+```bash
+# Build and start all containers (first run takes 5-10 minutes)
+docker compose up -d
+
+# Watch the logs to monitor startup
+docker compose logs -f
+# Press Ctrl+C to exit logs (containers keep running)
+```
+
+### 4. Run Database Migrations
+
+```bash
+# Apply database migrations
+docker compose exec app alembic upgrade head
+```
+
+### 5. Verify Backend is Running
+
+```bash
+# Check container status (all 6 should be running)
+docker compose ps
+
+# Test the health endpoint
+curl http://localhost:8000/health
+# Should return: {"status":"healthy"}
+```
+
+You can also visit the API documentation at: http://localhost:8000/docs
+
+---
+
+## Frontend Setup
+
+### 1. Install Dependencies
+
+```bash
+# Navigate to frontend directory
+cd frontend
+
+# Install npm packages
+npm install
+```
+
+### 2. Set Up Environment Variables
+
+```bash
+# Create local environment file
+cat > .env.local << EOF
+NEXT_PUBLIC_API_URL=http://localhost:8000
+NEXT_PUBLIC_API_V1_PREFIX=/api/v1
+EOF
+```
+
+### 3. Start Development Server
+
+```bash
+npm run dev
+```
+
+The frontend will be available at: http://localhost:3000
+
+---
+
+## Verify Installation
+
+### Quick Health Check
+
+```bash
+# Backend API
+curl http://localhost:8000/health
+# Expected: {"status":"healthy"}
+
+# Check all Docker containers
+docker compose ps
+# All 6 containers should show "running"
+
+# Frontend (in browser)
+# Visit http://localhost:3000
+```
+
+### Test Video Ingestion
+
+1. Open http://localhost:3000 in your browser
+2. Navigate to Videos page
+3. Click "Ingest Video" and enter a YouTube URL
+4. Watch the status progress from "pending" → "downloading" → "transcribing" → "completed"
+
+---
+
+## Optional: Local LLM with Ollama
+
+For RAG chat functionality, you need an LLM. Ollama provides free local LLM inference.
+
+### 1. Install Ollama
+
+```bash
+# Download and install from https://ollama.ai
+# Or use Homebrew:
+brew install ollama
+```
+
+### 2. Start Ollama
+
+```bash
+ollama serve
+```
+
+### 3. Pull a Model
+
+```bash
+# Pull a model (llama2 is a good starting point)
+ollama pull llama2
+
+# Or for better quality (requires more RAM):
+ollama pull llama3
+```
+
+### 4. Configure the Backend
+
+Edit `backend/.env`:
+
+```env
+LLM_PROVIDER=ollama
+OLLAMA_BASE_URL=http://host.docker.internal:11434
+OLLAMA_MODEL=llama2
+```
+
+Restart the app container:
+
+```bash
+docker compose restart app worker
+```
+
+---
+
+## Troubleshooting
+
+### Apple Silicon (M1/M2/M3/M4 and later) Specific Issues
+
+#### Docker Performance
+If containers are slow or unresponsive:
+1. Open Docker Desktop → Settings → Resources
+2. Increase Memory to 16GB or more
+3. Enable "Use Virtualization Framework" under General
+4. Enable "Use Rosetta for x86/amd64 emulation" if available
+
+#### Port Already in Use
+```bash
+# Find what's using a port (e.g., 8000)
+lsof -i :8000
+
+# Kill the process if needed
+kill -9 <PID>
+```
+
+#### Container Build Failures
+If `docker compose up -d` fails:
+```bash
+# Clean rebuild
+docker compose down -v
+docker system prune -af
+docker compose build --no-cache
+docker compose up -d
+```
+
+### Common Issues
+
+#### "Cannot connect to Docker daemon"
+- Ensure Docker Desktop is running (check the whale icon in menu bar)
+
+#### Database Connection Errors
+```bash
+# Check if PostgreSQL is healthy
+docker compose ps postgres
+docker compose logs postgres
+
+# Restart database
+docker compose restart postgres
+```
+
+#### Frontend Can't Connect to Backend
+- Ensure backend is running: `curl http://localhost:8000/health`
+- Check CORS settings in `backend/.env` include `http://localhost:3000`
+- Try accessing the API directly: http://localhost:8000/docs
+
+#### Whisper Transcription Fails or is Slow
+- Whisper requires significant memory; ensure Docker has 8GB+ allocated
+- For faster transcription, the `tiny` or `base` model is recommended for Apple Silicon
+- Edit `backend/.env`: `WHISPER_MODEL=tiny`
+
+#### HuggingFace Model Download Issues
+If models fail to download:
+```bash
+# Check if the cache directory exists
+ls -la hf_cache/
+
+# Restart with fresh cache
+docker compose down
+rm -rf hf_cache
+docker compose up -d
+```
+
+### Useful Commands
+
+```bash
+# View logs for specific service
+docker compose logs -f app
+docker compose logs -f worker
+
+# Restart a specific service
+docker compose restart app
+
+# Stop all services
+docker compose down
+
+# Stop and remove all data (fresh start)
+docker compose down -v
+
+# Check resource usage
+docker stats
+```
+
+---
+
+## Next Steps
+
+After setup is complete:
+
+1. **Explore the API**: Visit http://localhost:8000/docs for interactive API documentation
+2. **Ingest a video**: Add a YouTube URL through the Videos page
+3. **Start a conversation**: Create a chat with your ingested videos
+4. **Read the docs**:
+   - [README.md](./README.md) - Architecture overview
+   - [RESUME.md](./RESUME.md) - Current status and quick commands
+   - [AGENTS.md](./AGENTS.md) - Development guidelines
+
+---
+
+## Getting Help
+
+If you encounter issues not covered here:
+
+1. Check the existing documentation files in the repository
+2. Search for similar issues in the repository
+3. Ask a team member or open a discussion
+
+Happy coding! 🚀