diff --git a/ldoverrides/file_source_builder.go b/ldoverrides/file_source_builder.go
index faacad73..7f7d3c02 100644
--- a/ldoverrides/file_source_builder.go
+++ b/ldoverrides/file_source_builder.go
@@ -5,6 +5,7 @@ import (
 	"time"
 
 	"github.com/launchdarkly/go-server-sdk/v7/internal/filedata"
+	"github.com/launchdarkly/go-server-sdk/v7/ldfilewatch"
 	"github.com/launchdarkly/go-server-sdk/v7/subsystems"
 )
 
@@ -174,5 +175,6 @@ func (b *FileSourceBuilder) Build(context subsystems.ClientContext) (subsystems.
 		changeDetection:       b.changeDetection,
 		pollInterval:          pollInterval,
 		loggers:               loggers,
+		watchFiles:            ldfilewatch.WatchOptionalFiles,
 	}, nil
 }
diff --git a/ldoverrides/file_source_impl.go b/ldoverrides/file_source_impl.go
index bc75e5f7..112f090e 100644
--- a/ldoverrides/file_source_impl.go
+++ b/ldoverrides/file_source_impl.go
@@ -8,7 +8,6 @@ import (
 
 	"github.com/launchdarkly/go-sdk-common/v3/ldlog"
 	"github.com/launchdarkly/go-server-sdk/v7/internal/filedata"
-	"github.com/launchdarkly/go-server-sdk/v7/ldfilewatch"
 	"github.com/launchdarkly/go-server-sdk/v7/subsystems"
 	"github.com/launchdarkly/go-server-sdk/v7/subsystems/ldstoreimpl"
 	"github.com/launchdarkly/go-server-sdk/v7/subsystems/ldstoretypes"
@@ -20,6 +19,8 @@ type fileOverrideSource struct {
 	changeDetection       ChangeDetection
 	pollInterval          time.Duration
 	loggers               ldlog.Loggers
+	// watchFiles sets up watching mode. Tests replace it with one that fails.
+	watchFiles func(paths []string, loggers ldlog.Loggers, reload func(), closeCh <-chan struct{}) error
 
 	reloader     *filedata.Reloader
 	poller       *filedata.Poller
@@ -61,9 +62,16 @@ func (f *fileOverrideSource) Start(sink subsystems.OverrideSink) {
 	switch f.changeDetection {
 	case Watching:
 		f.closeWatchCh = make(chan struct{})
-		if err := ldfilewatch.WatchOptionalFiles(f.paths, f.loggers, f.reloader.Trigger, f.closeWatchCh); err != nil {
-			// COVERAGE: constructing a watcher only fails under unusual OS conditions
-			f.loggers.Errorf("Unable to watch override files: %s", err)
+		if err := f.watchFiles(f.paths, f.loggers, f.reloader.Trigger, f.closeWatchCh); err != nil {
+			// The watcher itself cannot be created, for example because the limit on inotify
+			// instances is reached. Without change detection a later edit would never take effect,
+			// so the source polls the files instead, no more often than polling mode allows.
+			interval := f.pollInterval
+			if interval < MinimumPollInterval {
+				interval = MinimumPollInterval
+			}
+			f.loggers.Errorf("Unable to watch override files; polling them instead every %s: %s", interval, err)
+			f.poller = filedata.NewPoller(f.paths, interval, f.reloader.Trigger)
 		}
 	case Polling:
 		f.poller = filedata.NewPoller(f.paths, f.pollInterval, f.reloader.Trigger)
diff --git a/ldoverrides/file_source_test.go b/ldoverrides/file_source_test.go
index 0b725b8b..c16fb65e 100644
--- a/ldoverrides/file_source_test.go
+++ b/ldoverrides/file_source_test.go
@@ -1,6 +1,7 @@
 package ldoverrides
 
 import (
+	"errors"
 	"github.com/launchdarkly/go-sdk-common/v3/ldlog"
 	"github.com/launchdarkly/go-sdk-common/v3/ldlogtest"
 	"os"
@@ -323,6 +324,33 @@ func TestFileSourceWatchingModeReloadsOnChange(t *testing.T) {
 	require.Len(t, flags, 0)
 }
 
+func TestFileSourceWatchingModeFallsBackToPollingWhenTheWatcherCannotBeCreated(t *testing.T) {
+	// Without change detection a later edit would never take effect. The source polls instead, at
+	// no less than the minimum poll interval, which watching mode otherwise ignores.
+	path := filepath.Join(t.TempDir(), "overrides.json")
+	writeFile(t, path, `{"flagValues": {"flag1": true}}`)
+
+	mockLog := ldlogtest.NewMockLog()
+	context := sharedtest.NewTestContext("", nil, &subsystems.LoggingConfiguration{Loggers: mockLog.Loggers})
+	source, err := FileSource().FilePaths(path).ChangeDetection(Watching).PollInterval(time.Millisecond).Build(context)
+	require.NoError(t, err)
+	source.(*fileOverrideSource).watchFiles = func([]string, ldlog.Loggers, func(), <-chan struct{}) error {
+		return errors.New("watcher unavailable")
+	}
+	sink := newCapturingSink()
+	source.Start(sink)
+	t.Cleanup(func() { _ = source.Close() })
+	sink.requireSnapshot(t)
+
+	writeFile(t, path, `{"flagValues": {"flag1": true, "flag2": false}}`)
+	newTime := time.Now().Add(2 * time.Second)
+	require.NoError(t, os.Chtimes(path, newTime, newTime))
+	flags := flagsByKey(t, sink.requireSnapshot(t))
+	require.Len(t, flags, 2)
+	mockLog.AssertMessageMatch(t, true, ldlog.Error,
+		"Unable to watch override files; polling them instead every 1s: watcher unavailable")
+}
+
 func TestFileSourcePollingModeReloadsOnChange(t *testing.T) {
 	path := filepath.Join(t.TempDir(), "overrides.json")
 	writeFile(t, path, `{"flagValues": {"flag1": true}}`)