I use iCloud Drive to share files between MacBook Pro and iPhone. Syncing change from Mac to iPhone is fine but the opposite is not. When I change something on my Mac the changes are reflected on my iPhone automatically. When I change/add a file from the iPhone, the changes are not automatically downloaded on the Mac.
When there is a new file added from the iPhone, the Mac shows the new file in Finder. However, the file content is not downloaded. It shows the solid-outline cloud item next to it. Hovering the icon shows Downloading tooltip. It never downloads though unless I click Download Now from the context menu. This behavior happens consistently across all files and folders; whether the file is created manually in Finder or through apps such as Obsidian.
In my iCloud setting, the Optimize Mac Storage option is unchecked. And I have plenty of space. All the files in question are small text files so space isn't the issue.
My Mac is running Monterey 12.6.3 and the iPhone iOS 16.3.1
Best Answer
What finally fixes the issue for me was to disable and re-enable iCloud Drive on my Mac. It seems like the Mac was stuck in a weird state, and the way to get out of that is to reset it.
After re-enabling iCloud Drive, syncing works as expected now. File changes are updated and reflected automatically.