diff --git a/README.md b/README.md
index 30d7d3575..2f7188be5 100644
--- a/README.md
+++ b/README.md
@@ -74,6 +74,9 @@ There are two primary modes of operation:
 
 In both configurations, a postgres connection string is required. Both DSN and URL formats are supported, [details are available here](https://pkg.go.dev/github.com/jackc/pgx/v4/pgxpool@v4.11.0#ParseConfig).
 
+In addition, the indexer uses a data directory that stores data needed for runtime operation and configuration.
+See the [Data Directory documentation](docs/DataDirectory.md) for how to (re-)initialize this directory in case it is lost or needs to be re-created.
+
 ### Database updater
 In this mode, the database will be populated with data fetched from an [Algorand archival node](https://developer.algorand.org/docs/run-a-node/setup/types/#archival-mode). Because every block must be fetched to bootstrap the database, the initial import for a ledger with a long history will take a while. If the daemon is terminated, it will resume processing wherever it left off.