iCloud Drive downloads limit hard drive space

I have iCloud Drive set up on my Mac and it keeps downloading files in the background. My hard-drive space becomes smaller and smaller and I run into problems with a full hard-drive.

E.g. I was recording a Zoom meeting and it suddenly stopped, because my hard-drive was full due to iCloud-Drive downloads. I now have to remove these downloads every time to free up disk space.

How can I make iCloud stop downloading files in the background?

Right click the file in iCloud Drive, the one you don't need. then, click remove download. this will free up space on your Mac and keep the file in iCloud, where you can download at any time by double clicking it.