It happened with the Windows July Cumulative Update (2024-07 Cumulative Update for Windows 11 Version 23H2 for x64-based Systems KB5040442) and the OneDrive client from the Productive Ring 24.146.0721.0003.

Problem

OneDrive ignored the Files on Demand feature to only synchronize placeholders, but all files were copied to the local hard drive. This meant that some hard disks had no more storage space available.

Workaround as an interim solution

I myself was not affected by this, but the signs and reports have developed that a workaroud may be to upgrade the OneDrive client to the next version in the production ring. OneDrive version 24.151.0728.0003

Liam Robinson has described this in a blog post and two Powershell scripts for uninstalling and reinstalling are included as a workaround.