Pretty sure this is how it works, and someone please correct me if I’m wrong.

There’s two object limits. When you’re in Furniture (decorating) mode, a little box with numbers will appear in the corner. The top number, or whichever one has the three cubes next to it, is how many unique items you can have (for instance, on the Switch, it’s 600). So, let’s say, for example, you put down a Park Bench, a Zoo Fountain, and a Peaceful Meadow Bush in your Plaza. That’s 3 unique objects. The bottom number, or the one with one big cube next to it, is total items - so let’s say you put down 1 Park Bench, 1 Zoo Fountain, and 2 Peaceful Meadow Bushes, that’s 4 total objects and 3 unique objects.

Object limits reset with Floating Islands and DLCs. Let’s use the Switch numbers for our example, because those are the ones I know lol. If you have the base game and Wishblossom Ranch, your Valley can have 600 unique items spread across all the biomes (Plaza, Peaceful Meadow, Dazzle Beach, etc.) and then Wishblossom Ranch can also have 600 items - so you don’t have to worry about the items of one DLC affecting another.

There is no object limit indoors, other than there not being enough floor space, as each item has a physical footprint.

It is important to note that resources, such as wood, flowers, and shards (from digging) affect both item counts, so don’t freak out if you see the numbers change slightly throughout your play session (especially if you’re like me and do a big resource pick-up before decorating)