Maximum place file size

Doesn’t seem like there is a file size limit—here’s my 3GB .psb paced 4x in an Illustrator file with the .ai file placed in InDesign:

Took sometime to make the proxy image, but it worked.

How many images are in your .ai file? Can you place all of the images directly into InDesign without any problems? What are your hardware specs?

If it's really the file size, save as PDF/X-4 without Illustrator editing capability. Save as AI first though. You'll have two files but the one you place in ID will be much smaller.

Illustrator actually manages file sizes quite well. The issue is that the default format (and the format required for placing in InDesign) requires including a PDF in the Illustrator file. Think of it like this: There are two formats of the same image: an Illustrator file with no embedded images and a PDF with images embedded at full resolution with minimal compression. These formats are combined into one file on your computer.

The default format for Illustrator files includes the Illustrator data (complete with layers, styles, links, effects, and hidden layers and objects) and a PDF, which must keep images embedded so it can be placed in InDesign or rasterised in Photoshop. If you have a lot of images, whether they are linked or embedded they will need to be embedded for the PDF portion of the file. You cannot control the settings for the PDF portion, except to omit them (save with PDF Compatibility disabled).

Turning off PDF Compatibility can significantly reduce file sizes. If your only use for a file is to edit it and print or export from Illustrator then turning off PDF Compatibility has several advantages. Files are much smaller (I have reduced files from hundreds of MB to 2 MB). Saving files is much faster since much less data is saved to disk. This introduces another advantage: less lost work because you save more often because saving is instantaneous.

Unfortunately if you need to use the Illustrator file outside of Illustrator you will need to save it in a compatible format, which is usually PDF. When you save with PDF Compatibility on you get no control over downsampling or compression. Images are not downsampled, compression is minimal, and images are not cropped. (Place a map of the world, crop out everything but Sardinia, then save a PDF. That PDF will contain a map of the world, almost all of it hidden.)

You can get around that by saving as PDF with Illustrator Editing Capability enabled. Effectively this is the same file but with a .PDF extension instead of .AI. But with one added benefit: you can specify the PDF export options. So if you want images downsampled or a high compression setting you can turn those on. The file will still be large, but perhaps no as large as the Illustrator file. Saving will still take longer, but perhaps not as long as the Illustrator file. you won’t lose any data because the Illustrator file is still embedded in the PDF You will have to remember to edit it in Illustrator.

Make sure you show options when placing the file. These are sticky options and if you chose something prior to this that isn't compatible with this file, you'd get that error.