If I delete project in ActivityTimeline, will it affect Jira?

No, If you disable a project in ActivityTimeline it will still be available in Jira. You can make project unavailable in ActivityTimeline in ActivityTimeline Configuration→Projects→Uncheck the box ‘Is Active’:

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Can I create projects directly in ActivityTimeline?

No, all projects must be created in Jira and synced to ActivityTimeline.

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