diff --git a/app/models/rule/action_executor/exclude_transaction.rb b/app/models/rule/action_executor/exclude_transaction.rb
new file mode 100644
index 000000000..e56edadc5
--- /dev/null
+++ b/app/models/rule/action_executor/exclude_transaction.rb
@@ -0,0 +1,26 @@
+class Rule::ActionExecutor::ExcludeTransaction < Rule::ActionExecutor
+  def label
+    "Exclude from budgeting and reports"
+  end
+
+  def execute(transaction_scope, value: nil, ignore_attribute_locks: false, rule_run: nil)
+    scope = transaction_scope.with_entry
+
+    unless ignore_attribute_locks
+      # Filter by entry's locked_attributes, not transaction's
+      # Since excluded is on Entry, not Transaction, we need to check entries.locked_attributes
+      scope = scope.where.not(
+        Arel.sql("entries.locked_attributes ? 'excluded'")
+      )
+    end
+
+    count_modified_resources(scope) do |txn|
+      # enrich_attribute returns true if the entry was actually modified, false otherwise
+      txn.entry.enrich_attribute(
+        :excluded,
+        true,
+        source: "rule"
+      )
+    end
+  end
+end
diff --git a/app/models/rule/registry/transaction_resource.rb b/app/models/rule/registry/transaction_resource.rb
index 115a747fd..02de3d8c8 100644
--- a/app/models/rule/registry/transaction_resource.rb
+++ b/app/models/rule/registry/transaction_resource.rb
@@ -17,7 +17,8 @@ class Rule::Registry::TransactionResource < Rule::Registry
       Rule::ActionExecutor::SetTransactionCategory.new(rule),
       Rule::ActionExecutor::SetTransactionTags.new(rule),
       Rule::ActionExecutor::SetTransactionMerchant.new(rule),
-      Rule::ActionExecutor::SetTransactionName.new(rule)
+      Rule::ActionExecutor::SetTransactionName.new(rule),
+      Rule::ActionExecutor::ExcludeTransaction.new(rule)
     ]
 
     if ai_enabled?
diff --git a/test/models/rule_test.rb b/test/models/rule_test.rb
index 5cddc644a..bf5622035 100644
--- a/test/models/rule_test.rb
+++ b/test/models/rule_test.rb
@@ -55,6 +55,45 @@ class RuleTest < ActiveSupport::TestCase
     assert_equal @groceries_category, transaction_entry2.transaction.category
   end
 
+  test "exclude transaction rule" do
+    transaction_entry = create_transaction(date: Date.current, account: @account, merchant: @whole_foods_merchant)
+
+    assert_not transaction_entry.excluded, "Transaction should not be excluded initially"
+
+    rule = Rule.create!(
+      family: @family,
+      resource_type: "transaction",
+      effective_date: 1.day.ago.to_date,
+      conditions: [ Rule::Condition.new(condition_type: "transaction_merchant", operator: "=", value: @whole_foods_merchant.id) ],
+      actions: [ Rule::Action.new(action_type: "exclude_transaction") ]
+    )
+
+    rule.apply
+
+    transaction_entry.reload
+
+    assert transaction_entry.excluded, "Transaction should be excluded after rule applies"
+  end
+
+  test "exclude transaction rule respects attribute locks" do
+    transaction_entry = create_transaction(date: Date.current, account: @account, merchant: @whole_foods_merchant)
+    transaction_entry.lock_attr!(:excluded)
+
+    rule = Rule.create!(
+      family: @family,
+      resource_type: "transaction",
+      effective_date: 1.day.ago.to_date,
+      conditions: [ Rule::Condition.new(condition_type: "transaction_merchant", operator: "=", value: @whole_foods_merchant.id) ],
+      actions: [ Rule::Action.new(action_type: "exclude_transaction") ]
+    )
+
+    rule.apply
+
+    transaction_entry.reload
+
+    assert_not transaction_entry.excluded, "Transaction should not be excluded when attribute is locked"
+  end
+
   # Artificial limitation put in place to prevent users from creating overly complex rules
   # Rules should be shallow and wide
   test "no nested compound conditions" do