diff --git a/crates/load-cargo/src/lib.rs b/crates/load-cargo/src/lib.rs
index 5654c04a5928..67ee9d111997 100644
--- a/crates/load-cargo/src/lib.rs
+++ b/crates/load-cargo/src/lib.rs
@@ -94,7 +94,9 @@ pub fn load_workspace(
             let contents = loader.load_sync(path);
             let path = vfs::VfsPath::from(path.to_path_buf());
             vfs.set_file_contents(path.clone(), contents);
-            vfs.file_id(&path)
+            vfs.file_id(&path).and_then(|(file_id, excluded)| {
+                (excluded == vfs::FileExcluded::No).then_some(file_id)
+            })
         },
         extra_env,
     );
diff --git a/crates/rust-analyzer/src/config.rs b/crates/rust-analyzer/src/config.rs
index 7656c07c9485..758f60dc3e43 100644
--- a/crates/rust-analyzer/src/config.rs
+++ b/crates/rust-analyzer/src/config.rs
@@ -84,10 +84,10 @@ config_data! {
         completion_snippets_custom: FxHashMap<String, SnippetDef> = Config::completion_snippets_default(),
 
 
-        /// These directories will be ignored by rust-analyzer. They are
+        /// These paths (file/directories) will be ignored by rust-analyzer. They are
         /// relative to the workspace root, and globs are not supported. You may
         /// also need to add the folders to Code's `files.watcherExclude`.
-        files_excludeDirs: Vec<Utf8PathBuf> = vec![],
+        files_exclude | files_excludeDirs: Vec<Utf8PathBuf> = vec![],
 
 
 
@@ -1787,7 +1787,7 @@ impl Config {
 
     fn discovered_projects(&self) -> Vec<ManifestOrProjectJson> {
         let exclude_dirs: Vec<_> =
-            self.files_excludeDirs().iter().map(|p| self.root_path.join(p)).collect();
+            self.files_exclude().iter().map(|p| self.root_path.join(p)).collect();
 
         let mut projects = vec![];
         for fs_proj in &self.discovered_projects_from_filesystem {
@@ -1909,10 +1909,14 @@ impl Config {
                 }
                 _ => FilesWatcher::Server,
             },
-            exclude: self.files_excludeDirs().iter().map(|it| self.root_path.join(it)).collect(),
+            exclude: self.excluded().collect(),
         }
     }
 
+    pub fn excluded(&self) -> impl Iterator<Item = AbsPathBuf> + use<'_> {
+        self.files_exclude().iter().map(|it| self.root_path.join(it))
+    }
+
     pub fn notifications(&self) -> NotificationsConfig {
         NotificationsConfig {
             cargo_toml_not_found: self.notifications_cargoTomlNotFound().to_owned(),
diff --git a/crates/rust-analyzer/src/global_state.rs b/crates/rust-analyzer/src/global_state.rs
index b52f64aaacec..70105cda006b 100644
--- a/crates/rust-analyzer/src/global_state.rs
+++ b/crates/rust-analyzer/src/global_state.rs
@@ -650,7 +650,8 @@ impl GlobalStateSnapshot {
         RwLockReadGuard::map(self.vfs.read(), |(it, _)| it)
     }
 
-    pub(crate) fn url_to_file_id(&self, url: &Url) -> anyhow::Result<FileId> {
+    /// Returns `None` if the file was excluded.
+    pub(crate) fn url_to_file_id(&self, url: &Url) -> anyhow::Result<Option<FileId>> {
         url_to_file_id(&self.vfs_read(), url)
     }
 
@@ -658,7 +659,8 @@ impl GlobalStateSnapshot {
         file_id_to_url(&self.vfs_read(), id)
     }
 
-    pub(crate) fn vfs_path_to_file_id(&self, vfs_path: &VfsPath) -> anyhow::Result<FileId> {
+    /// Returns `None` if the file was excluded.
+    pub(crate) fn vfs_path_to_file_id(&self, vfs_path: &VfsPath) -> anyhow::Result<Option<FileId>> {
         vfs_path_to_file_id(&self.vfs_read(), vfs_path)
     }
 
@@ -750,14 +752,21 @@ pub(crate) fn file_id_to_url(vfs: &vfs::Vfs, id: FileId) -> Url {
     url_from_abs_path(path)
 }
 
-pub(crate) fn url_to_file_id(vfs: &vfs::Vfs, url: &Url) -> anyhow::Result<FileId> {
+/// Returns `None` if the file was excluded.
+pub(crate) fn url_to_file_id(vfs: &vfs::Vfs, url: &Url) -> anyhow::Result<Option<FileId>> {
     let path = from_proto::vfs_path(url)?;
-    let res = vfs.file_id(&path).ok_or_else(|| anyhow::format_err!("file not found: {path}"))?;
-    Ok(res)
+    vfs_path_to_file_id(vfs, &path)
 }
 
-pub(crate) fn vfs_path_to_file_id(vfs: &vfs::Vfs, vfs_path: &VfsPath) -> anyhow::Result<FileId> {
-    let res =
+/// Returns `None` if the file was excluded.
+pub(crate) fn vfs_path_to_file_id(
+    vfs: &vfs::Vfs,
+    vfs_path: &VfsPath,
+) -> anyhow::Result<Option<FileId>> {
+    let (file_id, excluded) =
         vfs.file_id(vfs_path).ok_or_else(|| anyhow::format_err!("file not found: {vfs_path}"))?;
-    Ok(res)
+    match excluded {
+        vfs::FileExcluded::Yes => Ok(None),
+        vfs::FileExcluded::No => Ok(Some(file_id)),
+    }
 }
diff --git a/crates/rust-analyzer/src/handlers/notification.rs b/crates/rust-analyzer/src/handlers/notification.rs
index 48856d19e155..55344a4d6ac6 100644
--- a/crates/rust-analyzer/src/handlers/notification.rs
+++ b/crates/rust-analyzer/src/handlers/notification.rs
@@ -22,6 +22,7 @@ use crate::{
     mem_docs::DocumentData,
     reload,
     target_spec::TargetSpec,
+    try_default,
 };
 
 pub(crate) fn handle_cancel(state: &mut GlobalState, params: CancelParams) -> anyhow::Result<()> {
@@ -74,6 +75,14 @@ pub(crate) fn handle_did_open_text_document(
             tracing::error!("duplicate DidOpenTextDocument: {}", path);
         }
 
+        if let Some(abs_path) = path.as_path() {
+            if state.config.excluded().any(|excluded| abs_path.starts_with(&excluded)) {
+                tracing::trace!("opened excluded file {abs_path}");
+                state.vfs.write().0.insert_excluded_file(path);
+                return Ok(());
+            }
+        }
+
         let contents = params.text_document.text.into_bytes();
         state.vfs.write().0.set_file_contents(path, Some(contents));
         if state.config.discover_workspace_config().is_some() {
@@ -127,7 +136,8 @@ pub(crate) fn handle_did_close_text_document(
             tracing::error!("orphan DidCloseTextDocument: {}", path);
         }
 
-        if let Some(file_id) = state.vfs.read().0.file_id(&path) {
+        // Clear diagnostics also for excluded files, just in case.
+        if let Some((file_id, _)) = state.vfs.read().0.file_id(&path) {
             state.diagnostics.clear_native_for(file_id);
         }
 
@@ -146,7 +156,7 @@ pub(crate) fn handle_did_save_text_document(
 ) -> anyhow::Result<()> {
     if let Ok(vfs_path) = from_proto::vfs_path(&params.text_document.uri) {
         let snap = state.snapshot();
-        let file_id = snap.vfs_path_to_file_id(&vfs_path)?;
+        let file_id = try_default!(snap.vfs_path_to_file_id(&vfs_path)?);
         let sr = snap.analysis.source_root_id(file_id)?;
 
         if state.config.script_rebuild_on_save(Some(sr)) && state.build_deps_changed {
@@ -290,7 +300,7 @@ fn run_flycheck(state: &mut GlobalState, vfs_path: VfsPath) -> bool {
     let _p = tracing::info_span!("run_flycheck").entered();
 
     let file_id = state.vfs.read().0.file_id(&vfs_path);
-    if let Some(file_id) = file_id {
+    if let Some((file_id, vfs::FileExcluded::No)) = file_id {
         let world = state.snapshot();
         let invocation_strategy_once = state.config.flycheck(None).invocation_strategy_once();
         let may_flycheck_workspace = state.config.flycheck_workspace(None);
diff --git a/crates/rust-analyzer/src/handlers/request.rs b/crates/rust-analyzer/src/handlers/request.rs
index ed028f1d37b6..a3cb8c9be61f 100644
--- a/crates/rust-analyzer/src/handlers/request.rs
+++ b/crates/rust-analyzer/src/handlers/request.rs
@@ -53,6 +53,7 @@ use crate::{
     },
     target_spec::{CargoTargetSpec, TargetSpec},
     test_runner::{CargoTestHandle, TestTarget},
+    try_default,
 };
 
 pub(crate) fn handle_workspace_reload(state: &mut GlobalState, _: ()) -> anyhow::Result<()> {
@@ -83,7 +84,8 @@ pub(crate) fn handle_analyzer_status(
     let mut file_id = None;
     if let Some(tdi) = params.text_document {
         match from_proto::file_id(&snap, &tdi.uri) {
-            Ok(it) => file_id = Some(it),
+            Ok(Some(it)) => file_id = Some(it),
+            Ok(None) => {}
             Err(_) => format_to!(buf, "file {} not found in vfs", tdi.uri),
         }
     }
@@ -141,7 +143,7 @@ pub(crate) fn handle_view_syntax_tree(
     params: lsp_ext::ViewSyntaxTreeParams,
 ) -> anyhow::Result<String> {
     let _p = tracing::info_span!("handle_view_syntax_tree").entered();
-    let id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let res = snap.analysis.view_syntax_tree(id)?;
     Ok(res)
 }
@@ -151,7 +153,7 @@ pub(crate) fn handle_view_hir(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<String> {
     let _p = tracing::info_span!("handle_view_hir").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
     let res = snap.analysis.view_hir(position)?;
     Ok(res)
 }
@@ -161,7 +163,7 @@ pub(crate) fn handle_view_mir(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<String> {
     let _p = tracing::info_span!("handle_view_mir").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
     let res = snap.analysis.view_mir(position)?;
     Ok(res)
 }
@@ -171,7 +173,7 @@ pub(crate) fn handle_interpret_function(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<String> {
     let _p = tracing::info_span!("handle_interpret_function").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
     let res = snap.analysis.interpret_function(position)?;
     Ok(res)
 }
@@ -180,7 +182,7 @@ pub(crate) fn handle_view_file_text(
     snap: GlobalStateSnapshot,
     params: lsp_types::TextDocumentIdentifier,
 ) -> anyhow::Result<String> {
-    let file_id = from_proto::file_id(&snap, &params.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.uri)?);
     Ok(snap.analysis.file_text(file_id)?.to_string())
 }
 
@@ -189,7 +191,7 @@ pub(crate) fn handle_view_item_tree(
     params: lsp_ext::ViewItemTreeParams,
 ) -> anyhow::Result<String> {
     let _p = tracing::info_span!("handle_view_item_tree").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let res = snap.analysis.view_item_tree(file_id)?;
     Ok(res)
 }
@@ -315,7 +317,7 @@ pub(crate) fn handle_expand_macro(
     params: lsp_ext::ExpandMacroParams,
 ) -> anyhow::Result<Option<lsp_ext::ExpandedMacro>> {
     let _p = tracing::info_span!("handle_expand_macro").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
     let offset = from_proto::offset(&line_index, params.position)?;
 
@@ -328,7 +330,7 @@ pub(crate) fn handle_selection_range(
     params: lsp_types::SelectionRangeParams,
 ) -> anyhow::Result<Option<Vec<lsp_types::SelectionRange>>> {
     let _p = tracing::info_span!("handle_selection_range").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
     let res: anyhow::Result<Vec<lsp_types::SelectionRange>> = params
         .positions
@@ -371,7 +373,7 @@ pub(crate) fn handle_matching_brace(
     params: lsp_ext::MatchingBraceParams,
 ) -> anyhow::Result<Vec<Position>> {
     let _p = tracing::info_span!("handle_matching_brace").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
     params
         .positions
@@ -395,7 +397,7 @@ pub(crate) fn handle_join_lines(
 ) -> anyhow::Result<Vec<lsp_types::TextEdit>> {
     let _p = tracing::info_span!("handle_join_lines").entered();
 
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let config = snap.config.join_lines();
     let line_index = snap.file_line_index(file_id)?;
 
@@ -419,7 +421,7 @@ pub(crate) fn handle_on_enter(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<Option<Vec<lsp_ext::SnippetTextEdit>>> {
     let _p = tracing::info_span!("handle_on_enter").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
     let edit = match snap.analysis.on_enter(position)? {
         None => return Ok(None),
         Some(it) => it,
@@ -439,7 +441,8 @@ pub(crate) fn handle_on_type_formatting(
         return Ok(None);
     }
 
-    let mut position = from_proto::file_position(&snap, params.text_document_position)?;
+    let mut position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position)?);
     let line_index = snap.file_line_index(position.file_id)?;
 
     // in `ide`, the `on_type` invariant is that
@@ -465,32 +468,33 @@ pub(crate) fn handle_on_type_formatting(
     Ok(Some(change))
 }
 
+pub(crate) fn empty_diagnostic_report() -> lsp_types::DocumentDiagnosticReportResult {
+    lsp_types::DocumentDiagnosticReportResult::Report(lsp_types::DocumentDiagnosticReport::Full(
+        lsp_types::RelatedFullDocumentDiagnosticReport {
+            related_documents: None,
+            full_document_diagnostic_report: lsp_types::FullDocumentDiagnosticReport {
+                result_id: Some("rust-analyzer".to_owned()),
+                items: vec![],
+            },
+        },
+    ))
+}
+
 pub(crate) fn handle_document_diagnostics(
     snap: GlobalStateSnapshot,
     params: lsp_types::DocumentDiagnosticParams,
 ) -> anyhow::Result<lsp_types::DocumentDiagnosticReportResult> {
-    let empty = || {
-        lsp_types::DocumentDiagnosticReportResult::Report(
-            lsp_types::DocumentDiagnosticReport::Full(
-                lsp_types::RelatedFullDocumentDiagnosticReport {
-                    related_documents: None,
-                    full_document_diagnostic_report: lsp_types::FullDocumentDiagnosticReport {
-                        result_id: Some("rust-analyzer".to_owned()),
-                        items: vec![],
-                    },
-                },
-            ),
-        )
+    let file_id = match from_proto::file_id(&snap, &params.text_document.uri)? {
+        Some(it) => it,
+        None => return Ok(empty_diagnostic_report()),
     };
-
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
     let source_root = snap.analysis.source_root_id(file_id)?;
     if !snap.analysis.is_local_source_root(source_root)? {
-        return Ok(empty());
+        return Ok(empty_diagnostic_report());
     }
     let config = snap.config.diagnostics(Some(source_root));
     if !config.enabled {
-        return Ok(empty());
+        return Ok(empty_diagnostic_report());
     }
     let line_index = snap.file_line_index(file_id)?;
     let supports_related = snap.config.text_document_diagnostic_related_document_support();
@@ -546,7 +550,7 @@ pub(crate) fn handle_document_symbol(
     params: lsp_types::DocumentSymbolParams,
 ) -> anyhow::Result<Option<lsp_types::DocumentSymbolResponse>> {
     let _p = tracing::info_span!("handle_document_symbol").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
 
     let mut parents: Vec<(lsp_types::DocumentSymbol, Option<usize>)> = Vec::new();
@@ -760,7 +764,7 @@ pub(crate) fn handle_will_rename_files(
             }
         })
         .filter_map(|(file_id, new_name)| {
-            snap.analysis.will_rename_file(file_id, &new_name).ok()?
+            snap.analysis.will_rename_file(file_id?, &new_name).ok()?
         })
         .collect();
 
@@ -782,7 +786,8 @@ pub(crate) fn handle_goto_definition(
     params: lsp_types::GotoDefinitionParams,
 ) -> anyhow::Result<Option<lsp_types::GotoDefinitionResponse>> {
     let _p = tracing::info_span!("handle_goto_definition").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
     let nav_info = match snap.analysis.goto_definition(position)? {
         None => return Ok(None),
         Some(it) => it,
@@ -797,7 +802,10 @@ pub(crate) fn handle_goto_declaration(
     params: lsp_types::request::GotoDeclarationParams,
 ) -> anyhow::Result<Option<lsp_types::request::GotoDeclarationResponse>> {
     let _p = tracing::info_span!("handle_goto_declaration").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params.clone())?;
+    let position = try_default!(from_proto::file_position(
+        &snap,
+        params.text_document_position_params.clone()
+    )?);
     let nav_info = match snap.analysis.goto_declaration(position)? {
         None => return handle_goto_definition(snap, params),
         Some(it) => it,
@@ -812,7 +820,8 @@ pub(crate) fn handle_goto_implementation(
     params: lsp_types::request::GotoImplementationParams,
 ) -> anyhow::Result<Option<lsp_types::request::GotoImplementationResponse>> {
     let _p = tracing::info_span!("handle_goto_implementation").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
     let nav_info = match snap.analysis.goto_implementation(position)? {
         None => return Ok(None),
         Some(it) => it,
@@ -827,7 +836,8 @@ pub(crate) fn handle_goto_type_definition(
     params: lsp_types::request::GotoTypeDefinitionParams,
 ) -> anyhow::Result<Option<lsp_types::request::GotoTypeDefinitionResponse>> {
     let _p = tracing::info_span!("handle_goto_type_definition").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
     let nav_info = match snap.analysis.goto_type_definition(position)? {
         None => return Ok(None),
         Some(it) => it,
@@ -880,7 +890,7 @@ pub(crate) fn handle_parent_module(
         }
 
         // check if invoked at the crate root
-        let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+        let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
         let crate_id = match snap.analysis.crates_for(file_id)?.first() {
             Some(&crate_id) => crate_id,
             None => return Ok(None),
@@ -904,7 +914,7 @@ pub(crate) fn handle_parent_module(
     }
 
     // locate parent module by semantics
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
     let navs = snap.analysis.parent_module(position)?;
     let res = to_proto::goto_definition_response(&snap, None, navs)?;
     Ok(Some(res))
@@ -915,7 +925,7 @@ pub(crate) fn handle_runnables(
     params: lsp_ext::RunnablesParams,
 ) -> anyhow::Result<Vec<lsp_ext::Runnable>> {
     let _p = tracing::info_span!("handle_runnables").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let source_root = snap.analysis.source_root_id(file_id).ok();
     let line_index = snap.file_line_index(file_id)?;
     let offset = params.position.and_then(|it| from_proto::offset(&line_index, it).ok());
@@ -1035,7 +1045,7 @@ pub(crate) fn handle_related_tests(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<Vec<lsp_ext::TestInfo>> {
     let _p = tracing::info_span!("handle_related_tests").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
 
     let tests = snap.analysis.related_tests(position, None)?;
     let mut res = Vec::new();
@@ -1053,7 +1063,8 @@ pub(crate) fn handle_completion(
     lsp_types::CompletionParams { text_document_position, context,.. }: lsp_types::CompletionParams,
 ) -> anyhow::Result<Option<lsp_types::CompletionResponse>> {
     let _p = tracing::info_span!("handle_completion").entered();
-    let mut position = from_proto::file_position(&snap, text_document_position.clone())?;
+    let mut position =
+        try_default!(from_proto::file_position(&snap, text_document_position.clone())?);
     let line_index = snap.file_line_index(position.file_id)?;
     let completion_trigger_character =
         context.and_then(|ctx| ctx.trigger_character).and_then(|s| s.chars().next());
@@ -1102,7 +1113,8 @@ pub(crate) fn handle_completion_resolve(
 
     let resolve_data: lsp_ext::CompletionResolveData = serde_json::from_value(data)?;
 
-    let file_id = from_proto::file_id(&snap, &resolve_data.position.text_document.uri)?;
+    let file_id = from_proto::file_id(&snap, &resolve_data.position.text_document.uri)?
+        .expect("we never provide completions for excluded files");
     let line_index = snap.file_line_index(file_id)?;
     // FIXME: We should fix up the position when retrying the cancelled request instead
     let Ok(offset) = from_proto::offset(&line_index, resolve_data.position.position) else {
@@ -1185,7 +1197,7 @@ pub(crate) fn handle_folding_range(
     params: FoldingRangeParams,
 ) -> anyhow::Result<Option<Vec<FoldingRange>>> {
     let _p = tracing::info_span!("handle_folding_range").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let folds = snap.analysis.folding_ranges(file_id)?;
     let text = snap.analysis.file_text(file_id)?;
     let line_index = snap.file_line_index(file_id)?;
@@ -1202,7 +1214,8 @@ pub(crate) fn handle_signature_help(
     params: lsp_types::SignatureHelpParams,
 ) -> anyhow::Result<Option<lsp_types::SignatureHelp>> {
     let _p = tracing::info_span!("handle_signature_help").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
     let help = match snap.analysis.signature_help(position)? {
         Some(it) => it,
         None => return Ok(None),
@@ -1221,7 +1234,7 @@ pub(crate) fn handle_hover(
         PositionOrRange::Position(position) => Range::new(position, position),
         PositionOrRange::Range(range) => range,
     };
-    let file_range = from_proto::file_range(&snap, &params.text_document, range)?;
+    let file_range = try_default!(from_proto::file_range(&snap, &params.text_document, range)?);
 
     let hover = snap.config.hover();
     let info = match snap.analysis.hover(&hover, file_range)? {
@@ -1255,7 +1268,7 @@ pub(crate) fn handle_prepare_rename(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<Option<PrepareRenameResponse>> {
     let _p = tracing::info_span!("handle_prepare_rename").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
 
     let change = snap.analysis.prepare_rename(position)?.map_err(to_proto::rename_error)?;
 
@@ -1269,7 +1282,7 @@ pub(crate) fn handle_rename(
     params: RenameParams,
 ) -> anyhow::Result<Option<WorkspaceEdit>> {
     let _p = tracing::info_span!("handle_rename").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position)?;
+    let position = try_default!(from_proto::file_position(&snap, params.text_document_position)?);
 
     let mut change =
         snap.analysis.rename(position, &params.new_name)?.map_err(to_proto::rename_error)?;
@@ -1304,7 +1317,7 @@ pub(crate) fn handle_references(
     params: lsp_types::ReferenceParams,
 ) -> anyhow::Result<Option<Vec<Location>>> {
     let _p = tracing::info_span!("handle_references").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position)?;
+    let position = try_default!(from_proto::file_position(&snap, params.text_document_position)?);
 
     let exclude_imports = snap.config.find_all_refs_exclude_imports();
     let exclude_tests = snap.config.find_all_refs_exclude_tests();
@@ -1375,9 +1388,9 @@ pub(crate) fn handle_code_action(
         return Ok(None);
     }
 
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
-    let frange = from_proto::file_range(&snap, &params.text_document, params.range)?;
+    let frange = try_default!(from_proto::file_range(&snap, &params.text_document, params.range)?);
     let source_root = snap.analysis.source_root_id(file_id)?;
 
     let mut assists_config = snap.config.assist(Some(source_root));
@@ -1455,7 +1468,8 @@ pub(crate) fn handle_code_action_resolve(
         return Err(invalid_params_error("code action without data".to_owned()).into());
     };
 
-    let file_id = from_proto::file_id(&snap, &params.code_action_params.text_document.uri)?;
+    let file_id = from_proto::file_id(&snap, &params.code_action_params.text_document.uri)?
+        .expect("we never provide code actions for excluded files");
     if snap.file_version(file_id) != params.version {
         return Err(invalid_params_error("stale code action".to_owned()).into());
     }
@@ -1551,7 +1565,7 @@ pub(crate) fn handle_code_lens(
         return Ok(Some(Vec::default()));
     }
 
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let target_spec = TargetSpec::for_file(&snap, file_id)?;
 
     let annotations = snap.analysis.annotations(
@@ -1613,7 +1627,8 @@ pub(crate) fn handle_document_highlight(
     params: lsp_types::DocumentHighlightParams,
 ) -> anyhow::Result<Option<Vec<lsp_types::DocumentHighlight>>> {
     let _p = tracing::info_span!("handle_document_highlight").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
     let line_index = snap.file_line_index(position.file_id)?;
     let source_root = snap.analysis.source_root_id(position.file_id)?;
 
@@ -1639,12 +1654,12 @@ pub(crate) fn handle_ssr(
     params: lsp_ext::SsrParams,
 ) -> anyhow::Result<lsp_types::WorkspaceEdit> {
     let _p = tracing::info_span!("handle_ssr").entered();
-    let selections = params
+    let selections = try_default!(params
         .selections
         .iter()
         .map(|range| from_proto::file_range(&snap, &params.position.text_document, *range))
-        .collect::<Result<Vec<_>, _>>()?;
-    let position = from_proto::file_position(&snap, params.position)?;
+        .collect::<Result<Option<Vec<_>>, _>>()?);
+    let position = try_default!(from_proto::file_position(&snap, params.position)?);
     let source_change = snap.analysis.structural_search_replace(
         &params.query,
         params.parse_only,
@@ -1660,11 +1675,11 @@ pub(crate) fn handle_inlay_hints(
 ) -> anyhow::Result<Option<Vec<InlayHint>>> {
     let _p = tracing::info_span!("handle_inlay_hints").entered();
     let document_uri = &params.text_document.uri;
-    let FileRange { file_id, range } = from_proto::file_range(
+    let FileRange { file_id, range } = try_default!(from_proto::file_range(
         &snap,
         &TextDocumentIdentifier::new(document_uri.to_owned()),
         params.range,
-    )?;
+    )?);
     let line_index = snap.file_line_index(file_id)?;
     let range = TextRange::new(
         range.start().min(line_index.index.len()),
@@ -1744,7 +1759,8 @@ pub(crate) fn handle_call_hierarchy_prepare(
     params: CallHierarchyPrepareParams,
 ) -> anyhow::Result<Option<Vec<CallHierarchyItem>>> {
     let _p = tracing::info_span!("handle_call_hierarchy_prepare").entered();
-    let position = from_proto::file_position(&snap, params.text_document_position_params)?;
+    let position =
+        try_default!(from_proto::file_position(&snap, params.text_document_position_params)?);
 
     let nav_info = match snap.analysis.call_hierarchy(position)? {
         None => return Ok(None),
@@ -1769,7 +1785,7 @@ pub(crate) fn handle_call_hierarchy_incoming(
     let item = params.item;
 
     let doc = TextDocumentIdentifier::new(item.uri);
-    let frange = from_proto::file_range(&snap, &doc, item.selection_range)?;
+    let frange = try_default!(from_proto::file_range(&snap, &doc, item.selection_range)?);
     let fpos = FilePosition { file_id: frange.file_id, offset: frange.range.start() };
 
     let config = snap.config.call_hierarchy();
@@ -1807,7 +1823,7 @@ pub(crate) fn handle_call_hierarchy_outgoing(
     let item = params.item;
 
     let doc = TextDocumentIdentifier::new(item.uri);
-    let frange = from_proto::file_range(&snap, &doc, item.selection_range)?;
+    let frange = try_default!(from_proto::file_range(&snap, &doc, item.selection_range)?);
     let fpos = FilePosition { file_id: frange.file_id, offset: frange.range.start() };
     let line_index = snap.file_line_index(fpos.file_id)?;
 
@@ -1842,7 +1858,7 @@ pub(crate) fn handle_semantic_tokens_full(
 ) -> anyhow::Result<Option<SemanticTokensResult>> {
     let _p = tracing::info_span!("handle_semantic_tokens_full").entered();
 
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let text = snap.analysis.file_text(file_id)?;
     let line_index = snap.file_line_index(file_id)?;
 
@@ -1872,7 +1888,7 @@ pub(crate) fn handle_semantic_tokens_full_delta(
 ) -> anyhow::Result<Option<SemanticTokensFullDeltaResult>> {
     let _p = tracing::info_span!("handle_semantic_tokens_full_delta").entered();
 
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let text = snap.analysis.file_text(file_id)?;
     let line_index = snap.file_line_index(file_id)?;
 
@@ -1915,7 +1931,7 @@ pub(crate) fn handle_semantic_tokens_range(
 ) -> anyhow::Result<Option<SemanticTokensRangeResult>> {
     let _p = tracing::info_span!("handle_semantic_tokens_range").entered();
 
-    let frange = from_proto::file_range(&snap, &params.text_document, params.range)?;
+    let frange = try_default!(from_proto::file_range(&snap, &params.text_document, params.range)?);
     let text = snap.analysis.file_text(frange.file_id)?;
     let line_index = snap.file_line_index(frange.file_id)?;
 
@@ -1940,7 +1956,7 @@ pub(crate) fn handle_open_docs(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<ExternalDocsResponse> {
     let _p = tracing::info_span!("handle_open_docs").entered();
-    let position = from_proto::file_position(&snap, params)?;
+    let position = try_default!(from_proto::file_position(&snap, params)?);
 
     let ws_and_sysroot = snap.workspaces.iter().find_map(|ws| match &ws.kind {
         ProjectWorkspaceKind::Cargo { cargo, .. }
@@ -1982,7 +1998,7 @@ pub(crate) fn handle_open_cargo_toml(
     params: lsp_ext::OpenCargoTomlParams,
 ) -> anyhow::Result<Option<lsp_types::GotoDefinitionResponse>> {
     let _p = tracing::info_span!("handle_open_cargo_toml").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
 
     let cargo_spec = match TargetSpec::for_file(&snap, file_id)? {
         Some(TargetSpec::Cargo(it)) => it,
@@ -2000,8 +2016,8 @@ pub(crate) fn handle_move_item(
     params: lsp_ext::MoveItemParams,
 ) -> anyhow::Result<Vec<lsp_ext::SnippetTextEdit>> {
     let _p = tracing::info_span!("handle_move_item").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
-    let range = from_proto::file_range(&snap, &params.text_document, params.range)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
+    let range = try_default!(from_proto::file_range(&snap, &params.text_document, params.range)?);
 
     let direction = match params.direction {
         lsp_ext::MoveItemDirection::Up => ide::Direction::Up,
@@ -2022,7 +2038,7 @@ pub(crate) fn handle_view_recursive_memory_layout(
     params: lsp_types::TextDocumentPositionParams,
 ) -> anyhow::Result<Option<lsp_ext::RecursiveMemoryLayout>> {
     let _p = tracing::info_span!("handle_view_recursive_memory_layout").entered();
-    let file_id = from_proto::file_id(&snap, &params.text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(&snap, &params.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
     let offset = from_proto::offset(&line_index, params.position)?;
 
@@ -2210,7 +2226,7 @@ fn run_rustfmt(
     text_document: TextDocumentIdentifier,
     range: Option<lsp_types::Range>,
 ) -> anyhow::Result<Option<Vec<lsp_types::TextEdit>>> {
-    let file_id = from_proto::file_id(snap, &text_document.uri)?;
+    let file_id = try_default!(from_proto::file_id(snap, &text_document.uri)?);
     let file = snap.analysis.file_text(file_id)?;
 
     // Determine the edition of the crate the file belongs to (if there's multiple, we pick the
@@ -2275,7 +2291,7 @@ fn run_rustfmt(
                     .into());
                 }
 
-                let frange = from_proto::file_range(snap, &text_document, range)?;
+                let frange = try_default!(from_proto::file_range(snap, &text_document, range)?);
                 let start_line = line_index.index.line_col(frange.range.start()).line;
                 let end_line = line_index.index.line_col(frange.range.end()).line;
 
@@ -2416,15 +2432,15 @@ pub(crate) fn internal_testing_fetch_config(
     state: GlobalStateSnapshot,
     params: InternalTestingFetchConfigParams,
 ) -> anyhow::Result<Option<InternalTestingFetchConfigResponse>> {
-    let source_root = params
-        .text_document
-        .map(|it| {
+    let source_root = match params.text_document {
+        Some(it) => Some(
             state
                 .analysis
-                .source_root_id(from_proto::file_id(&state, &it.uri)?)
-                .map_err(anyhow::Error::from)
-        })
-        .transpose()?;
+                .source_root_id(try_default!(from_proto::file_id(&state, &it.uri)?))
+                .map_err(anyhow::Error::from)?,
+        ),
+        None => None,
+    };
     Ok(Some(match params.config {
         InternalTestingFetchConfigOption::AssistEmitMustUse => {
             InternalTestingFetchConfigResponse::AssistEmitMustUse(
diff --git a/crates/rust-analyzer/src/integrated_benchmarks.rs b/crates/rust-analyzer/src/integrated_benchmarks.rs
index 5cdc51a1c199..c6aa8ba17077 100644
--- a/crates/rust-analyzer/src/integrated_benchmarks.rs
+++ b/crates/rust-analyzer/src/integrated_benchmarks.rs
@@ -25,6 +25,14 @@ use vfs::{AbsPathBuf, VfsPath};
 
 use load_cargo::{load_workspace_at, LoadCargoConfig, ProcMacroServerChoice};
 
+#[track_caller]
+fn file_id(vfs: &vfs::Vfs, path: &VfsPath) -> vfs::FileId {
+    match vfs.file_id(path) {
+        Some((file_id, vfs::FileExcluded::No)) => file_id,
+        None | Some((_, vfs::FileExcluded::Yes)) => panic!("can't find virtual file for {path}"),
+    }
+}
+
 #[test]
 fn integrated_highlighting_benchmark() {
     if std::env::var("RUN_SLOW_BENCHES").is_err() {
@@ -62,7 +70,7 @@ fn integrated_highlighting_benchmark() {
     let file_id = {
         let file = workspace_to_load.join(file);
         let path = VfsPath::from(AbsPathBuf::assert(file));
-        vfs.file_id(&path).unwrap_or_else(|| panic!("can't find virtual file for {path}"))
+        file_id(&vfs, &path)
     };
 
     {
@@ -130,7 +138,7 @@ fn integrated_completion_benchmark() {
     let file_id = {
         let file = workspace_to_load.join(file);
         let path = VfsPath::from(AbsPathBuf::assert(file));
-        vfs.file_id(&path).unwrap_or_else(|| panic!("can't find virtual file for {path}"))
+        file_id(&vfs, &path)
     };
 
     // kick off parsing and index population
@@ -324,7 +332,7 @@ fn integrated_diagnostics_benchmark() {
     let file_id = {
         let file = workspace_to_load.join(file);
         let path = VfsPath::from(AbsPathBuf::assert(file));
-        vfs.file_id(&path).unwrap_or_else(|| panic!("can't find virtual file for {path}"))
+        file_id(&vfs, &path)
     };
 
     let diagnostics_config = DiagnosticsConfig {
diff --git a/crates/rust-analyzer/src/lib.rs b/crates/rust-analyzer/src/lib.rs
index 1221f7c7012e..27d6225cdb7e 100644
--- a/crates/rust-analyzer/src/lib.rs
+++ b/crates/rust-analyzer/src/lib.rs
@@ -173,3 +173,14 @@ fn completion_item_hash(item: &CompletionItem, is_ref_completion: bool) -> [u8;
 
     hasher.finalize()
 }
+
+#[doc(hidden)]
+macro_rules! try_default_ {
+    ($it:expr $(,)?) => {
+        match $it {
+            Some(it) => it,
+            None => return Ok(Default::default()),
+        }
+    };
+}
+pub(crate) use try_default_ as try_default;
diff --git a/crates/rust-analyzer/src/lsp/from_proto.rs b/crates/rust-analyzer/src/lsp/from_proto.rs
index 47e9961cf13f..6375a1a054b7 100644
--- a/crates/rust-analyzer/src/lsp/from_proto.rs
+++ b/crates/rust-analyzer/src/lsp/from_proto.rs
@@ -9,7 +9,7 @@ use vfs::AbsPathBuf;
 use crate::{
     global_state::GlobalStateSnapshot,
     line_index::{LineIndex, PositionEncoding},
-    lsp_ext,
+    lsp_ext, try_default,
 };
 
 pub(crate) fn abs_path(url: &lsp_types::Url) -> anyhow::Result<AbsPathBuf> {
@@ -61,37 +61,44 @@ pub(crate) fn text_range(
     }
 }
 
-pub(crate) fn file_id(snap: &GlobalStateSnapshot, url: &lsp_types::Url) -> anyhow::Result<FileId> {
+/// Returns `None` if the file was excluded.
+pub(crate) fn file_id(
+    snap: &GlobalStateSnapshot,
+    url: &lsp_types::Url,
+) -> anyhow::Result<Option<FileId>> {
     snap.url_to_file_id(url)
 }
 
+/// Returns `None` if the file was excluded.
 pub(crate) fn file_position(
     snap: &GlobalStateSnapshot,
     tdpp: lsp_types::TextDocumentPositionParams,
-) -> anyhow::Result<FilePosition> {
-    let file_id = file_id(snap, &tdpp.text_document.uri)?;
+) -> anyhow::Result<Option<FilePosition>> {
+    let file_id = try_default!(file_id(snap, &tdpp.text_document.uri)?);
     let line_index = snap.file_line_index(file_id)?;
     let offset = offset(&line_index, tdpp.position)?;
-    Ok(FilePosition { file_id, offset })
+    Ok(Some(FilePosition { file_id, offset }))
 }
 
+/// Returns `None` if the file was excluded.
 pub(crate) fn file_range(
     snap: &GlobalStateSnapshot,
     text_document_identifier: &lsp_types::TextDocumentIdentifier,
     range: lsp_types::Range,
-) -> anyhow::Result<FileRange> {
+) -> anyhow::Result<Option<FileRange>> {
     file_range_uri(snap, &text_document_identifier.uri, range)
 }
 
+/// Returns `None` if the file was excluded.
 pub(crate) fn file_range_uri(
     snap: &GlobalStateSnapshot,
     document: &lsp_types::Url,
     range: lsp_types::Range,
-) -> anyhow::Result<FileRange> {
-    let file_id = file_id(snap, document)?;
+) -> anyhow::Result<Option<FileRange>> {
+    let file_id = try_default!(file_id(snap, document)?);
     let line_index = snap.file_line_index(file_id)?;
     let range = text_range(&line_index, range)?;
-    Ok(FileRange { file_id, range })
+    Ok(Some(FileRange { file_id, range }))
 }
 
 pub(crate) fn assist_kind(kind: lsp_types::CodeActionKind) -> Option<AssistKind> {
@@ -108,6 +115,7 @@ pub(crate) fn assist_kind(kind: lsp_types::CodeActionKind) -> Option<AssistKind>
     Some(assist_kind)
 }
 
+/// Returns `None` if the file was excluded.
 pub(crate) fn annotation(
     snap: &GlobalStateSnapshot,
     range: lsp_types::Range,
@@ -121,7 +129,7 @@ pub(crate) fn annotation(
                 return Ok(None);
             }
             let pos @ FilePosition { file_id, .. } =
-                file_position(snap, params.text_document_position_params)?;
+                try_default!(file_position(snap, params.text_document_position_params)?);
             let line_index = snap.file_line_index(file_id)?;
 
             Ok(Annotation {
@@ -133,7 +141,7 @@ pub(crate) fn annotation(
             if snap.url_file_version(&params.text_document.uri) != Some(data.version) {
                 return Ok(None);
             }
-            let pos @ FilePosition { file_id, .. } = file_position(snap, params)?;
+            let pos @ FilePosition { file_id, .. } = try_default!(file_position(snap, params)?);
             let line_index = snap.file_line_index(file_id)?;
 
             Ok(Annotation {
diff --git a/crates/rust-analyzer/src/main_loop.rs b/crates/rust-analyzer/src/main_loop.rs
index ebc65373b522..f5d9469f2622 100644
--- a/crates/rust-analyzer/src/main_loop.rs
+++ b/crates/rust-analyzer/src/main_loop.rs
@@ -27,7 +27,10 @@ use crate::{
         FetchWorkspaceResponse, GlobalState,
     },
     hack_recover_crate_name,
-    handlers::dispatch::{NotificationDispatcher, RequestDispatcher},
+    handlers::{
+        dispatch::{NotificationDispatcher, RequestDispatcher},
+        request::empty_diagnostic_report,
+    },
     lsp::{
         from_proto, to_proto,
         utils::{notification_is, Progress},
@@ -548,6 +551,9 @@ impl GlobalState {
             self.mem_docs
                 .iter()
                 .map(|path| vfs.file_id(path).unwrap())
+                .filter_map(|(file_id, excluded)| {
+                    (excluded == vfs::FileExcluded::No).then_some(file_id)
+                })
                 .filter(|&file_id| {
                     let source_root = db.file_source_root(file_id);
                     // Only publish diagnostics for files in the workspace, not from crates.io deps
@@ -632,6 +638,9 @@ impl GlobalState {
             .mem_docs
             .iter()
             .map(|path| self.vfs.read().0.file_id(path).unwrap())
+            .filter_map(|(file_id, excluded)| {
+                (excluded == vfs::FileExcluded::No).then_some(file_id)
+            })
             .filter(|&file_id| {
                 let source_root = db.file_source_root(file_id);
                 !db.source_root(source_root).is_library
@@ -879,7 +888,10 @@ impl GlobalState {
                 self.task_pool.handle.spawn_with_sender(ThreadIntent::Worker, move |sender| {
                     let _p = tracing::info_span!("GlobalState::check_if_indexed").entered();
                     tracing::debug!(?uri, "handling uri");
-                    let id = from_proto::file_id(&snap, &uri).expect("unable to get FileId");
+                    let Some(id) = from_proto::file_id(&snap, &uri).expect("unable to get FileId")
+                    else {
+                        return;
+                    };
                     if let Ok(crates) = &snap.analysis.crates_for(id) {
                         if crates.is_empty() {
                             if snap.config.discover_workspace_config().is_some() {
@@ -987,13 +999,14 @@ impl GlobalState {
                 );
                 for diag in diagnostics {
                     match url_to_file_id(&self.vfs.read().0, &diag.url) {
-                        Ok(file_id) => self.diagnostics.add_check_diagnostic(
+                        Ok(Some(file_id)) => self.diagnostics.add_check_diagnostic(
                             id,
                             &package_id,
                             file_id,
                             diag.diagnostic,
                             diag.fix,
                         ),
+                        Ok(None) => {}
                         Err(err) => {
                             error!(
                                 "flycheck {id}: File with cargo diagnostic not found in VFS: {}",
@@ -1115,17 +1128,7 @@ impl GlobalState {
             .on_latency_sensitive::<NO_RETRY, lsp_request::SemanticTokensRangeRequest>(handlers::handle_semantic_tokens_range)
             // FIXME: Some of these NO_RETRY could be retries if the file they are interested didn't change.
             // All other request handlers
-            .on_with_vfs_default::<lsp_request::DocumentDiagnosticRequest>(handlers::handle_document_diagnostics, || lsp_types::DocumentDiagnosticReportResult::Report(
-                lsp_types::DocumentDiagnosticReport::Full(
-                    lsp_types::RelatedFullDocumentDiagnosticReport {
-                        related_documents: None,
-                        full_document_diagnostic_report: lsp_types::FullDocumentDiagnosticReport {
-                            result_id: Some("rust-analyzer".to_owned()),
-                            items: vec![],
-                        },
-                    },
-                ),
-            ), || lsp_server::ResponseError {
+            .on_with_vfs_default::<lsp_request::DocumentDiagnosticRequest>(handlers::handle_document_diagnostics, empty_diagnostic_report, || lsp_server::ResponseError {
                 code: lsp_server::ErrorCode::ServerCancelled as i32,
                 message: "server cancelled the request".to_owned(),
                 data: serde_json::to_value(lsp_types::DiagnosticServerCancellationData {
diff --git a/crates/rust-analyzer/src/reload.rs b/crates/rust-analyzer/src/reload.rs
index d18e57704774..e3c003dbf8b1 100644
--- a/crates/rust-analyzer/src/reload.rs
+++ b/crates/rust-analyzer/src/reload.rs
@@ -705,7 +705,9 @@ impl GlobalState {
             let load = |path: &AbsPath| {
                 let vfs_path = vfs::VfsPath::from(path.to_path_buf());
                 self.crate_graph_file_dependencies.insert(vfs_path.clone());
-                vfs.file_id(&vfs_path)
+                vfs.file_id(&vfs_path).and_then(|(file_id, excluded)| {
+                    (excluded == vfs::FileExcluded::No).then_some(file_id)
+                })
             };
 
             ws_to_crate_graph(&self.workspaces, self.config.extra_env(None), load)
diff --git a/crates/rust-analyzer/tests/slow-tests/main.rs b/crates/rust-analyzer/tests/slow-tests/main.rs
index 2b3c0a47a220..5ad28d0b909e 100644
--- a/crates/rust-analyzer/tests/slow-tests/main.rs
+++ b/crates/rust-analyzer/tests/slow-tests/main.rs
@@ -1372,6 +1372,40 @@ pub fn foo() {}
 name = "bar"
 version = "0.0.0"
 
+[dependencies]
+foo = { path = "../foo" }
+
+//- /bar/src/lib.rs
+"#,
+    )
+    .root("foo")
+    .root("bar")
+    .root("baz")
+    .with_config(json!({
+       "files": {
+           "exclude": ["foo"]
+        }
+    }))
+    .server()
+    .wait_until_workspace_is_loaded();
+
+    server.request::<WorkspaceSymbolRequest>(Default::default(), json!([]));
+
+    let server = Project::with_fixture(
+        r#"
+//- /foo/Cargo.toml
+[package]
+name = "foo"
+version = "0.0.0"
+
+//- /foo/src/lib.rs
+pub fn foo() {}
+
+//- /bar/Cargo.toml
+[package]
+name = "bar"
+version = "0.0.0"
+
 //- /bar/src/lib.rs
 pub fn bar() {}
 
@@ -1388,7 +1422,7 @@ version = "0.0.0"
     .root("baz")
     .with_config(json!({
        "files": {
-           "excludeDirs": ["foo", "bar"]
+           "exclude": ["foo", "bar"]
         }
     }))
     .server()
diff --git a/crates/vfs-notify/src/lib.rs b/crates/vfs-notify/src/lib.rs
index 0ae8b7baf464..320033417640 100644
--- a/crates/vfs-notify/src/lib.rs
+++ b/crates/vfs-notify/src/lib.rs
@@ -280,8 +280,9 @@ impl NotifyActor {
                                 return false;
                             }
 
-                            root == path
-                                || dirs.exclude.iter().chain(&dirs.include).all(|it| it != path)
+                            // We want to filter out subdirectories that are roots themselves, because they will be visited separately.
+                            dirs.exclude.iter().all(|it| it != path)
+                                && (root == path || dirs.include.iter().all(|it| it != path))
                         });
 
                     let files = walkdir.filter_map(|it| it.ok()).filter_map(|entry| {
diff --git a/crates/vfs/src/lib.rs b/crates/vfs/src/lib.rs
index a26444e9ea23..3feca512e55a 100644
--- a/crates/vfs/src/lib.rs
+++ b/crates/vfs/src/lib.rs
@@ -100,6 +100,9 @@ pub enum FileState {
     Exists(u64),
     /// The file is deleted.
     Deleted,
+    /// The file was specifically excluded by the user. We still include excluded files
+    /// when they're opened (without their contents).
+    Excluded,
 }
 
 /// Changed file in the [`Vfs`].
@@ -164,10 +167,22 @@ pub enum ChangeKind {
     Delete,
 }
 
+#[derive(Debug, Clone, Copy, PartialEq, Eq)]
+pub enum FileExcluded {
+    Yes,
+    No,
+}
+
 impl Vfs {
     /// Id of the given path if it exists in the `Vfs` and is not deleted.
-    pub fn file_id(&self, path: &VfsPath) -> Option<FileId> {
-        self.interner.get(path).filter(|&it| matches!(self.get(it), FileState::Exists(_)))
+    pub fn file_id(&self, path: &VfsPath) -> Option<(FileId, FileExcluded)> {
+        let file_id = self.interner.get(path)?;
+        let file_state = self.get(file_id);
+        match file_state {
+            FileState::Exists(_) => Some((file_id, FileExcluded::No)),
+            FileState::Deleted => None,
+            FileState::Excluded => Some((file_id, FileExcluded::Yes)),
+        }
     }
 
     /// File path corresponding to the given `file_id`.
@@ -216,6 +231,7 @@ impl Vfs {
                 }
                 Change::Modify(v, new_hash)
             }
+            (FileState::Excluded, _) => return false,
         };
 
         let mut set_data = |change_kind| {
@@ -297,6 +313,13 @@ impl Vfs {
     fn get(&self, file_id: FileId) -> FileState {
         self.data[file_id.0 as usize]
     }
+
+    /// We cannot ignore excluded files, because this will lead to errors when the client
+    /// requests semantic information for them, so we instead mark them specially.
+    pub fn insert_excluded_file(&mut self, path: VfsPath) {
+        let file_id = self.alloc_file_id(path);
+        self.data[file_id.0 as usize] = FileState::Excluded;
+    }
 }
 
 impl fmt::Debug for Vfs {
diff --git a/docs/book/src/configuration_generated.md b/docs/book/src/configuration_generated.md
index 49eb7248898e..a7f54289b964 100644
--- a/docs/book/src/configuration_generated.md
+++ b/docs/book/src/configuration_generated.md
@@ -470,9 +470,9 @@ The warnings will be indicated by a blue squiggly underline in code
 and a blue icon in the `Problems Panel`.
 
 
-**rust-analyzer.files.excludeDirs** (default: [])
+**rust-analyzer.files.exclude** (default: [])
 
- These directories will be ignored by rust-analyzer. They are
+ These paths (file/directories) will be ignored by rust-analyzer. They are
 relative to the workspace root, and globs are not supported. You may
 also need to add the folders to Code's `files.watcherExclude`.
 
diff --git a/editors/code/package.json b/editors/code/package.json
index 57f4254b6899..5db8ca52a587 100644
--- a/editors/code/package.json
+++ b/editors/code/package.json
@@ -1473,8 +1473,8 @@
             {
                 "title": "files",
                 "properties": {
-                    "rust-analyzer.files.excludeDirs": {
-                        "markdownDescription": "These directories will be ignored by rust-analyzer. They are\nrelative to the workspace root, and globs are not supported. You may\nalso need to add the folders to Code's `files.watcherExclude`.",
+                    "rust-analyzer.files.exclude": {
+                        "markdownDescription": "These paths (file/directories) will be ignored by rust-analyzer. They are\nrelative to the workspace root, and globs are not supported. You may\nalso need to add the folders to Code's `files.watcherExclude`.",
                         "default": [],
                         "type": "array",
                         "items": {