diff --git a/src/Microsoft.VisualStudio.ProjectSystem.Managed.VS/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandler.cs b/src/Microsoft.VisualStudio.ProjectSystem.Managed.VS/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandler.cs
index 8fe24dd4920..1bfc202f509 100644
--- a/src/Microsoft.VisualStudio.ProjectSystem.Managed.VS/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandler.cs
+++ b/src/Microsoft.VisualStudio.ProjectSystem.Managed.VS/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandler.cs
@@ -183,10 +183,7 @@ private void ApplyChangesToContext(IWorkspaceProjectContext context, IProjectCha
 
                 foreach (string includePath in difference.ChangedItems)
                 {
-                    UpdateInContextIfPresent(context, includePath, previousMetadata, currentMetadata, isActiveContext, logger);
-
-                    // TODO: Check for changes in the metadata indicating if we should ignore the file
-                    // in the current configuration.
+                    HandleEvaluationMetadataChange(context, includePath, previousMetadata, currentMetadata, isActiveContext, logger);
                 }
             }
 
@@ -223,16 +220,38 @@ private void AddToContextIfNotPresent(IWorkspaceProjectContext context, string i
             }
         }
 
-        private void UpdateInContextIfPresent(IWorkspaceProjectContext context, string includePath, IImmutableDictionary<string, IImmutableDictionary<string, string>> previousMetadata, IImmutableDictionary<string, IImmutableDictionary<string, string>> currentMetadata, bool isActiveContext, IManagedProjectDiagnosticOutputService logger)
+        /// <remarks>
+        ///     This should only be called for evaluation changes. The items we get from design-time builds represent
+        ///     command line arguments and won't have metadata.
+        /// </remarks>
+        private void HandleEvaluationMetadataChange(IWorkspaceProjectContext context, string includePath, IImmutableDictionary<string, IImmutableDictionary<string, string>> previousMetadata, IImmutableDictionary<string, IImmutableDictionary<string, string>> currentMetadata, bool isActiveContext, IManagedProjectDiagnosticOutputService logger)
         {
-            string fullPath = _project.MakeRooted(includePath);
-
-            if (_paths.Contains(fullPath))
+            // A change in ExcludeFromCurrentConfiguration metadata needs to be processed as an add or remove rather
+            // than an update, so check for that first.
+            bool previouslyIncluded = IsItemInCurrentConfiguration(includePath, previousMetadata);
+            bool currentlyIncluded = IsItemInCurrentConfiguration(includePath, currentMetadata);
+            
+            if (previouslyIncluded && !currentlyIncluded)
+            {
+                RemoveFromContextIfPresent(context, includePath, logger);
+            }
+            else if (!previouslyIncluded && currentlyIncluded)
             {
-                IImmutableDictionary<string, string> previousItemMetadata = previousMetadata.GetValueOrDefault(includePath, ImmutableStringDictionary<string>.EmptyOrdinal);
-                IImmutableDictionary<string, string> currentItemMetadata = currentMetadata.GetValueOrDefault(includePath, ImmutableStringDictionary<string>.EmptyOrdinal);
+                AddToContextIfNotPresent(context, includePath, currentMetadata, isActiveContext, logger);
+            }
+            else
+            {
+                // No change to ExcludeFromCurrentConfiguration; handle as an update.
+                
+                string fullPath = _project.MakeRooted(includePath);
 
-                UpdateInContext(context, fullPath, previousItemMetadata, currentItemMetadata, isActiveContext, logger);
+                if (_paths.Contains(fullPath))
+                {
+                    IImmutableDictionary<string, string> previousItemMetadata = previousMetadata.GetValueOrDefault(includePath, ImmutableStringDictionary<string>.EmptyOrdinal);
+                    IImmutableDictionary<string, string> currentItemMetadata = currentMetadata.GetValueOrDefault(includePath, ImmutableStringDictionary<string>.EmptyOrdinal);
+
+                    UpdateInContext(context, fullPath, previousItemMetadata, currentItemMetadata, isActiveContext, logger);
+                }
             }
         }
 
diff --git a/tests/Microsoft.VisualStudio.ProjectSystem.Managed.VS.UnitTests/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandlerTests.cs b/tests/Microsoft.VisualStudio.ProjectSystem.Managed.VS.UnitTests/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandlerTests.cs
index 148bc2e940c..b0eeaecbe43 100644
--- a/tests/Microsoft.VisualStudio.ProjectSystem.Managed.VS.UnitTests/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandlerTests.cs
+++ b/tests/Microsoft.VisualStudio.ProjectSystem.Managed.VS.UnitTests/ProjectSystem/VS/LanguageServices/Handlers/AbstractEvaluationCommandLineHandlerTests.cs
@@ -99,7 +99,7 @@ public void AddEvaluationChanges_CanAddItemWithMetadata()
             var difference = IProjectChangeDiffFactory.WithAddedItems("A.cs");
             var metadata = MetadataFactory.Create("A.cs", ("Name", "Value"));
 
-            ApplyProjectEvaluation(context, handler, 1, difference, metadata);
+            ApplyProjectEvaluation(context, handler, 1, difference, metadata: metadata);
 
             var result = handler.Files[@"C:\Project\A.cs"];
 
@@ -117,7 +117,7 @@ public void AddEvaluationChanges_ItemsWithExclusionMetadataAreIgnored()
                                           .Add("B.cs", ("ExcludeFromCurrentConfiguration", "false"));
                             
 
-            ApplyProjectEvaluation(context, handler, 1, difference, metadata);
+            ApplyProjectEvaluation(context, handler, 1, difference, metadata: metadata);
 
             string[] expectedFiles = new[] { @"C:\Project\B.cs", @"C:\Project\C.cs" };
             Assert.Equal(expectedFiles.OrderBy(f => f), handler.FileNames.OrderBy(f => f));
@@ -311,7 +311,7 @@ public void ApplyProjectEvaluationChanges_WithExistingEvaluationChanges_CanAddCh
             var difference = IProjectChangeDiffFactory.WithChangedItems(file);
             var metadata = MetadataFactory.Create(file, ("Name", "Value"));
 
-            ApplyProjectEvaluation(context, handler, 2, difference, metadata);
+            ApplyProjectEvaluation(context, handler, 2, difference, metadata: metadata);
 
             var result = handler.Files[@"C:\Project\A.cs"];
 
@@ -372,10 +372,56 @@ public void ApplyProjectBuild_WhenOlderEvaluationChangesWithRemovedConflict_Desi
             Assert.Single(handler.FileNames, @"C:\Project\Source.cs");
         }
 
-        private static void ApplyProjectEvaluation(IWorkspaceProjectContext context, AbstractEvaluationCommandLineHandler handler, IComparable version, IProjectChangeDiff difference, IImmutableDictionary<string, IImmutableDictionary<string, string>>? metadata = null)
+        [Fact]
+        public void ApplyProjectEvaluation_ChangingExclusionMetadata_IncludesFile()
+        {
+            var handler = CreateInstance(@"C:\Project\Project.csproj");
+            var context = IWorkspaceProjectContextMockFactory.Create();
+
+            var metadata = MetadataFactory.Create("Source.cs", ("ExcludeFromCurrentConfiguration", "true"));
+
+            ApplyProjectEvaluation(context, handler, version: 0, IProjectChangeDiffFactory.WithAddedItems("Source.cs"), metadata: metadata);
+
+            Assert.Empty(handler.FileNames);
+
+            var previousMetadata = metadata;
+            metadata = MetadataFactory.Create("Source.cs", ("ExcludeFromCurrentConfiguration", "false"));
+
+            ApplyProjectEvaluation(context, handler, version: 1, IProjectChangeDiffFactory.WithChangedItems("Source.cs"), previousMetadata, metadata);
+
+            Assert.Single(handler.FileNames, @"C:\Project\Source.cs");
+        }
+
+        [Fact]
+        public void ApplyProjectEvaluation_ChangingExclusionMetadata_ExcludesFile()
+        {
+            var handler = CreateInstance(@"C:\Project\Project.csproj");
+            var context = IWorkspaceProjectContextMockFactory.Create();
+
+            var metadata = MetadataFactory.Create("Source.cs", ("ExcludeFromCurrentConfiguration", "false"));
+
+            ApplyProjectEvaluation(context, handler, version: 0, IProjectChangeDiffFactory.WithAddedItems("Source.cs"), metadata: metadata);
+
+            Assert.Single(handler.FileNames, @"C:\Project\Source.cs");
+
+            var previousMetadata = metadata;
+            metadata = MetadataFactory.Create("Source.cs", ("ExcludeFromCurrentConfiguration", "true"));
+
+            ApplyProjectEvaluation(context, handler, version: 1, IProjectChangeDiffFactory.WithChangedItems("Source.cs"), previousMetadata, metadata);
+
+            Assert.Empty(handler.FileNames);
+        }
+
+        private static void ApplyProjectEvaluation(
+            IWorkspaceProjectContext context,
+            AbstractEvaluationCommandLineHandler handler,
+            IComparable version,
+            IProjectChangeDiff difference,
+            IImmutableDictionary<string, IImmutableDictionary<string, string>>? previousMetadata = null,
+            IImmutableDictionary<string, IImmutableDictionary<string, string>>? metadata = null)
         {
             metadata ??= ImmutableDictionary<string, IImmutableDictionary<string, string>>.Empty;
-            var previousMetadata = ImmutableDictionary<string, IImmutableDictionary<string, string>>.Empty;
+            previousMetadata ??= ImmutableDictionary<string, IImmutableDictionary<string, string>>.Empty;
             bool isActiveContext = true;
             var logger = IManagedProjectDiagnosticOutputServiceFactory.Create();