diff --git a/.changes/unreleased/+local-source-exclusions-and-hatchling-sdists.yaml b/.changes/unreleased/+local-source-exclusions-and-hatchling-sdists.yaml
new file mode 100644
index 00000000..5d73723c
--- /dev/null
+++ b/.changes/unreleased/+local-source-exclusions-and-hatchling-sdists.yaml
@@ -0,0 +1,3 @@
+kind: Fixed
+body: Allow local Python overrides to exclude exact generated subtrees before source observation, and accept valid Hatchling source distributions whose single root directory is implicit in archive entries.
+time: 2026-08-16T05:45:00+08:00
diff --git a/docs/.review/APT_PROVIDER.md b/docs/.review/APT_PROVIDER.md
index be97e031..660818db 100644
--- a/docs/.review/APT_PROVIDER.md
+++ b/docs/.review/APT_PROVIDER.md
@@ -3,17 +3,17 @@ artifact: swe-design-review-attestation
 schema_version: 2
 scope_key: bd8b79396ed3ab3d8e062279e409430bcf54daf5acf561e1b5d63f4302f9edc4
 scope: {"kind": "path", "primary_target": "docs/APT_PROVIDER.md", "repository": "/home/omry/dev/reploy", "selector": "docs/APT_PROVIDER.md"}
-review_content_identity_sha256: 4ced672e66a1f128c825aaa3e0c9d06ef2335784d6a058d18871590e44c2a7e7
-target_content_identity_sha256: 863f6a96ed723af42eec92f3e422acdfe439fd8f2ef226a7f31bda5d8360d690
+review_content_identity_sha256: 3cb75520f49dee8255a7bc807e55670c1c59c75981b5753cb3c94ad29749b593
+target_content_identity_sha256: 5c8bcb33496743ccef81f81684cf38482d1a9b225e096f47b328b95ea049a68a
 baseline_content_identity_sha256: 9f98a355bf1d27e1c417bb5080a2f86eda476110f89ccf264d5ba02f7ee8d13b
-target_documents: [{"path": "docs/APT_PROVIDER.md", "repository": "/home/omry/dev/reploy", "sha256": "281e4c65fc5e3e1bd1584ad2543f6388e631ab364b9b00c7630e342dacdae323"}]
+target_documents: [{"path": "docs/APT_PROVIDER.md", "repository": "/home/omry/dev/reploy", "sha256": "be2008134ae557cf275893325fcd7caae7588ced609c5dc05bf142ad0a6aa60c"}]
 baseline_documents: [{"path": "docs/BLUEPRINT_ENVIRONMENT_MODEL.md", "repository": "/home/omry/dev/reploy", "sha256": "8969ffde4d2f20d2e02fb530d0e9688ed63d9dd8962a9a700473d4a6a54e7ef4"}]
 document_repository: "/home/omry/dev/reploy"
 document_path: "docs/APT_PROVIDER.md"
-document_revision_provenance: "c68e86950815a95fb257f216d3a5183eaf017461"
-document_sha256: 281e4c65fc5e3e1bd1584ad2543f6388e631ab364b9b00c7630e342dacdae323
+document_revision_provenance: "a13e17402b578d5f6c6922ac82773ad2f116237f"
+document_sha256: be2008134ae557cf275893325fcd7caae7588ced609c5dc05bf142ad0a6aa60c
 verdict: clean
-attested_at: 2026-08-22T13:27:58Z
+attested_at: 2026-08-22T19:51:20Z
 ---
 <!-- swe-design-review-attestation:v2 -->
 
diff --git a/docs/.review/APT_PROVIDER_DETAIL_DESIGN.md b/docs/.review/APT_PROVIDER_DETAIL_DESIGN.md
index 8f6f1063..cbcf3b74 100644
--- a/docs/.review/APT_PROVIDER_DETAIL_DESIGN.md
+++ b/docs/.review/APT_PROVIDER_DETAIL_DESIGN.md
@@ -3,17 +3,17 @@ artifact: swe-design-review-attestation
 schema_version: 2
 scope_key: dd04dd2c2041a5035ffd15d245763f28fd28d9c4d7c4e83ca3a0cb45f092a863
 scope: {"kind": "path", "primary_target": "docs/APT_PROVIDER_DETAIL_DESIGN.md", "repository": "/home/omry/dev/reploy", "selector": "docs/APT_PROVIDER_DETAIL_DESIGN.md"}
-review_content_identity_sha256: 9ee4d59e64a734c7570535405a019153d9f3ce7293b87fc85bfaf0eb31edaaf5
+review_content_identity_sha256: 8ba6a9a8660c148eaa26c1de35dd900e98f0d6e274c9cfb4d0b1036fb17f56ff
 target_content_identity_sha256: e93421059c4ba62f015aa08c248901201e6f091a26fdee58614dbf6e684456bb
-baseline_content_identity_sha256: abb90da6717c7b7ed36addc0bf1a9dbaed6c93d144f6c768d82f85d460d3cdc7
+baseline_content_identity_sha256: 3f6f4ef49e1b4270a8aefc5120f8d86e3837e74390ea648dc09505d2047f53f4
 target_documents: [{"path": "docs/APT_PROVIDER_DETAIL_DESIGN.md", "repository": "/home/omry/dev/reploy", "sha256": "14e7809c811f921168594cf40aae0c2e9d480016352d59d74fcaa8030c12bdda"}]
-baseline_documents: [{"path": "docs/APT_PROVIDER.md", "repository": "/home/omry/dev/reploy", "sha256": "281e4c65fc5e3e1bd1584ad2543f6388e631ab364b9b00c7630e342dacdae323"}, {"path": "docs/BLUEPRINT_ENVIRONMENT_MODEL.md", "repository": "/home/omry/dev/reploy", "sha256": "8969ffde4d2f20d2e02fb530d0e9688ed63d9dd8962a9a700473d4a6a54e7ef4"}]
+baseline_documents: [{"path": "docs/APT_PROVIDER.md", "repository": "/home/omry/dev/reploy", "sha256": "be2008134ae557cf275893325fcd7caae7588ced609c5dc05bf142ad0a6aa60c"}, {"path": "docs/BLUEPRINT_ENVIRONMENT_MODEL.md", "repository": "/home/omry/dev/reploy", "sha256": "8969ffde4d2f20d2e02fb530d0e9688ed63d9dd8962a9a700473d4a6a54e7ef4"}]
 document_repository: "/home/omry/dev/reploy"
 document_path: "docs/APT_PROVIDER_DETAIL_DESIGN.md"
-document_revision_provenance: "c68e86950815a95fb257f216d3a5183eaf017461"
+document_revision_provenance: "a13e17402b578d5f6c6922ac82773ad2f116237f"
 document_sha256: 14e7809c811f921168594cf40aae0c2e9d480016352d59d74fcaa8030c12bdda
 verdict: clean
-attested_at: 2026-08-22T13:28:02Z
+attested_at: 2026-08-22T19:52:51Z
 ---
 <!-- swe-design-review-attestation:v2 -->
 
diff --git a/docs/APT_PROVIDER.md b/docs/APT_PROVIDER.md
index a9ff99e8..88d7b8fa 100644
--- a/docs/APT_PROVIDER.md
+++ b/docs/APT_PROVIDER.md
@@ -337,12 +337,16 @@ match.
 
 When a staging package override selects local Python source, its filesystem
 path is only a local build input. Reploy observes an immutable path-free input
-digest while withholding VCS metadata, then lets the declared Python build
-backend define the package boundary by producing an sdist. The backend sees
-ordinary generated directories and caches; Reploy does not decide package
-contents with a generic ignore list. Reploy validates and retains exactly one
-closed `.tar.gz` sdist, securely extracts that retained artifact, and builds
-the wheel only from the extraction.
+digest while withholding VCS metadata and any exact relative subtrees listed
+by the selected override's optional `exclude` array, then lets the declared
+Python build backend define the package boundary by producing an sdist.
+Exclusions are literal forward-slash paths, not glob or ignore-file patterns;
+they are applied before Reploy reads metadata beneath the selected path and are
+part of source-input identity. Selected FIFOs and other unsupported special
+files remain errors. Apart from these explicit input exclusions, the backend
+sees ordinary generated directories and caches. Reploy validates and retains
+exactly one closed `.tar.gz` sdist, securely extracts that retained artifact,
+and builds the wheel only from the extraction.
 
 A selected snapshot may contain project-owned `.reploy.yaml` build metadata.
 The initial strict recipe declares either `pep517` or `setuptools-legacy` and
diff --git a/docs/REDESIGN_EVALUATION.md b/docs/REDESIGN_EVALUATION.md
index 6d7a2666..fcea552f 100644
--- a/docs/REDESIGN_EVALUATION.md
+++ b/docs/REDESIGN_EVALUATION.md
@@ -310,9 +310,12 @@ explicit opt-in later.
 **Approved implementation contract:**
 
 - Reploy observes and copies an immutable projection containing every selected
-  local-source entry except VCS metadata. Generated environments, caches, and
-  other development files remain visible to the declared build backend; the
-  backend alone decides whether they enter the sdist.
+  local-source entry except VCS metadata and exact subtrees explicitly excluded
+  by the local override. Exclusions are literal input-selection paths, are
+  applied before entry metadata is read, and participate in source identity.
+  Other generated environments, caches, and development files remain visible
+  to the declared build backend; the backend alone decides whether they enter
+  the sdist.
 - Every explicit image build with a selected local Python project performs the
   complete source projection, sdist build, validation, and wheel build before
   deciding whether later provider layers or the final environment image are
@@ -721,11 +724,12 @@ the source manifest:
 - The virtual environment's Python symlink resolves to the system interpreter,
   correctly triggering the escape check.
 
-Slice 12 replaced that generic snapshot boundary with a complete provisional
-input (excluding VCS metadata), followed by backend-defined sdist creation and
-Reploy-owned sdist validation. Generated development state may be visible to
-the backend but does not enter the retained artifact unless the project's
-packaging metadata selects it.
+Slice 12 replaced that generic snapshot boundary with a provisional input,
+followed by backend-defined sdist creation and Reploy-owned sdist validation.
+The input excludes VCS metadata and may now exclude exact developer-declared
+subtrees. Other generated development state may be visible to the backend but
+does not enter the retained artifact unless the project's packaging metadata
+selects it.
 
 That historical diagnostic also exposed excessive internal context and used
 the ambiguous phrase `workspace root`. Slice 12 now reports source-input,
diff --git a/internal/deploy/package_overrides.go b/internal/deploy/package_overrides.go
index 2c6453f3..fee2689f 100644
--- a/internal/deploy/package_overrides.go
+++ b/internal/deploy/package_overrides.go
@@ -7,7 +7,9 @@ import (
 	"io"
 	"io/fs"
 	"os"
+	"path"
 	"path/filepath"
+	"slices"
 	"sort"
 	"strings"
 	"unicode"
@@ -43,8 +45,13 @@ type BaseImageOverrideV1 struct {
 // PackageOverrideChoiceV1 selects exactly one local source or exact upstream
 // version. A mapping never requests installation by itself.
 type PackageOverrideChoiceV1 struct {
-	Path    string `yaml:"path,omitempty"`
-	Version string `yaml:"version,omitempty"`
+	Path    string   `yaml:"path,omitempty"`
+	Version string   `yaml:"version,omitempty"`
+	Exclude []string `yaml:"exclude,omitempty"`
+}
+
+func (choice PackageOverrideChoiceV1) Empty() bool {
+	return choice.Path == "" && choice.Version == "" && len(choice.Exclude) == 0
 }
 
 // ResolvedPackageOverridesV1 contains interpolated, normalized lookup keys and
@@ -59,6 +66,7 @@ type ResolvedPackageOverridesV1 struct {
 type ResolvedPackageOverrideChoiceV1 struct {
 	Path    string
 	Version string
+	Exclude []string
 }
 
 // PackageOverrideIntentV1 is the path-free build input retained in the lock.
@@ -78,10 +86,11 @@ type PackageAdditionIntentV1 struct {
 }
 
 type PackageOverrideIntentChoiceV1 struct {
-	Provider string `json:"provider"`
-	Package  string `json:"package"`
-	Kind     string `json:"kind"`
-	Version  string `json:"version"`
+	Provider string   `json:"provider"`
+	Package  string   `json:"package"`
+	Kind     string   `json:"kind"`
+	Version  string   `json:"version"`
+	Exclude  []string `json:"exclude,omitempty"`
 }
 
 func EmptyPackageOverridesV1(environmentID string) PackageOverridesV1 {
@@ -118,6 +127,7 @@ func EncodePackageOverridesV1(overrides PackageOverridesV1) ([]byte, error) {
 	if err := ValidatePackageOverridesV1(overrides); err != nil {
 		return nil, err
 	}
+	overrides = canonicalPackageOverridesV1(overrides)
 	content, err := yaml.Marshal(overrides)
 	if err != nil {
 		return nil, fmt.Errorf("encode package overrides: %w", err)
@@ -125,6 +135,24 @@ func EncodePackageOverridesV1(overrides PackageOverridesV1) ([]byte, error) {
 	return content, nil
 }
 
+// canonicalPackageOverridesV1 returns an encoding copy whose semantically
+// unordered exclusion lists use their stable lexical order. Validation must
+// run first; copying the nested mappings avoids mutating caller-owned values.
+func canonicalPackageOverridesV1(overrides PackageOverridesV1) PackageOverridesV1 {
+	canonicalOverrides := make(map[string]map[string]PackageOverrideChoiceV1, len(overrides.Environment.PackageOverrides))
+	for provider, packages := range overrides.Environment.PackageOverrides {
+		canonicalPackages := make(map[string]PackageOverrideChoiceV1, len(packages))
+		for packageID, choice := range packages {
+			exclusions, _ := NormalizePackageOverrideExclusionsV1(choice.Exclude)
+			choice.Exclude = exclusions
+			canonicalPackages[packageID] = choice
+		}
+		canonicalOverrides[provider] = canonicalPackages
+	}
+	overrides.Environment.PackageOverrides = canonicalOverrides
+	return overrides
+}
+
 func ValidatePackageOverridesV1(overrides PackageOverridesV1) error {
 	environment := overrides.Environment
 	if err := blueprint.ValidateEnvironmentID("package overrides environment.id", environment.ID); err != nil {
@@ -202,11 +230,46 @@ func ValidatePackageOverridesV1(overrides PackageOverridesV1) error {
 			if version != "" && (strings.HasPrefix(version, "-") || containsControl(version)) {
 				return fmt.Errorf("package override %s.%s version must be plain version text", provider, packageID)
 			}
+			exclusions, err := NormalizePackageOverrideExclusionsV1(choice.Exclude)
+			if err != nil {
+				return fmt.Errorf("package override %s.%s exclude: %w", provider, packageID, err)
+			}
+			if len(exclusions) != 0 && pathValue == "" {
+				return fmt.Errorf("package override %s.%s exclude requires a local path", provider, packageID)
+			}
 		}
 	}
 	return nil
 }
 
+// NormalizePackageOverrideExclusionsV1 validates exact source-relative paths
+// and returns their stable lexical order. Entries select the named path and
+// its descendants; they are deliberately not glob or ignore-file patterns.
+func NormalizePackageOverrideExclusionsV1(exclusions []string) ([]string, error) {
+	normalized := append([]string{}, exclusions...)
+	for index, exclusion := range normalized {
+		if exclusion == "" || strings.TrimSpace(exclusion) != exclusion ||
+			!utf8.ValidString(exclusion) || containsControl(exclusion) ||
+			path.IsAbs(exclusion) || path.Clean(exclusion) != exclusion ||
+			strings.ContainsAny(exclusion, `\:*?[]`) || exclusion == "." ||
+			exclusion == ".." || strings.HasPrefix(exclusion, "../") {
+			return nil, fmt.Errorf("entry %d must be a canonical relative path using forward slashes", index)
+		}
+		for _, component := range strings.Split(exclusion, "/") {
+			if component == "" || component == "." || component == ".." {
+				return nil, fmt.Errorf("entry %d must be a canonical relative path using forward slashes", index)
+			}
+		}
+	}
+	sort.Strings(normalized)
+	for index := 1; index < len(normalized); index++ {
+		if normalized[index-1] == normalized[index] {
+			return nil, fmt.Errorf("contains duplicate path %q", normalized[index])
+		}
+	}
+	return normalized, nil
+}
+
 // NormalizePackageAdditionV1 validates a provider-native development package
 // addition without translating its package name. The os provider currently
 // selects the Debian/Ubuntu APT implementation at build time.
@@ -355,7 +418,14 @@ func ResolvePackageOverridesV1(
 			}
 			owners[normalized] = packageID
 
-			resolvedChoice := ResolvedPackageOverrideChoiceV1{Version: choice.Version}
+			exclusions, err := NormalizePackageOverrideExclusionsV1(choice.Exclude)
+			if err != nil {
+				return ResolvedPackageOverridesV1{}, fmt.Errorf("package override %s.%s exclude: %w", provider, packageID, err)
+			}
+			resolvedChoice := ResolvedPackageOverrideChoiceV1{
+				Version: choice.Version,
+				Exclude: exclusions,
+			}
 			if choice.Path != "" {
 				interpolated, err := blueprint.ResolveEnvironmentVariableString(choice.Path, variables)
 				if err != nil {
@@ -420,6 +490,7 @@ func (overrides ResolvedPackageOverridesV1) Intent() (PackageOverrideIntentV1, e
 			switch {
 			case choice.Path != "" && choice.Version == "":
 				item.Kind = "local"
+				item.Exclude = append([]string{}, choice.Exclude...)
 			case choice.Path == "" && choice.Version != "":
 				item.Kind = "version"
 				item.Version = choice.Version
@@ -486,10 +557,20 @@ func ValidatePackageOverrideIntentV1(intent PackageOverrideIntentV1) error {
 			if choice.Version != "" {
 				return fmt.Errorf("local package override intent %s.%s must not contain a version", choice.Provider, choice.Package)
 			}
+			exclusions, err := NormalizePackageOverrideExclusionsV1(choice.Exclude)
+			if err != nil {
+				return fmt.Errorf("local package override intent %s.%s exclude: %w", choice.Provider, choice.Package, err)
+			}
+			if !slices.Equal(exclusions, choice.Exclude) {
+				return fmt.Errorf("local package override intent %s.%s exclusions must be unique and sorted", choice.Provider, choice.Package)
+			}
 		case "version":
 			if choice.Version == "" || strings.HasPrefix(choice.Version, "-") || containsControl(choice.Version) {
 				return fmt.Errorf("version package override intent %s.%s must contain plain version text", choice.Provider, choice.Package)
 			}
+			if len(choice.Exclude) != 0 {
+				return fmt.Errorf("version package override intent %s.%s must not contain exclusions", choice.Provider, choice.Package)
+			}
 		default:
 			return fmt.Errorf("package override intent %s.%s has unsupported kind %q", choice.Provider, choice.Package, choice.Kind)
 		}
diff --git a/internal/deploy/package_overrides_test.go b/internal/deploy/package_overrides_test.go
index 291875cd..f1f6feee 100644
--- a/internal/deploy/package_overrides_test.go
+++ b/internal/deploy/package_overrides_test.go
@@ -23,8 +23,11 @@ func TestPackageOverridesRoundTripAndResolve(t *testing.T) {
 		},
 		PackageOverrides: map[string]map[string]PackageOverrideChoiceV1{
 			"python": {
-				"Demo_Pkg": {Path: "{{ workspace_root }}/demo"},
-				"other":    {Version: "2.4.0"},
+				"Demo_Pkg": {
+					Path:    "{{ workspace_root }}/demo",
+					Exclude: []string{"recordings/.omegaflow", ".venv"},
+				},
+				"other": {Version: "2.4.0"},
 			},
 		},
 	}}
@@ -51,6 +54,9 @@ func TestPackageOverridesRoundTripAndResolve(t *testing.T) {
 	if got := resolved.Providers["python"]["demo-pkg"].Path; got != filepath.Join(dir, "workspace", "demo") {
 		t.Fatalf("resolved local path = %q", got)
 	}
+	if got := resolved.Providers["python"]["demo-pkg"].Exclude; len(got) != 2 || got[0] != ".venv" || got[1] != "recordings/.omegaflow" {
+		t.Fatalf("resolved exclusions = %#v", got)
+	}
 	if got := resolved.Providers["python"]["other"].Version; got != "2.4.0" {
 		t.Fatalf("resolved version = %q", got)
 	}
@@ -62,8 +68,11 @@ func TestPackageOverridesRoundTripAndResolve(t *testing.T) {
 		t.Fatal(err)
 	}
 	if len(intent.Choices) != 2 ||
-		intent.Choices[0] != (PackageOverrideIntentChoiceV1{Provider: "python", Package: "demo-pkg", Kind: "local"}) ||
-		intent.Choices[1] != (PackageOverrideIntentChoiceV1{Provider: "python", Package: "other", Kind: "version", Version: "2.4.0"}) {
+		intent.Choices[0].Provider != "python" || intent.Choices[0].Package != "demo-pkg" ||
+		intent.Choices[0].Kind != "local" || len(intent.Choices[0].Exclude) != 2 ||
+		intent.Choices[0].Exclude[0] != ".venv" || intent.Choices[0].Exclude[1] != "recordings/.omegaflow" ||
+		intent.Choices[1].Provider != "python" || intent.Choices[1].Package != "other" ||
+		intent.Choices[1].Kind != "version" || intent.Choices[1].Version != "2.4.0" {
 		t.Fatalf("intent = %#v", intent)
 	}
 	if len(intent.Additions) != 1 ||
@@ -237,6 +246,11 @@ func TestPackageOverridesRejectInvalidShape(t *testing.T) {
 		{name: "multiple documents", yaml: "environment:\n  id: demo\n  package_overrides: {}\n---\n{}\n", want: "multiple YAML documents"},
 		{name: "both choices", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {path: ../demo, version: 1.0}\n", want: "exactly one"},
 		{name: "neither choice", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {}\n", want: "exactly one"},
+		{name: "exclude on version", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {version: 1.0, exclude: [recordings]}\n", want: "requires a local path"},
+		{name: "absolute exclude", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {path: ../demo, exclude: [/recordings]}\n", want: "canonical relative path"},
+		{name: "escaping exclude", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {path: ../demo, exclude: [../recordings]}\n", want: "canonical relative path"},
+		{name: "glob exclude", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {path: ../demo, exclude: ['recordings/*']}\n", want: "canonical relative path"},
+		{name: "duplicate exclude", yaml: "environment:\n  id: demo\n  package_overrides:\n    python:\n      demo: {path: ../demo, exclude: [recordings, recordings]}\n", want: "duplicate path"},
 		{name: "missing mappings", yaml: "environment:\n  id: demo\n", want: "package_overrides must use a mapping"},
 		{name: "variable cycle", yaml: "environment:\n  id: demo\n  vars: {a: '{{ b }}', b: '{{ a }}'}\n  package_overrides: {}\n", want: "cycle"},
 		{name: "unsupported addition provider", yaml: "environment:\n  id: demo\n  package_additions: {apt: [default-jre-headless]}\n  package_overrides: {}\n", want: "use os"},
diff --git a/internal/deploy/validated_build.go b/internal/deploy/validated_build.go
index f0fa724b..cb5510ae 100644
--- a/internal/deploy/validated_build.go
+++ b/internal/deploy/validated_build.go
@@ -52,8 +52,9 @@ func PackageOverridesDigestV1(overrides PackageOverridesV1) (canonical.Digest, e
 		return "", err
 	}
 	// EncodePackageOverridesV1 normalizes YAML map ordering, scalar spelling,
-	// and omitted optional fields. Hash that normalized representation so every
-	// value accepted by the sidecar schema has a stable identity.
+	// exclusion ordering, and omitted optional fields. Hash that normalized
+	// representation so every value accepted by the sidecar schema has a stable
+	// identity.
 	return canonical.Sum("package-overrides", "package-overrides-v1", string(content))
 }
 
diff --git a/internal/deploy/validated_build_test.go b/internal/deploy/validated_build_test.go
index 93c9b827..d859d105 100644
--- a/internal/deploy/validated_build_test.go
+++ b/internal/deploy/validated_build_test.go
@@ -122,6 +122,32 @@ func TestPackageOverridesDigestV1NormalizesEmptyOptionalVars(t *testing.T) {
 	}
 }
 
+func TestPackageOverridesDigestV1NormalizesExclusionOrder(t *testing.T) {
+	first := EmptyPackageOverridesV1("demo")
+	first.Environment.PackageOverrides["python"] = map[string]PackageOverrideChoiceV1{
+		"demo": {Path: "../demo", Exclude: []string{"recordings/.omegaflow", ".venv"}},
+	}
+	second := EmptyPackageOverridesV1("demo")
+	second.Environment.PackageOverrides["python"] = map[string]PackageOverrideChoiceV1{
+		"demo": {Path: "../demo", Exclude: []string{".venv", "recordings/.omegaflow"}},
+	}
+
+	firstDigest, err := PackageOverridesDigestV1(first)
+	if err != nil {
+		t.Fatal(err)
+	}
+	secondDigest, err := PackageOverridesDigestV1(second)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if firstDigest != secondDigest {
+		t.Fatalf("equivalent exclusion orders have different digests: %s != %s", firstDigest, secondDigest)
+	}
+	if got := first.Environment.PackageOverrides["python"]["demo"].Exclude; !reflect.DeepEqual(got, []string{"recordings/.omegaflow", ".venv"}) {
+		t.Fatalf("digest mutated caller exclusions: %#v", got)
+	}
+}
+
 func TestValidateValidatedBuildV1RejectsUnsafeImageReference(t *testing.T) {
 	platform, err := blueprint.ParsePlatform("linux/amd64")
 	if err != nil {
diff --git a/internal/dockerdeploy/pack_stage_v1.go b/internal/dockerdeploy/pack_stage_v1.go
index 7125aebc..c0308c46 100644
--- a/internal/dockerdeploy/pack_stage_v1.go
+++ b/internal/dockerdeploy/pack_stage_v1.go
@@ -186,6 +186,7 @@ func localBlueprintInitialPackageOverridesV1(
 			}
 			stagedPackages[packageID] = deploy.PackageOverrideChoiceV1{
 				Path: path, Version: choice.Version,
+				Exclude: append([]string{}, choice.Exclude...),
 			}
 		}
 		staged.Environment.PackageOverrides[provider] = stagedPackages
diff --git a/internal/dockerdeploy/pack_stage_v1_test.go b/internal/dockerdeploy/pack_stage_v1_test.go
index d65d0883..5422d8ea 100644
--- a/internal/dockerdeploy/pack_stage_v1_test.go
+++ b/internal/dockerdeploy/pack_stage_v1_test.go
@@ -128,6 +128,8 @@ func TestStagePackDesiredStateV1ImportsLocalBlueprintSidecarOnCreate(t *testing.
     python:
       omegaconf-inspector:
         path: "{{ workspace_root }}/checkout"
+        exclude:
+          - recordings/.omegaflow
 `)
 	if err := os.WriteFile(filepath.Join(sourceDir, deploy.PackageOverridesFilename), sidecar, 0o600); err != nil {
 		t.Fatal(err)
@@ -149,6 +151,9 @@ func TestStagePackDesiredStateV1ImportsLocalBlueprintSidecarOnCreate(t *testing.
 	if choice.Path != "{{ workspace_root }}/checkout" {
 		t.Fatalf("staged path = %q", choice.Path)
 	}
+	if !reflect.DeepEqual(choice.Exclude, []string{"recordings/.omegaflow"}) {
+		t.Fatalf("staged exclusions = %#v", choice.Exclude)
+	}
 	if got := staged.Environment.Vars["workspace_root"]; got != filepath.Dir(localProject) {
 		t.Fatalf("staged workspace_root = %#v, want %q", got, filepath.Dir(localProject))
 	}
diff --git a/internal/dockerdeploy/python_local_sources.go b/internal/dockerdeploy/python_local_sources.go
index 489d539b..765d6477 100644
--- a/internal/dockerdeploy/python_local_sources.go
+++ b/internal/dockerdeploy/python_local_sources.go
@@ -6,6 +6,7 @@ import (
 	"io"
 	"os"
 	"path/filepath"
+	"slices"
 	"sort"
 	"strings"
 	"unicode/utf8"
@@ -18,13 +19,14 @@ import (
 
 const pythonSourceManifestSchemaV1 = pythonprovider.SourceInputManifestSchemaV1
 
-// PythonLocalOverrideV1 is an uninterpreted, staging-only physical locator.
-// Constructing it never accesses HostDir; source observation is demand-driven
-// after a direct request or resolved package closure identifies a matching
-// distribution.
+// PythonLocalOverrideV1 is a staging-only physical locator plus its normalized
+// input exclusions. Constructing it never accesses HostDir; source observation
+// is demand-driven after a direct request or resolved package closure identifies
+// a matching distribution.
 type PythonLocalOverrideV1 struct {
 	Distribution string
 	HostDir      string
+	Exclude      []string
 }
 
 // PythonLocalSource is a staging-only physical locator paired with the
@@ -40,6 +42,7 @@ type PythonLocalSource struct {
 
 type PythonSourceManifestV1 struct {
 	Schema  string                        `json:"schema"`
+	Exclude []string                      `json:"exclude"`
 	Entries []PythonSourceManifestEntryV1 `json:"entries"`
 }
 
@@ -71,7 +74,11 @@ func PythonLocalOverridesV1(
 		if !filepath.IsAbs(choice.Path) || filepath.Clean(choice.Path) != choice.Path {
 			return nil, fmt.Errorf("local Python override %q path must be absolute and clean", distribution)
 		}
-		result = append(result, PythonLocalOverrideV1{Distribution: distribution, HostDir: choice.Path})
+		result = append(result, PythonLocalOverrideV1{
+			Distribution: distribution,
+			HostDir:      choice.Path,
+			Exclude:      append([]string{}, choice.Exclude...),
+		})
 	}
 	sort.Slice(result, func(left int, right int) bool {
 		return result[left].Distribution < result[right].Distribution
@@ -85,10 +92,10 @@ func ObserveSelectedPythonLocalSources(
 	overrides []PythonLocalOverrideV1,
 	distributions []string,
 ) ([]PythonLocalSource, error) {
-	return observeSelectedPythonLocalSources(overrides, distributions, ObservePythonSourceManifest)
+	return observeSelectedPythonLocalSources(overrides, distributions, ObservePythonSourceManifestWithExclusions)
 }
 
-type pythonSourceManifestObserver func(string) (PythonSourceManifestV1, canonical.Digest, error)
+type pythonSourceManifestObserver func(string, []string) (PythonSourceManifestV1, canonical.Digest, error)
 
 func observeSelectedPythonLocalSources(
 	overrides []PythonLocalOverrideV1,
@@ -126,6 +133,10 @@ func observeSelectedPythonLocalSources(
 		if override.HostDir == "" || !filepath.IsAbs(override.HostDir) || filepath.Clean(override.HostDir) != override.HostDir {
 			return nil, fmt.Errorf("local Python override %q path must be absolute and clean", override.Distribution)
 		}
+		exclusions, err := deploy.NormalizePackageOverrideExclusionsV1(override.Exclude)
+		if err != nil || !slices.Equal(exclusions, override.Exclude) {
+			return nil, fmt.Errorf("local Python override %q exclusions must be canonical, unique, and sorted", override.Distribution)
+		}
 		if _, found := selected[override.Distribution]; !found {
 			continue
 		}
@@ -133,7 +144,7 @@ func observeSelectedPythonLocalSources(
 		if err != nil {
 			return nil, fmt.Errorf("local Python override %q source: %w", override.Distribution, err)
 		}
-		manifest, digest, err := observe(hostDir)
+		manifest, digest, err := observe(hostDir, override.Exclude)
 		if err != nil {
 			return nil, fmt.Errorf("local Python override %q source input: %w", override.Distribution, err)
 		}
@@ -147,14 +158,29 @@ func observeSelectedPythonLocalSources(
 
 // ObservePythonSourceManifest records the complete immutable input exposed to
 // the build backend, excluding only repository metadata that v1 deliberately
-// withholds. Packaging metadata, not a Reploy ignore list, defines the sdist.
+// withholds.
 func ObservePythonSourceManifest(sourceDir string) (PythonSourceManifestV1, canonical.Digest, error) {
+	return ObservePythonSourceManifestWithExclusions(sourceDir, []string{})
+}
+
+// ObservePythonSourceManifestWithExclusions additionally withholds exact
+// source-relative paths and their descendants before their metadata is read.
+// Packaging metadata still defines the retained sdist from the selected input.
+func ObservePythonSourceManifestWithExclusions(
+	sourceDir string,
+	exclusions []string,
+) (PythonSourceManifestV1, canonical.Digest, error) {
 	realSource, err := resolveRealPythonSourceDirectory(sourceDir)
 	if err != nil {
 		return PythonSourceManifestV1{}, "", err
 	}
+	normalizedExclusions, err := deploy.NormalizePackageOverrideExclusionsV1(exclusions)
+	if err != nil {
+		return PythonSourceManifestV1{}, "", fmt.Errorf("source exclusions: %w", err)
+	}
 	manifest := PythonSourceManifestV1{
 		Schema:  pythonSourceManifestSchemaV1,
+		Exclude: normalizedExclusions,
 		Entries: []PythonSourceManifestEntryV1{},
 	}
 	err = filepath.WalkDir(realSource, func(filename string, entry os.DirEntry, walkErr error) error {
@@ -164,6 +190,17 @@ func ObservePythonSourceManifest(sourceDir string) (PythonSourceManifestV1, cano
 		if filename == realSource {
 			return nil
 		}
+		relative, err := filepath.Rel(realSource, filename)
+		if err != nil {
+			return err
+		}
+		relative = filepath.ToSlash(relative)
+		if excludedPythonSourceEntry(relative, normalizedExclusions) {
+			if entry.IsDir() {
+				return filepath.SkipDir
+			}
+			return nil
+		}
 		name := entry.Name()
 		if ignoredPythonSourceEntry(name) {
 			if entry.IsDir() {
@@ -171,11 +208,7 @@ func ObservePythonSourceManifest(sourceDir string) (PythonSourceManifestV1, cano
 			}
 			return nil
 		}
-		relative, err := filepath.Rel(realSource, filename)
-		if err != nil {
-			return err
-		}
-		manifestEntry := PythonSourceManifestEntryV1{Path: filepath.ToSlash(relative)}
+		manifestEntry := PythonSourceManifestEntryV1{Path: relative}
 		info, err := entry.Info()
 		if err != nil {
 			return err
@@ -228,6 +261,15 @@ func ObservePythonSourceManifest(sourceDir string) (PythonSourceManifestV1, cano
 	return manifest, digest, nil
 }
 
+func excludedPythonSourceEntry(relative string, exclusions []string) bool {
+	for _, exclusion := range exclusions {
+		if relative == exclusion || strings.HasPrefix(relative, exclusion+"/") {
+			return true
+		}
+	}
+	return false
+}
+
 func resolveRealPythonSourceDirectory(directory string) (string, error) {
 	absolute, err := filepath.Abs(directory)
 	if err != nil {
diff --git a/internal/dockerdeploy/python_local_sources_posix_test.go b/internal/dockerdeploy/python_local_sources_posix_test.go
new file mode 100644
index 00000000..417aa713
--- /dev/null
+++ b/internal/dockerdeploy/python_local_sources_posix_test.go
@@ -0,0 +1,42 @@
+//go:build aix || darwin || dragonfly || freebsd || linux || netbsd || openbsd || solaris
+
+package dockerdeploy
+
+import (
+	"os"
+	"path/filepath"
+	"strings"
+	"syscall"
+	"testing"
+)
+
+func TestObservePythonSourceManifestExcludesFIFOWithoutInspectingIt(t *testing.T) {
+	sourceDir := t.TempDir()
+	if err := os.WriteFile(filepath.Join(sourceDir, "pyproject.toml"), []byte("[build-system]\n"), 0o644); err != nil {
+		t.Fatal(err)
+	}
+	generated := filepath.Join(sourceDir, "recordings", ".omegaflow", "run")
+	if err := os.MkdirAll(generated, 0o755); err != nil {
+		t.Fatal(err)
+	}
+	fifo := filepath.Join(generated, "input.pipe")
+	if err := syscall.Mkfifo(fifo, 0o600); err != nil {
+		t.Fatal(err)
+	}
+
+	manifest, _, err := ObservePythonSourceManifestWithExclusions(
+		sourceDir, []string{"recordings/.omegaflow"},
+	)
+	if err != nil {
+		t.Fatal(err)
+	}
+	for _, entry := range manifest.Entries {
+		if strings.HasPrefix(entry.Path, "recordings/.omegaflow") {
+			t.Fatalf("excluded FIFO subtree entered source manifest: %#v", entry)
+		}
+	}
+	if _, _, err := ObservePythonSourceManifest(sourceDir); err == nil ||
+		!strings.Contains(err.Error(), "unsupported file type") {
+		t.Fatalf("selected FIFO error = %v", err)
+	}
+}
diff --git a/internal/dockerdeploy/python_local_sources_test.go b/internal/dockerdeploy/python_local_sources_test.go
index 00970bae..da2a62c3 100644
--- a/internal/dockerdeploy/python_local_sources_test.go
+++ b/internal/dockerdeploy/python_local_sources_test.go
@@ -17,7 +17,7 @@ func TestPythonLocalOverridesV1ExtractsSortedLocatorsWithoutFilesystemReads(t *t
 		Providers: map[string]map[string]deploy.ResolvedPackageOverrideChoiceV1{
 			"python": {
 				"other":    {Version: "2.0"},
-				"demo-pkg": {Path: missing},
+				"demo-pkg": {Path: missing, Exclude: []string{"recordings/.omegaflow"}},
 			},
 		},
 	}
@@ -25,7 +25,10 @@ func TestPythonLocalOverridesV1ExtractsSortedLocatorsWithoutFilesystemReads(t *t
 	if err != nil {
 		t.Fatal(err)
 	}
-	want := []PythonLocalOverrideV1{{Distribution: "demo-pkg", HostDir: missing}}
+	want := []PythonLocalOverrideV1{{
+		Distribution: "demo-pkg", HostDir: missing,
+		Exclude: []string{"recordings/.omegaflow"},
+	}}
 	if !reflect.DeepEqual(overrides, want) {
 		t.Fatalf("local overrides = %#v, want %#v", overrides, want)
 	}
@@ -40,8 +43,14 @@ func TestObserveSelectedPythonLocalSourcesDoesNotReadUnselectedPaths(t *testing.
 	if err := os.WriteFile(filepath.Join(selected, "pyproject.toml"), []byte("[project]\nname='demo'\nversion='1.0'\n"), 0o644); err != nil {
 		t.Fatal(err)
 	}
+	if err := os.Mkdir(filepath.Join(selected, "generated"), 0o755); err != nil {
+		t.Fatal(err)
+	}
+	if err := os.WriteFile(filepath.Join(selected, "generated", "state"), []byte("state"), 0o644); err != nil {
+		t.Fatal(err)
+	}
 	overrides := []PythonLocalOverrideV1{
-		{Distribution: "demo", HostDir: selected},
+		{Distribution: "demo", HostDir: selected, Exclude: []string{"generated"}},
 		{Distribution: "unused", HostDir: filepath.Join(root, "missing")},
 	}
 	sources, err := ObserveSelectedPythonLocalSources(overrides, []string{"demo"})
@@ -49,9 +58,15 @@ func TestObserveSelectedPythonLocalSourcesDoesNotReadUnselectedPaths(t *testing.
 		t.Fatal(err)
 	}
 	if len(sources) != 1 || sources[0].Distribution != "demo" ||
-		sources[0].HostDir != selected || len(sources[0].Manifest.Entries) == 0 {
+		sources[0].HostDir != selected || len(sources[0].Manifest.Entries) == 0 ||
+		!reflect.DeepEqual(sources[0].Manifest.Exclude, []string{"generated"}) {
 		t.Fatalf("local sources = %#v", sources)
 	}
+	for _, entry := range sources[0].Manifest.Entries {
+		if entry.Path == "generated" || strings.HasPrefix(entry.Path, "generated/") {
+			t.Fatalf("selected source retained excluded path: %#v", entry)
+		}
+	}
 }
 
 func TestObserveSelectedPythonLocalSourcesBindsCurrentContent(t *testing.T) {
@@ -177,3 +192,51 @@ func TestObservePythonSourceManifestCanonicalizesDepthFirstTraversal(t *testing.
 		t.Fatalf("manifest paths = %#v, want %#v", got, want)
 	}
 }
+
+func TestObservePythonSourceManifestAppliesExactExclusionsAndBindsIntent(t *testing.T) {
+	sourceDir := t.TempDir()
+	for name, content := range map[string]string{
+		"pyproject.toml":                   "[build-system]\n",
+		"recordings/keep.txt":              "keep\n",
+		"recordings/.omegaflow/state.json": "generated\n",
+	} {
+		filename := filepath.Join(sourceDir, filepath.FromSlash(name))
+		if err := os.MkdirAll(filepath.Dir(filename), 0o755); err != nil {
+			t.Fatal(err)
+		}
+		if err := os.WriteFile(filename, []byte(content), 0o644); err != nil {
+			t.Fatal(err)
+		}
+	}
+
+	manifest, digest, err := ObservePythonSourceManifestWithExclusions(
+		sourceDir, []string{"recordings/.omegaflow"},
+	)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if !reflect.DeepEqual(manifest.Exclude, []string{"recordings/.omegaflow"}) {
+		t.Fatalf("manifest exclusions = %#v", manifest.Exclude)
+	}
+	for _, entry := range manifest.Entries {
+		if entry.Path == "recordings/.omegaflow" || strings.HasPrefix(entry.Path, "recordings/.omegaflow/") {
+			t.Fatalf("excluded source entry was observed: %#v", entry)
+		}
+	}
+	withoutIntent, withoutIntentDigest, err := ObservePythonSourceManifestWithExclusions(
+		sourceDir, []string{"missing-generated-state"},
+	)
+	if err != nil {
+		t.Fatal(err)
+	}
+	baseline, baselineDigest, err := ObservePythonSourceManifest(sourceDir)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if !reflect.DeepEqual(withoutIntent.Entries, baseline.Entries) {
+		t.Fatalf("nonexistent exclusion changed selected entries: %#v / %#v", withoutIntent.Entries, baseline.Entries)
+	}
+	if withoutIntentDigest == baselineDigest || digest == baselineDigest {
+		t.Fatal("source exclusion intent did not participate in the source-input digest")
+	}
+}
diff --git a/internal/dockerdeploy/python_resolver_wheels_integration_test.go b/internal/dockerdeploy/python_resolver_wheels_integration_test.go
index bf9fa28e..2ca98c9a 100644
--- a/internal/dockerdeploy/python_resolver_wheels_integration_test.go
+++ b/internal/dockerdeploy/python_resolver_wheels_integration_test.go
@@ -152,8 +152,8 @@ func TestPythonLocalSourceResolverIntegration(t *testing.T) {
 		t.Fatal(err)
 	}
 	pyproject := `[build-system]
-requires = ["setuptools>=77"]
-build-backend = "setuptools.build_meta"
+requires = ["hatchling"]
+build-backend = "hatchling.build"
 
 [project]
 name = "demo-server"
@@ -177,7 +177,9 @@ demo-server = "demo_server:main"
 	); err != nil {
 		t.Fatal(err)
 	}
-	manifest, digest, err := ObservePythonSourceManifest(sourceDir)
+	manifest, digest, err := ObservePythonSourceManifestWithExclusions(
+		sourceDir, []string{".venv-demo"},
+	)
 	if err != nil {
 		t.Fatal(err)
 	}
@@ -189,6 +191,9 @@ demo-server = "demo_server:main"
 	if err != nil {
 		t.Fatal(err)
 	}
+	if _, err := os.Lstat(filepath.Join(snapshots[0].HostDir, ".venv-demo")); !os.IsNotExist(err) {
+		t.Fatalf("excluded .venv-demo entered immutable source snapshot: %v", err)
+	}
 	probeWorkspace := buildIntegrationProbeWorkspace(t, platform)
 	session, err := OpenPythonResolverSession(ctx, descriptor, probeWorkspace, artifacts)
 	if err != nil {
diff --git a/internal/dockerdeploy/python_source_snapshots.go b/internal/dockerdeploy/python_source_snapshots.go
index 312ffa71..c7bfed86 100644
--- a/internal/dockerdeploy/python_source_snapshots.go
+++ b/internal/dockerdeploy/python_source_snapshots.go
@@ -9,12 +9,14 @@ import (
 	"path"
 	"path/filepath"
 	"reflect"
+	"slices"
 	"strconv"
 	"strings"
 	"unicode/utf8"
 
 	"github.com/omry/reploy/internal/blueprint"
 	"github.com/omry/reploy/internal/canonical"
+	"github.com/omry/reploy/internal/deploy"
 	pythonprovider "github.com/omry/reploy/internal/providers/python"
 )
 
@@ -161,6 +163,16 @@ func validatePythonSourceManifestV1(manifest PythonSourceManifestV1) error {
 	if manifest.Entries == nil {
 		return fmt.Errorf("entries must use an array")
 	}
+	if manifest.Exclude == nil {
+		return fmt.Errorf("exclude must use an array")
+	}
+	exclusions, err := deploy.NormalizePackageOverrideExclusionsV1(manifest.Exclude)
+	if err != nil {
+		return fmt.Errorf("exclusions: %w", err)
+	}
+	if !slices.Equal(exclusions, manifest.Exclude) {
+		return fmt.Errorf("exclusions must be unique and sorted")
+	}
 	directories := map[string]struct{}{".": {}}
 	for index, entry := range manifest.Entries {
 		if entry.Path == "" || entry.Path == "." || path.IsAbs(entry.Path) || path.Clean(entry.Path) != entry.Path ||
@@ -279,7 +291,7 @@ func stageOnePythonSourceSnapshot(source PythonLocalSource, destination string)
 	if err := os.Chmod(destination, 0o555); err != nil {
 		return err
 	}
-	observed, digest, err := ObservePythonSourceManifest(destination)
+	observed, digest, err := ObservePythonSourceManifestWithExclusions(destination, source.Manifest.Exclude)
 	if err != nil {
 		return err
 	}
diff --git a/internal/dockerdeploy/python_source_snapshots_test.go b/internal/dockerdeploy/python_source_snapshots_test.go
index 5dc8ac0c..8466b3d5 100644
--- a/internal/dockerdeploy/python_source_snapshots_test.go
+++ b/internal/dockerdeploy/python_source_snapshots_test.go
@@ -86,7 +86,8 @@ func TestStagePythonLocalSourceSnapshotsCopiesOnlyManifestEntries(t *testing.T)
 func TestStagePythonLocalSourceSnapshotsExplainsInvalidManifestOrder(t *testing.T) {
 	sourceDir := t.TempDir()
 	manifest := PythonSourceManifestV1{
-		Schema: pythonSourceManifestSchemaV1,
+		Schema:  pythonSourceManifestSchemaV1,
+		Exclude: []string{},
 		Entries: []PythonSourceManifestEntryV1{
 			{Path: "zeta", Kind: "directory", Mode: "0755"},
 			{Path: "alpha", Kind: "directory", Mode: "0755"},
diff --git a/internal/overrideui/editor.go b/internal/overrideui/editor.go
index 9173b20f..99c8b812 100644
--- a/internal/overrideui/editor.go
+++ b/internal/overrideui/editor.go
@@ -1024,7 +1024,11 @@ func (m *model) viewMain() string {
 			source = item.Provider + " provider"
 		}
 		if item.Choice.Path != "" {
-			source = "local · " + item.Choice.Path
+			if len(item.Choice.Exclude) == 0 {
+				source = "local · " + item.Choice.Path
+			} else {
+				source = fmt.Sprintf("local · %d excluded · %s", len(item.Choice.Exclude), item.Choice.Path)
+			}
 		}
 		if item.Choice.Version != "" {
 			if item.Provider == "python" {
@@ -1099,7 +1103,7 @@ func (m *model) viewMain() string {
 }
 
 func (m *model) isUnusedOverride(item overrideItem) bool {
-	if item.Choice == (deploy.PackageOverrideChoiceV1{}) {
+	if item.Choice.Empty() {
 		return false
 	}
 	for _, unused := range m.unusedOverrides {
@@ -1484,7 +1488,7 @@ func (m *model) updateMain(key tea.KeyMsg) (tea.Model, tea.Cmd) {
 func (m *model) updateChoose(key tea.KeyMsg) (tea.Model, tea.Cmd) {
 	switch key.String() {
 	case "esc":
-		if !m.current().Explicit && m.current().Choice == (deploy.PackageOverrideChoiceV1{}) {
+		if !m.current().Explicit && m.current().Choice.Empty() {
 			m.resetCurrentOverride()
 		}
 		m.screen = screenMain
@@ -1733,7 +1737,10 @@ func (m *model) updatePath(key tea.KeyMsg) (tea.Model, tea.Cmd) {
 			m.status = "Choose a project directory, enter a path relative to the workspace, or enter an absolute path."
 			return m, nil
 		}
-		m.items[m.cursor].Choice = deploy.PackageOverrideChoiceV1{Path: storedPath(m.workspaceResolved, selected)}
+		m.items[m.cursor].Choice = deploy.PackageOverrideChoiceV1{
+			Path:    storedPath(m.workspaceResolved, selected),
+			Exclude: append([]string{}, m.items[m.cursor].Choice.Exclude...),
+		}
 		m.input.Blur()
 		m.screen = screenMain
 		m.dirty = true
@@ -2063,7 +2070,7 @@ func (m *model) refreshDiscoveredItems() {
 				item.Sources = append([]string{}, sources...)
 			}
 		} else if item.Discovered {
-			if item.Choice == (deploy.PackageOverrideChoiceV1{}) {
+			if item.Choice.Empty() {
 				continue
 			}
 			item.Discovered = false
diff --git a/internal/overrideui/editor_test.go b/internal/overrideui/editor_test.go
index 008265fd..ba1ef64c 100644
--- a/internal/overrideui/editor_test.go
+++ b/internal/overrideui/editor_test.go
@@ -29,7 +29,7 @@ func TestNewModelLoadsExistingOverridesAndBlueprintRoots(t *testing.T) {
 	overrides.Environment.Base = &deploy.BaseImageOverrideV1{Image: "python:3.13-slim"}
 	overrides.Environment.Vars["workspace_root"] = filepath.Dir(project)
 	overrides.Environment.PackageOverrides["python"] = map[string]deploy.PackageOverrideChoiceV1{
-		"demo":  {Path: "{{ workspace_root }}/demo"},
+		"demo":  {Path: "{{ workspace_root }}/demo", Exclude: []string{"recordings/.omegaflow"}},
 		"extra": {Version: "2.0"},
 	}
 	commitOverrides(t, dir, overrides)
@@ -54,12 +54,16 @@ func TestNewModelLoadsExistingOverridesAndBlueprintRoots(t *testing.T) {
 	if len(m.items) != 3 {
 		t.Fatalf("items = %#v", m.items)
 	}
-	if m.items[0].Package != "other" || !m.items[0].Explicit || m.items[0].Choice != (deploy.PackageOverrideChoiceV1{}) {
+	if m.items[0].Package != "other" || !m.items[0].Explicit || !m.items[0].Choice.Empty() {
 		t.Fatalf("blueprint root = %#v", m.items[0])
 	}
 	if m.items[1].Package != "demo" || m.items[1].Explicit || m.items[1].Choice.Path == "" {
 		t.Fatalf("demo item = %#v", m.items[1])
 	}
+	if !reflect.DeepEqual(m.items[1].Choice.Exclude, []string{"recordings/.omegaflow"}) ||
+		!reflect.DeepEqual(m.buildRaw().Environment.PackageOverrides["python"]["demo"].Exclude, []string{"recordings/.omegaflow"}) {
+		t.Fatalf("editor did not preserve local-source exclusions: %#v", m.items[1].Choice)
+	}
 	if m.items[2].Package != "extra" || m.items[2].Explicit || m.items[2].Choice.Version != "2.0" {
 		t.Fatalf("extra item = %#v", m.items[2])
 	}
@@ -628,7 +632,10 @@ func TestMainViewFitsNarrowTerminal(t *testing.T) {
 	m := editorModelForInteraction(t)
 	m.width = 48
 	m.height = 24
-	m.items[0].Choice = deploy.PackageOverrideChoiceV1{Path: "/a/very/long/path/to/a/local/project/that/must/not-overflow"}
+	m.items[0].Choice = deploy.PackageOverrideChoiceV1{
+		Path:    "/a/very/long/path/to/a/local/project/that/must/not-overflow",
+		Exclude: []string{"recordings/.omegaflow"},
+	}
 	m.items = append(m.items, overrideItem{
 		Provider: "python",
 		Package:  "a-long-package-name-that-is-only-an-override",
@@ -649,17 +656,26 @@ func TestMainViewFitsNarrowTerminal(t *testing.T) {
 	if !strings.Contains(view, "override-only") {
 		t.Fatalf("narrow view lost override-only classification:\n%s", view)
 	}
+	if !strings.Contains(view, "1 excluded") {
+		t.Fatalf("narrow view hid the local source exclusion count:\n%s", view)
+	}
 }
 
 func TestMainViewShowsFullLocalPathWhenTerminalHasRoom(t *testing.T) {
 	m := editorModelForInteraction(t)
 	m.width = 140
 	path := "/home/omry/dev/reploy/examples/omegaconf-inspector"
-	m.items[0].Choice = deploy.PackageOverrideChoiceV1{Path: path}
+	m.items[0].Choice = deploy.PackageOverrideChoiceV1{
+		Path:    path,
+		Exclude: []string{"recordings/.omegaflow"},
+	}
 	view := m.View()
-	if !strings.Contains(view, "local · "+path) {
+	if !strings.Contains(view, path) {
 		t.Fatalf("wide view truncated the local source path:\n%s", view)
 	}
+	if !strings.Contains(view, "1 excluded") {
+		t.Fatalf("wide view hid the local source exclusion count:\n%s", view)
+	}
 }
 
 func TestProjectResultsDoNotRenderTerminalControls(t *testing.T) {
@@ -899,7 +915,7 @@ func TestResetRemovesOverrideOnlyRowButRetainsExplicitDependency(t *testing.T) {
 	m.cursor = 0
 	updated, _ = m.updateKey(tea.KeyMsg{Type: tea.KeyDelete})
 	m = updated.(*model)
-	if len(m.items) != 1 || m.items[0].Choice != (deploy.PackageOverrideChoiceV1{}) {
+	if len(m.items) != 1 || !m.items[0].Choice.Empty() {
 		t.Fatalf("reset explicit items = %#v", m.items)
 	}
 }
@@ -1082,6 +1098,25 @@ func TestLocalSourceEditorPrefillsWorkspaceRelativeSelection(t *testing.T) {
 	}
 }
 
+func TestLocalSourceEditorPreservesExclusionsWhenReselectingPath(t *testing.T) {
+	workspace := t.TempDir()
+	project := pythonProject(t, filepath.Join(workspace, "demo"), "demo")
+	m := editorModelForInteraction(t)
+	m.workspaceResolved = workspace
+	m.items[0].Choice = deploy.PackageOverrideChoiceV1{
+		Path:    "{{ workspace_root }}/demo",
+		Exclude: []string{"recordings/.omegaflow"},
+	}
+	m.screen = screenPath
+	m.input.SetValue(project)
+	m.results = []string{}
+	updated, _ := m.updatePath(tea.KeyMsg{Type: tea.KeyEnter})
+	m = updated.(*model)
+	if !reflect.DeepEqual(m.items[0].Choice.Exclude, []string{"recordings/.omegaflow"}) {
+		t.Fatalf("reselected local path dropped exclusions: %#v", m.items[0].Choice)
+	}
+}
+
 func TestMatchingProjectsDoesNotSilentlyTruncateWorkspace(t *testing.T) {
 	root := t.TempDir()
 	for index := range 105 {
diff --git a/internal/providers/python/source_distribution.go b/internal/providers/python/source_distribution.go
index 9612a751..021d0d7b 100644
--- a/internal/providers/python/source_distribution.go
+++ b/internal/providers/python/source_distribution.go
@@ -284,9 +284,14 @@ func inspectSourceDistributionArchive(filename string) (SourceDistributionMetada
 			)
 		}
 	}
-	if root == "" || paths[root] != tar.TypeDir {
+	if root == "" {
 		return SourceDistributionMetadataV1{}, fmt.Errorf(
-			"Python source distribution must contain one explicit top-level directory",
+			"Python source distribution must contain exactly one top-level directory",
+		)
+	}
+	if rootType, found := paths[root]; found && rootType != tar.TypeDir {
+		return SourceDistributionMetadataV1{}, fmt.Errorf(
+			"Python source distribution top-level path %q must be a directory", root,
 		)
 	}
 	for name := range paths {
@@ -297,6 +302,12 @@ func inspectSourceDistributionArchive(filename string) (SourceDistributionMetada
 					name, parent,
 				)
 			}
+			if parentType, found := paths[parent]; found && parentType != tar.TypeDir {
+				return SourceDistributionMetadataV1{}, fmt.Errorf(
+					"Python source distribution path %q traverses non-directory ancestor %q",
+					name, parent,
+				)
+			}
 		}
 	}
 	if len(packageMetadata) == 0 {
diff --git a/internal/providers/python/source_distribution_test.go b/internal/providers/python/source_distribution_test.go
index 606acf92..fac41905 100644
--- a/internal/providers/python/source_distribution_test.go
+++ b/internal/providers/python/source_distribution_test.go
@@ -61,6 +61,46 @@ func TestSourceDistributionValidationAndExtraction(t *testing.T) {
 	}
 }
 
+func TestSourceDistributionAcceptsImplicitSingleRoot(t *testing.T) {
+	archive := filepath.Join(t.TempDir(), "demo_pkg-1.2.3.tar.gz")
+	writeTestSourceDistribution(t, archive, []testSourceDistributionEntry{
+		{name: "demo_pkg-1.2.3/pyproject.toml", kind: tar.TypeReg, content: "[build-system]\n"},
+		{name: "demo_pkg-1.2.3/PKG-INFO", kind: tar.TypeReg, content: "Name: Demo-Pkg\nVersion: 1.2.3\n\n"},
+		{name: "demo_pkg-1.2.3/src/demo.py", kind: tar.TypeReg, content: "value = 1\n"},
+	})
+	descriptor, metadata, err := DescribeSourceDistributionFileV1(
+		archive, "sdists/demo_pkg-1.2.3.tar.gz",
+	)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if descriptor.Kind != "sdist" || metadata.Root != "demo_pkg-1.2.3" {
+		t.Fatalf("descriptor/metadata = %#v / %#v", descriptor, metadata)
+	}
+	destination := t.TempDir()
+	if _, err := ExtractSourceDistributionFileV1(archive, destination); err != nil {
+		t.Fatal(err)
+	}
+	content, err := os.ReadFile(filepath.Join(destination, "demo_pkg-1.2.3", "src", "demo.py"))
+	if err != nil || string(content) != "value = 1\n" {
+		t.Fatalf("implicit-root extracted file = %q, %v", content, err)
+	}
+}
+
+func TestSourceDistributionRejectsExplicitNonDirectoryRoot(t *testing.T) {
+	archive := filepath.Join(t.TempDir(), "demo-1.tar.gz")
+	writeTestSourceDistribution(t, archive, []testSourceDistributionEntry{
+		{name: "demo-1", kind: tar.TypeReg, content: "not a directory"},
+		{name: "demo-1/pyproject.toml", kind: tar.TypeReg, content: "[build-system]\n"},
+		{name: "demo-1/PKG-INFO", kind: tar.TypeReg, content: "Name: demo\nVersion: 1\n\n"},
+	})
+	if _, _, err := DescribeSourceDistributionFileV1(
+		archive, "sdists/demo-1.tar.gz",
+	); err == nil || !strings.Contains(err.Error(), "top-level path \"demo-1\" must be a directory") {
+		t.Fatalf("error = %v", err)
+	}
+}
+
 func TestSourceDistributionRejectsUnsafeArchiveShapes(t *testing.T) {
 	tests := []struct {
 		name  string
@@ -107,6 +147,21 @@ func TestSourceDistributionRejectsUnsafeArchiveShapes(t *testing.T) {
 	}
 }
 
+func TestSourceDistributionRejectsExplicitNonDirectoryAncestor(t *testing.T) {
+	archive := filepath.Join(t.TempDir(), "demo-1.tar.gz")
+	writeTestSourceDistribution(t, archive, []testSourceDistributionEntry{
+		{name: "demo-1/pyproject.toml", kind: tar.TypeReg, content: "[build-system]\n"},
+		{name: "demo-1/PKG-INFO", kind: tar.TypeReg, content: "Name: demo\nVersion: 1\n\n"},
+		{name: "demo-1/src", kind: tar.TypeReg, content: "not a directory"},
+		{name: "demo-1/src/demo.py", kind: tar.TypeReg, content: "value = 1\n"},
+	})
+	if _, _, err := DescribeSourceDistributionFileV1(
+		archive, "sdists/demo-1.tar.gz",
+	); err == nil || !strings.Contains(err.Error(), "non-directory ancestor") {
+		t.Fatalf("error = %v", err)
+	}
+}
+
 func TestSourceDistributionPKGINFOErrorsNameTheSdistMetadata(t *testing.T) {
 	archive := filepath.Join(t.TempDir(), "demo-1.tar.gz")
 	writeTestSourceDistribution(t, archive, []testSourceDistributionEntry{