diff --git a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ProjectFileExclusionManager.java b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ProjectFileExclusionManager.java
index 82eeba9b06d1..f480e53dbbd8 100644
--- a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ProjectFileExclusionManager.java
+++ b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ProjectFileExclusionManager.java
@@ -27,25 +27,24 @@ import com.intellij.openapi.vfs.VfsUtil;
 import com.intellij.openapi.vfs.VirtualFile;
 import com.intellij.openapi.vfs.VirtualFileManager;
 
+import com.intellij.util.containers.HashSet;
 import com.intellij.util.indexing.FileBasedIndex;
 import org.jdom.Attribute;
 import org.jdom.Element;
 import org.jetbrains.annotations.NotNull;
 
-import java.util.Collection;
-import java.util.Map;
-import java.util.TreeMap;
+import java.util.*;
 
 /**
  * @author Rustam Vishnyakov
  */
-@State(name = "ExcludedFiles", storages = {@Storage(id = "default", file = "$PROJECT_FILE$")})
+@State(name = "ProjectFileExclusionManager", storages = {@Storage(id = "default", file = "$PROJECT_FILE$")})
 public class ProjectFileExclusionManager implements PersistentStateComponent<Element> {
 
   private final static String FILE_ELEMENT = "file";
-  private final static String PATH_ATTR = "path";
+  private final static String PATH_ATTR = "url";
 
-  private final Map<String,VirtualFile> myExcludedFiles = new TreeMap<String,VirtualFile>();
+  private final Set<VirtualFile> myExcludedFiles = new HashSet<VirtualFile>();
   private final Project myProject;
 
   public ProjectFileExclusionManager(Project project) {
@@ -54,14 +53,14 @@ public class ProjectFileExclusionManager implements PersistentStateComponent<Ele
 
   public void addExclusion(VirtualFile file) {
     if (file.isDirectory()) return;
-    myExcludedFiles.put(file.getPath(), file);
+    myExcludedFiles.add(file);
     FileBasedIndex.getInstance().requestReindexExcluded(file);
     fireRootsChange(myProject);
   }
 
   public void removeExclusion(VirtualFile file) {
-    if (myExcludedFiles.containsValue(file)) {
-      myExcludedFiles.remove(file.getPath());
+    if (myExcludedFiles.contains(file)) {
+      myExcludedFiles.remove(file);
       FileBasedIndex.getInstance().requestReindex(file);
       fireRootsChange(myProject);
     }
@@ -77,18 +76,28 @@ public class ProjectFileExclusionManager implements PersistentStateComponent<Ele
   }
 
   public boolean isExcluded(VirtualFile file) {
-    return myExcludedFiles.containsKey(file.getPath());
+    return myExcludedFiles.contains(file);
   }
 
   public Collection<VirtualFile> getExcludedFiles() {
-    return myExcludedFiles.values();
+    return myExcludedFiles;
+  }
+
+  public Collection<VirtualFile> getSortedExcludedFiles() {
+    List<VirtualFile> excludedFiles = new ArrayList<VirtualFile>();
+    excludedFiles.addAll(myExcludedFiles);
+    Collections.sort(excludedFiles, new Comparator<VirtualFile>() {
+      public int compare(final VirtualFile file1, final VirtualFile file2) {
+        return file1.getPath().toLowerCase().compareTo(file2.getPath().toLowerCase());
+      }
+    });
+    return excludedFiles;
   }
 
   @Override
   public Element getState() {
     final Element root = new Element("root");
-    for (String key : myExcludedFiles.keySet()) {
-      VirtualFile vf = myExcludedFiles.get(key);
+    for (VirtualFile vf : getSortedExcludedFiles()) {
       final Element vfElement = new Element(FILE_ELEMENT);
       final Attribute filePathAttr = new Attribute(PATH_ATTR, VfsUtil.pathToUrl(vf.getPath()));
       vfElement.setAttribute(filePathAttr);
@@ -108,7 +117,7 @@ public class ProjectFileExclusionManager implements PersistentStateComponent<Ele
           final String filePath = filePathAttr.getValue();
           VirtualFile vf = vfManager.findFileByUrl(filePath);
           if (vf != null) {
-            myExcludedFiles.put(vf.getPath(), vf);
+            myExcludedFiles.add(vf);
           }
         }
       }
diff --git a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludeFromProjectAction.java b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludeFromProjectAction.java
index fd0aa51ff604..8070e4c6d5af 100644
--- a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludeFromProjectAction.java
+++ b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludeFromProjectAction.java
@@ -15,12 +15,14 @@
  */
 package com.intellij.openapi.file.exclude.ui;
 
-import com.intellij.openapi.actionSystem.AnAction;
-import com.intellij.openapi.actionSystem.AnActionEvent;
-import com.intellij.openapi.actionSystem.DataContext;
-import com.intellij.openapi.actionSystem.PlatformDataKeys;
+import com.intellij.openapi.actionSystem.*;
+import com.intellij.openapi.application.ApplicationManager;
 import com.intellij.openapi.file.exclude.ProjectFileExclusionManager;
+import com.intellij.openapi.module.Module;
+import com.intellij.openapi.module.ModuleUtil;
 import com.intellij.openapi.project.Project;
+import com.intellij.openapi.roots.*;
+import com.intellij.openapi.vfs.VfsUtil;
 import com.intellij.openapi.vfs.VirtualFile;
 
 /**
@@ -31,11 +33,55 @@ public class ExcludeFromProjectAction extends AnAction {
   public void actionPerformed(AnActionEvent e) {
     DataContext dataContext = e.getDataContext();
     final Project project = PlatformDataKeys.PROJECT.getData(dataContext);
-    if (project == null)  return;
+    if (project == null) return;
     final VirtualFile file = PlatformDataKeys.VIRTUAL_FILE.getData(dataContext);
     if (file == null) return;
-    ProjectFileExclusionManager fileExManager = ProjectFileExclusionManager.getInstance(project);
-    if (fileExManager == null) return;
-    fileExManager.addExclusion(file);
+    if (file.isDirectory()) {
+      ApplicationManager.getApplication().runWriteAction(new Runnable() {
+        @Override
+        public void run() {
+          addExcludedFolder(project, file);
+        }
+      });
+    }
+    else {
+      ProjectFileExclusionManager fileExManager = ProjectFileExclusionManager.getInstance(project);
+      if (fileExManager == null) return;
+      fileExManager.addExclusion(file);
+    }
+  }
+
+  private static void addExcludedFolder(Project project, VirtualFile folder) {
+    Module module = ModuleUtil.findModuleForFile(folder, project);
+    if (module == null) return;
+    ModifiableRootModel model = ModuleRootManager.getInstance(module).getModifiableModel();
+    for (ContentEntry entry : model.getContentEntries()) {
+      VirtualFile entryFile = entry.getFile();
+      if (entryFile != null) {
+        if (VfsUtil.isAncestor(entryFile, folder, true)) {
+          entry.addExcludeFolder(folder);
+          model.commit();
+          return;
+        }
+      }
+    }
+    model.dispose();
+  }
+
+  @Override
+  public void update(AnActionEvent e) {
+    DataContext dataContext = e.getDataContext();
+    final VirtualFile file = PlatformDataKeys.VIRTUAL_FILE.getData(dataContext);
+    final Presentation presentation = e.getPresentation();
+    if (file == null) {
+      presentation.setVisible(false);
+      return;
+    }
+    final Project project = PlatformDataKeys.PROJECT.getData(dataContext);
+    if (project != null) {
+      if (file.equals(project.getBaseDir()) || !file.isWritable()) {
+        presentation.setEnabled(false);
+      }
+    }
   }
 }
diff --git a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludedFilesConfigurable.java b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludedFilesConfigurable.java
index 94b16f01d1fe..39973ead11d5 100644
--- a/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludedFilesConfigurable.java
+++ b/platform/lang-impl/src/com/intellij/openapi/file/exclude/ui/ExcludedFilesConfigurable.java
@@ -38,7 +38,7 @@ public class ExcludedFilesConfigurable implements SearchableConfigurable {
 
   public ExcludedFilesConfigurable(Project project) {
     myExclusionManager = ProjectFileExclusionManager.getInstance(project);
-    myExcludedFilesPanel = new ExcludedFilesPanel(myExclusionManager != null ? myExclusionManager.getExcludedFiles() : null);
+    myExcludedFilesPanel = new ExcludedFilesPanel(myExclusionManager != null ? myExclusionManager.getSortedExcludedFiles() : null);
   }
 
   @NotNull
@@ -104,11 +104,11 @@ public class ExcludedFilesConfigurable implements SearchableConfigurable {
 
   @Override
   public void reset() {
-    myExcludedFilesPanel.resetFiles(myExclusionManager != null ? myExclusionManager.getExcludedFiles() : null);
+    myExcludedFilesPanel.resetFiles(myExclusionManager != null ? myExclusionManager.getSortedExcludedFiles() : null);
   }
 
   @Override
   public void disposeUIResources() {
-    //To change body of implemented methods use File | Settings | File Templates.
+    //
   }
 }