diff --git a/core/org.eclipse.cdt.ui/plugin.properties b/core/org.eclipse.cdt.ui/plugin.properties
index 202b774b516..a0361934ba4 100644
--- a/core/org.eclipse.cdt.ui/plugin.properties
+++ b/core/org.eclipse.cdt.ui/plugin.properties
@@ -600,8 +600,8 @@ ShiftLeftAction.label= S&hift Left
 # Decorators
 indexedFilesDecorator.label = C/C++ Indexed Files
 indexedFilesDecorator.description = Decorates files indexed by C/C++ Indexer.
-excludedFile.name = C/C++ Files Excluded from Build
-excludedFile.description = Decorates source files excluded from C/C++ build.
+excludedFile.name = C/C++ Files and Folders Excluded from Build
+excludedFile.description = Decorates source files and folders excluded from C/C++ build.
 includeFolderDecorator.name = C/C++ Missing Include Folders
 includeFolderDecorator.description = Decorates missing include folders with error/warning indicator.
 
diff --git a/core/org.eclipse.cdt.ui/plugin.xml b/core/org.eclipse.cdt.ui/plugin.xml
index 5ccde09be0e..bbd934adfb8 100644
--- a/core/org.eclipse.cdt.ui/plugin.xml
+++ b/core/org.eclipse.cdt.ui/plugin.xml
@@ -4071,7 +4071,10 @@
             state="true">
          <description>%excludedFile.description</description>
          <enablement>
-            <objectClass name="org.eclipse.core.resources.IFile" />
+            <or>
+               <objectClass name="org.eclipse.core.resources.IFile" />
+               <objectClass name="org.eclipse.core.resources.IFolder" />
+            </or>
          </enablement>
       </decorator>
       <decorator
diff --git a/core/org.eclipse.cdt.ui/src/org/eclipse/cdt/internal/ui/viewsupport/ExcludedFileDecorator.java b/core/org.eclipse.cdt.ui/src/org/eclipse/cdt/internal/ui/viewsupport/ExcludedFileDecorator.java
index 53779fad18b..04068a0852c 100644
--- a/core/org.eclipse.cdt.ui/src/org/eclipse/cdt/internal/ui/viewsupport/ExcludedFileDecorator.java
+++ b/core/org.eclipse.cdt.ui/src/org/eclipse/cdt/internal/ui/viewsupport/ExcludedFileDecorator.java
@@ -11,6 +11,8 @@
 package org.eclipse.cdt.internal.ui.viewsupport;
 
 import org.eclipse.core.resources.IFile;
+import org.eclipse.core.resources.IFolder;
+import org.eclipse.core.resources.IResource;
 import org.eclipse.jface.preference.JFacePreferences;
 import org.eclipse.jface.resource.JFaceResources;
 import org.eclipse.jface.viewers.IDecoration;
@@ -31,29 +33,27 @@ import org.eclipse.cdt.internal.ui.CPluginImages;
  * renders the label using the qualifier (gray) color.
  */
 public class ExcludedFileDecorator implements ILightweightLabelDecorator {
-
 	@Override
 	public void decorate(Object element, IDecoration decoration) {
-		if (element instanceof IFile) {
-			IFile resource = (IFile) element;
+		if (element instanceof IFile || element instanceof IFolder) {
+			IResource resource = (IResource) element;
 			ICProjectDescriptionManager mngr = CoreModel.getDefault().getProjectDescriptionManager();
 			ICProjectDescription desc = mngr.getProjectDescription(resource.getProject(), false);
 			if (desc == null)
 				return;
 			ICConfigurationDescription conf = desc.getDefaultSettingConfiguration();
 			ICSourceEntry[] entries = conf.getSourceEntries();
-			boolean isSource = false;
+			boolean isUnderSourceRoot = false;
 			for (ICSourceEntry icSourceEntry : entries) {
 				if (icSourceEntry.getFullPath().isPrefixOf(resource.getFullPath())) {
-					isSource = true;
+					isUnderSourceRoot = true;
 					break;
 				}
 			}
 			// Only bother to mark items that would be included otherwise
-			if (isSource && CDataUtil.isExcluded(resource.getFullPath(), entries)) {
+			if (isUnderSourceRoot && CDataUtil.isExcluded(resource.getFullPath(), entries)) {
 				decoration.addOverlay(CPluginImages.DESC_OVR_INACTIVE);
-				decoration.setForegroundColor(JFaceResources.getColorRegistry().get(
-						JFacePreferences.QUALIFIER_COLOR));
+				decoration.setForegroundColor(JFaceResources.getColorRegistry().get(JFacePreferences.QUALIFIER_COLOR));
 			}
 		}
 	}
@@ -76,4 +76,4 @@ public class ExcludedFileDecorator implements ILightweightLabelDecorator {
 	public void removeListener(ILabelProviderListener listener) {
 		// We don't track state changes
 	}
-}
\ No newline at end of file
+}