diff --git a/_appmap/importer.py b/_appmap/importer.py
index ab33b427..93c6bcb0 100644
--- a/_appmap/importer.py
+++ b/_appmap/importer.py
@@ -173,12 +173,15 @@ def instrument_functions(filterable, selected_functions=None):
             logger.debug("  functions %s", functions)
 
             for fn_name, static_fn, fn in functions:
-                if selected_functions and fn_name not in selected_functions:
-                    continue
 
-                new_fn = cls.filter_chain.wrap(FilterableFn(filterable, fn, static_fn))
-                if fn != new_fn:
-                    wrapt.wrap_function_wrapper(filterable.obj, fn_name, new_fn)
+                # Only instrument the function if it was specifically called out for the package
+                # (e.g. because it should be labeled), or it's included by the filters
+                filterableFn = FilterableFn(filterable, fn, static_fn)
+                matched = cls.filter_chain.filter(filterableFn)
+                if (selected_functions and fn_name in selected_functions) or matched:
+                    new_fn = cls.filter_chain.wrap(filterableFn)
+                    if fn != new_fn:
+                        wrapt.wrap_function_wrapper(filterable.obj, fn_name, new_fn)
 
         # Import Config here, to avoid circular top-level imports.
         from .configuration import Config  # pylint: disable=import-outside-toplevel
diff --git a/_appmap/test/conftest.py b/_appmap/test/conftest.py
index 4bccae1f..a9f5385b 100644
--- a/_appmap/test/conftest.py
+++ b/_appmap/test/conftest.py
@@ -1,4 +1,5 @@
 import importlib
+import sys
 from distutils.dir_util import copy_tree
 from functools import partialmethod
 
@@ -65,6 +66,10 @@ def pytest_runtest_setup(item):
     # Reload it to make sure it's instrumented, or not, as set in appmap.yml.
     importlib.reload(yaml)
 
+    # Remove the example_class module, so it will get reinstrumented the next time it's needed. We
+    # should find a way to do this more generically, i.e. for any modules loaded by a test case.
+    sys.modules.pop("example_class", None)
+
 
 @pytest.fixture(scope="session", name="git_directory")
 def git_directory_fixture(tmp_path_factory):
@@ -100,6 +105,7 @@ def _dj_autoclear_mailbox() -> None:
 
 @pytest.fixture(name="verify_example_appmap")
 def fixture_verify_appmap(monkeypatch):
+
     def _generate(check_fn, method_name):
         monkeypatch.setattr(
             generation.FuncEntry,
@@ -110,7 +116,9 @@ def _generate(check_fn, method_name):
         rec = appmap.Recording()
         with rec:
             # pylint: disable=import-outside-toplevel, import-error
-            from example_class import ExampleClass
+            from example_class import (  # pyright: ignore[reportMissingImports]
+                ExampleClass,
+            )
 
             # pylint: enable=import-outside-toplevel, import-error
 
diff --git a/_appmap/test/data/appmap-exclude-fn.yml b/_appmap/test/data/appmap-exclude-fn.yml
new file mode 100644
index 00000000..a317cc9b
--- /dev/null
+++ b/_appmap/test/data/appmap-exclude-fn.yml
@@ -0,0 +1,7 @@
+
+name: TestApp
+packages:
+- path: example_class
+  exclude:
+  - ExampleClass.another_method
+- path: package1.package2.Mod1Class
diff --git a/_appmap/test/data/appmap-no-pyyaml.yml b/_appmap/test/data/appmap-no-pyyaml.yml
new file mode 100644
index 00000000..5cbfd963
--- /dev/null
+++ b/_appmap/test/data/appmap-no-pyyaml.yml
@@ -0,0 +1,13 @@
+name: TestApp
+packages:
+# note: this rule needs to go first, before the more general rule
+- path: example_class.Super
+  shallow: true
+- path: example_class
+- path: appmap_testing
+- path: package1
+labels:
+  serialization: yaml.dump
+  example-label:
+  - example_class.ExampleClass.test_exception
+  - yaml.dump
diff --git a/_appmap/test/test_importer.py b/_appmap/test/test_importer.py
index 4559bd13..88edab8b 100644
--- a/_appmap/test/test_importer.py
+++ b/_appmap/test/test_importer.py
@@ -2,7 +2,10 @@
 
 import sys
 
+import pytest
+
 from _appmap.importer import Importer, wrap_exec_module
+from _appmap.wrapt.wrappers import BoundFunctionWrapper
 
 
 def test_exec_module_protection(monkeypatch):
@@ -28,3 +31,18 @@ def do_import(*args, **kwargs):  # pylint: disable=unused-argument
 
     f()
     assert True
+
+
+@pytest.mark.appmap_enabled(config="appmap-exclude-fn.yml")
+@pytest.mark.usefixtures("with_data_dir")
+def test_excluded(verify_example_appmap):
+    def check_imports(*_):
+        #  pylint: disable=import-outside-toplevel, import-error
+        from example_class import ExampleClass  # pyright: ignore[reportMissingImports]
+
+        #  pylint: enable=import-outside-toplevel, import-error
+
+        assert isinstance(ExampleClass.instance_method, BoundFunctionWrapper)
+        assert not isinstance(ExampleClass.another_method, BoundFunctionWrapper)
+
+    verify_example_appmap(check_imports, "instance_method")
diff --git a/_appmap/test/test_labels.py b/_appmap/test/test_labels.py
index 624217e1..a5a11887 100644
--- a/_appmap/test/test_labels.py
+++ b/_appmap/test/test_labels.py
@@ -40,6 +40,7 @@ def check_labels(*_):
 
         verify_example_appmap(check_labels, "instance_method")
 
+    @pytest.mark.appmap_enabled(config="appmap-no-pyyaml.yml")
     def test_mod_instrumented_by_preset(self, verify_example_appmap):
         def check_labels(*_):
             import yaml  # pylint: disable=import-outside-toplevel