diff --git a/litellm/integrations/otel/logger.py b/litellm/integrations/otel/logger.py
index fa5770f9b81..4ddddbd92f1 100644
--- a/litellm/integrations/otel/logger.py
+++ b/litellm/integrations/otel/logger.py
@@ -29,7 +29,7 @@ from litellm.integrations.custom_logger import CustomLogger
 from litellm.integrations.otel.emitter import SpanEmitter, stamp_error
 from litellm.integrations.otel.mappers import resolve_mappers
 from litellm.integrations.otel.model.baggage import promoted_baggage
-from litellm.integrations.otel.model.config import OpenTelemetryV2Config
+from litellm.integrations.otel.model.config import OpenTelemetryV2Config, excluded_db_systems_from
 from litellm.integrations.otel.model.metadata import (
     LLMCallEvent,
     RequestIdentity,
@@ -922,7 +922,7 @@ def _excluded_db_systems(logger: "OpenTelemetryV2") -> frozenset[str]:
     configured: Final = litellm.callback_settings.get("otel", {}).get("excluded_services")
     if configured is None:
         return logger.config.excluded_services
-    return OpenTelemetryV2Config(excluded_services=configured).excluded_services
+    return excluded_db_systems_from(configured)
 
 
 def _v2_configs(in_memory_loggers: Sequence[object], logger: "OpenTelemetryV2") -> tuple[OpenTelemetryV2Config, ...]:
diff --git a/litellm/integrations/otel/model/config.py b/litellm/integrations/otel/model/config.py
index cde366b099e..c0a61c46190 100644
--- a/litellm/integrations/otel/model/config.py
+++ b/litellm/integrations/otel/model/config.py
@@ -4,7 +4,7 @@ from enum import Enum
 from functools import lru_cache
 from typing import Annotated, Any, Final
 
-from pydantic import AliasChoices, BaseModel, Field, field_validator, model_validator
+from pydantic import AliasChoices, BaseModel, Field, TypeAdapter, field_validator, model_validator
 from pydantic_settings import BaseSettings, NoDecode, SettingsConfigDict
 
 from litellm._logging import verbose_logger
@@ -352,6 +352,16 @@ class OpenTelemetryV2Config(BaseSettings):
         return cls()
 
 
+_EXCLUDED_SERVICES_INPUT: Final = TypeAdapter(str | list[str])
+
+
+def excluded_db_systems_from(value: object) -> frozenset[str]:
+    """Normalize a raw ``excluded_services`` value without building a settings model that rereads the env"""
+    parsed: Final = _EXCLUDED_SERVICES_INPUT.validate_python(value)
+    names: Final = [item.strip() for item in parsed.split(",") if item.strip()] if isinstance(parsed, str) else parsed
+    return _normalize_excluded_services(frozenset(names))
+
+
 def _normalize_excluded_services(services: frozenset[str]) -> frozenset[str]:
     """Fold each accepted spelling to its ``db.system.name`` value.
 
diff --git a/tests/unit/integrations/otel/test_otel_v2_destinations.py b/tests/unit/integrations/otel/test_otel_v2_destinations.py
index 87e89626ad9..5a7057203e4 100644
--- a/tests/unit/integrations/otel/test_otel_v2_destinations.py
+++ b/tests/unit/integrations/otel/test_otel_v2_destinations.py
@@ -1091,6 +1091,20 @@ class TestProviderWiring:
 
         assert self._fan_out_of(preset)._excluded_db_systems == frozenset({"postgresql"})
 
+    def test_callback_settings_excluded_services_apply_even_when_other_otel_env_vars_are_malformed(self, monkeypatch):
+        """Reading the setting must not rebuild the whole settings model, or an unrelated bad env
+        value the operator overrode in config would stop publication before the fan-out is attached"""
+        preset = OpenTelemetryV2(
+            config=OpenTelemetryV2Config(exporters=[ExporterSpec(kind="in_memory")]),
+            callback_name="langfuse_otel",
+        )
+        monkeypatch.setenv("LITELLM_OTEL_LEGACY_COMPAT", "not-a-bool")
+        monkeypatch.setattr(litellm, "callback_settings", {"otel": {"excluded_services": ["postgres"]}}, raising=False)
+
+        publish_global_otel_v2_provider([], lambda _p: None, registered=preset)
+
+        assert self._fan_out_of(preset)._excluded_db_systems == frozenset({"postgresql"})
+
     def test_excluded_services_fall_back_to_the_published_logger_config_without_callback_settings(self, monkeypatch):
         monkeypatch.setattr(litellm, "callback_settings", {"otel": {"exporter": "in_memory"}}, raising=False)
         preset = OpenTelemetryV2(