diff --git a/litellm/proxy/_types.py b/litellm/proxy/_types.py
index 5bba842c7eb..0929fe1c398 100644
--- a/litellm/proxy/_types.py
+++ b/litellm/proxy/_types.py
@@ -2396,6 +2396,17 @@ class ConfigGeneralSettings(LiteLLMPydanticObjectBase):
         ),
     )
 
+    budget_exceeded_models_policy: Optional[Literal["blocked", "all", "free_only"]] = Field(
+        "blocked",
+        description=(
+            "Controls model-list behavior when a team/user/key budget is exceeded. "
+            "'blocked' (default) returns 429 as before. "
+            "'all' returns the full model list regardless of budget. "
+            "'free_only' returns only zero-cost models. "
+            "Inference calls always enforce the budget regardless of this setting."
+        ),
+    )
+
 
 class ConfigYAML(LiteLLMPydanticObjectBase):
     """
diff --git a/litellm/proxy/proxy_server.py b/litellm/proxy/proxy_server.py
index e4d933ac699..42718171a82 100644
--- a/litellm/proxy/proxy_server.py
+++ b/litellm/proxy/proxy_server.py
@@ -8832,6 +8832,13 @@ async def model_list(
     if hidden_names:
         all_models = [m for m in all_models if m not in hidden_names]
 
+    # Budget-exceeded models policy: when "free_only", return only zero-cost models
+    policy = settings.get("budget_exceeded_models_policy", "blocked")
+    if policy == "free_only":
+        from litellm.proxy.auth.auth_checks import _is_model_cost_zero
+
+        all_models = [m for m in all_models if _is_model_cost_zero(m, llm_router)]
+
     # Surface the public team name by default; legacy internal keys via flag.
     # The internal routing key drives the metadata/fallback lookup, while the
     # public name is what the client sees as the model id.