diff --git a/sentry_sdk/integrations/pydantic_ai/__init__.py b/sentry_sdk/integrations/pydantic_ai/__init__.py
index 11dd171944..2f1808d14f 100644
--- a/sentry_sdk/integrations/pydantic_ai/__init__.py
+++ b/sentry_sdk/integrations/pydantic_ai/__init__.py
@@ -19,15 +19,20 @@ class PydanticAIIntegration(Integration):
     identifier = "pydantic_ai"
     origin = f"auto.ai.{identifier}"
 
-    def __init__(self, include_prompts: bool = True) -> None:
+    def __init__(
+        self, include_prompts: bool = True, handled_tool_call_exceptions: bool = True
+    ) -> None:
         """
         Initialize the Pydantic AI integration.
 
         Args:
             include_prompts: Whether to include prompts and messages in span data.
                 Requires send_default_pii=True. Defaults to True.
+            handled_tool_exceptions: Capture tool call exceptions that Pydantic AI
+                internally prevents from bubbling up.
         """
         self.include_prompts = include_prompts
+        self.handled_tool_call_exceptions = handled_tool_call_exceptions
 
     @staticmethod
     def setup_once() -> None:
diff --git a/sentry_sdk/integrations/pydantic_ai/patches/tools.py b/sentry_sdk/integrations/pydantic_ai/patches/tools.py
index e4251d671c..b826a543fc 100644
--- a/sentry_sdk/integrations/pydantic_ai/patches/tools.py
+++ b/sentry_sdk/integrations/pydantic_ai/patches/tools.py
@@ -4,10 +4,7 @@
 import sentry_sdk
 
 from ..spans import execute_tool_span, update_execute_tool_span
-from ..utils import (
-    _capture_exception,
-    get_current_agent,
-)
+from ..utils import _capture_exception, get_current_agent
 
 from typing import TYPE_CHECKING
 
@@ -23,6 +20,7 @@
 
 try:
     from pydantic_ai._tool_manager import ToolManager  # type: ignore
+    from pydantic_ai.exceptions import ToolRetryError  # type: ignore
 except ImportError:
     raise DidNotEnable("pydantic-ai not installed")
 
@@ -82,8 +80,21 @@ async def wrapped_call_tool(
                         )
                         update_execute_tool_span(span, result)
                         return result
-                    except Exception as exc:
-                        _capture_exception(exc)
+                    except ToolRetryError as exc:
+                        # Avoid circular import due to multi-file integration structure
+                        from sentry_sdk.integrations.pydantic_ai import (
+                            PydanticAIIntegration,
+                        )
+
+                        integration = sentry_sdk.get_client().get_integration(
+                            PydanticAIIntegration
+                        )
+                        if (
+                            integration is None
+                            or not integration.handled_tool_call_exceptions
+                        ):
+                            raise exc from None
+                        _capture_exception(exc, handled=True)
                         raise exc from None
 
         # No span context - just call original
diff --git a/sentry_sdk/integrations/pydantic_ai/utils.py b/sentry_sdk/integrations/pydantic_ai/utils.py
index 743f3078f2..62d36fb912 100644
--- a/sentry_sdk/integrations/pydantic_ai/utils.py
+++ b/sentry_sdk/integrations/pydantic_ai/utils.py
@@ -206,12 +206,12 @@ def _set_available_tools(span: "sentry_sdk.tracing.Span", agent: "Any") -> None:
         pass
 
 
-def _capture_exception(exc: "Any") -> None:
+def _capture_exception(exc: "Any", handled: bool = False) -> None:
     set_span_errored()
 
     event, hint = event_from_exception(
         exc,
         client_options=sentry_sdk.get_client().options,
-        mechanism={"type": "pydantic_ai", "handled": False},
+        mechanism={"type": "pydantic_ai", "handled": handled},
     )
     sentry_sdk.capture_event(event, hint=hint)
diff --git a/tests/integrations/pydantic_ai/test_pydantic_ai.py b/tests/integrations/pydantic_ai/test_pydantic_ai.py
index 7f81769407..049bcde39c 100644
--- a/tests/integrations/pydantic_ai/test_pydantic_ai.py
+++ b/tests/integrations/pydantic_ai/test_pydantic_ai.py
@@ -1,10 +1,14 @@
 import asyncio
 import pytest
 
+from typing import Annotated
+from pydantic import Field
+
 from sentry_sdk.integrations.pydantic_ai import PydanticAIIntegration
 
 from pydantic_ai import Agent
 from pydantic_ai.models.test import TestModel
+from pydantic_ai.exceptions import ModelRetry, UnexpectedModelBehavior
 
 
 @pytest.fixture
@@ -277,6 +281,157 @@ def add_numbers(a: int, b: int) -> int:
         assert "add_numbers" in available_tools_str
 
 
+@pytest.mark.parametrize(
+    "handled_tool_call_exceptions",
+    [False, True],
+)
+@pytest.mark.asyncio
+async def test_agent_with_tool_model_retry(
+    sentry_init, capture_events, test_agent, handled_tool_call_exceptions
+):
+    """
+    Test that a handled exception is captured when a tool raises ModelRetry.
+    """
+
+    retries = 0
+
+    @test_agent.tool_plain
+    def add_numbers(a: int, b: int) -> float:
+        """Add two numbers together, but raises an exception on the first attempt."""
+        nonlocal retries
+        if retries == 0:
+            retries += 1
+            raise ModelRetry(message="Try again with the same arguments.")
+        return a + b
+
+    sentry_init(
+        integrations=[
+            PydanticAIIntegration(
+                handled_tool_call_exceptions=handled_tool_call_exceptions
+            )
+        ],
+        traces_sample_rate=1.0,
+        send_default_pii=True,
+    )
+
+    events = capture_events()
+
+    result = await test_agent.run("What is 5 + 3?")
+
+    assert result is not None
+
+    if handled_tool_call_exceptions:
+        (error, transaction) = events
+    else:
+        (transaction,) = events
+    spans = transaction["spans"]
+
+    if handled_tool_call_exceptions:
+        assert error["level"] == "error"
+        assert error["exception"]["values"][0]["mechanism"]["handled"]
+
+    # Find child span types (invoke_agent is the transaction, not a child span)
+    chat_spans = [s for s in spans if s["op"] == "gen_ai.chat"]
+    tool_spans = [s for s in spans if s["op"] == "gen_ai.execute_tool"]
+
+    # Should have tool spans
+    assert len(tool_spans) >= 1
+
+    # Check tool spans
+    model_retry_tool_span = tool_spans[0]
+    assert "execute_tool" in model_retry_tool_span["description"]
+    assert model_retry_tool_span["data"]["gen_ai.operation.name"] == "execute_tool"
+    assert model_retry_tool_span["data"]["gen_ai.tool.type"] == "function"
+    assert model_retry_tool_span["data"]["gen_ai.tool.name"] == "add_numbers"
+    assert "gen_ai.tool.input" in model_retry_tool_span["data"]
+
+    tool_span = tool_spans[1]
+    assert "execute_tool" in tool_span["description"]
+    assert tool_span["data"]["gen_ai.operation.name"] == "execute_tool"
+    assert tool_span["data"]["gen_ai.tool.type"] == "function"
+    assert tool_span["data"]["gen_ai.tool.name"] == "add_numbers"
+    assert "gen_ai.tool.input" in tool_span["data"]
+    assert "gen_ai.tool.output" in tool_span["data"]
+
+    # Check chat spans have available_tools
+    for chat_span in chat_spans:
+        assert "gen_ai.request.available_tools" in chat_span["data"]
+        available_tools_str = chat_span["data"]["gen_ai.request.available_tools"]
+        # Available tools is serialized as a string
+        assert "add_numbers" in available_tools_str
+
+
+@pytest.mark.parametrize(
+    "handled_tool_call_exceptions",
+    [False, True],
+)
+@pytest.mark.asyncio
+async def test_agent_with_tool_validation_error(
+    sentry_init, capture_events, test_agent, handled_tool_call_exceptions
+):
+    """
+    Test that a handled exception is captured when a tool has unsatisfiable constraints.
+    """
+
+    @test_agent.tool_plain
+    def add_numbers(a: Annotated[int, Field(gt=0, lt=0)], b: int) -> int:
+        """Add two numbers together."""
+        return a + b
+
+    sentry_init(
+        integrations=[
+            PydanticAIIntegration(
+                handled_tool_call_exceptions=handled_tool_call_exceptions
+            )
+        ],
+        traces_sample_rate=1.0,
+        send_default_pii=True,
+    )
+
+    events = capture_events()
+
+    result = None
+    with pytest.raises(UnexpectedModelBehavior):
+        result = await test_agent.run("What is 5 + 3?")
+
+    assert result is None
+
+    if handled_tool_call_exceptions:
+        (error, model_behaviour_error, transaction) = events
+    else:
+        (
+            model_behaviour_error,
+            transaction,
+        ) = events
+    spans = transaction["spans"]
+
+    if handled_tool_call_exceptions:
+        assert error["level"] == "error"
+        assert error["exception"]["values"][0]["mechanism"]["handled"]
+
+    # Find child span types (invoke_agent is the transaction, not a child span)
+    chat_spans = [s for s in spans if s["op"] == "gen_ai.chat"]
+    tool_spans = [s for s in spans if s["op"] == "gen_ai.execute_tool"]
+
+    # Should have tool spans
+    assert len(tool_spans) >= 1
+
+    # Check tool spans
+    model_retry_tool_span = tool_spans[0]
+    assert "execute_tool" in model_retry_tool_span["description"]
+    assert model_retry_tool_span["data"]["gen_ai.operation.name"] == "execute_tool"
+    assert model_retry_tool_span["data"]["gen_ai.tool.type"] == "function"
+    assert model_retry_tool_span["data"]["gen_ai.tool.name"] == "add_numbers"
+    assert "gen_ai.tool.input" in model_retry_tool_span["data"]
+
+    # Check chat spans have available_tools
+    for chat_span in chat_spans:
+        assert "gen_ai.request.available_tools" in chat_span["data"]
+        available_tools_str = chat_span["data"]["gen_ai.request.available_tools"]
+        # Available tools is serialized as a string
+        assert "add_numbers" in available_tools_str
+
+
 @pytest.mark.asyncio
 async def test_agent_with_tools_streaming(sentry_init, capture_events, test_agent):
     """