diff --git a/src/lib/capability.ts b/src/lib/capability.ts
index a10ac6abc..bca88f114 100644
--- a/src/lib/capability.ts
+++ b/src/lib/capability.ts
@@ -347,7 +347,7 @@ export class Capability implements CapabilityExport {
           event: Event.Update,
           finalizeCallback: async (update: InstanceType<T>, logger = aliasLogger) => {
             Log.info(`Executing finalize action with alias: ${binding.alias || "no alias provided"}`);
-            await finalizeCallback(update, logger);
+            return await finalizeCallback(update, logger);
           },
         };
         bindings.push(watchBinding);
diff --git a/src/lib/types.ts b/src/lib/types.ts
index bda05857a..fed2c7aff 100644
--- a/src/lib/types.ts
+++ b/src/lib/types.ts
@@ -276,7 +276,7 @@ export type ValidateActionResponse = {
 export type FinalizeAction<T extends GenericClass, K extends KubernetesObject = InstanceType<T>> = (
   update: K,
   logger?: Logger,
-) => Promise<void> | void;
+) => Promise<boolean | void> | boolean | void;
 
 export type FinalizeActionChain<T extends GenericClass> = {
   /**
diff --git a/src/lib/watch-processor.ts b/src/lib/watch-processor.ts
index 9fbadf35a..7761127b1 100644
--- a/src/lib/watch-processor.ts
+++ b/src/lib/watch-processor.ts
@@ -107,12 +107,22 @@ async function runBinding(binding: Binding, capabilityNamespaces: string[], igno
             if (!obj.metadata?.deletionTimestamp) {
               return;
             }
+
+            let shouldRemoveFinalizer: boolean | void | undefined = true;
             try {
-              await binding.finalizeCallback?.(obj);
+              shouldRemoveFinalizer = await binding.finalizeCallback?.(obj);
 
-              // irrespective of callback success / failure, remove pepr finalizer
+              // if not opt'ed out of / if in error state, remove pepr finalizer
             } finally {
-              await removeFinalizer(binding, obj);
+              const peprFinal = "pepr.dev/finalizer";
+              const meta = obj.metadata!;
+              const resource = `${meta.namespace || "ClusterScoped"}/${meta.name}`;
+
+              // [ true, void, undefined ] SHOULD remove finalizer
+              // [ false ] should NOT remove finalizer
+              shouldRemoveFinalizer === false
+                ? Log.debug({ obj }, `Skipping removal of finalizer '${peprFinal}' from '${resource}'`)
+                : await removeFinalizer(binding, obj);
             }
           } else {
             await binding.watchCallback?.(obj, phase);