diff --git a/dev-packages/e2e-tests/test-applications/nextjs-app-dir/app/server-action/page.tsx b/dev-packages/e2e-tests/test-applications/nextjs-app-dir/app/server-action/page.tsx
index 4137fafd9c3c..6784970d2aae 100644
--- a/dev-packages/e2e-tests/test-applications/nextjs-app-dir/app/server-action/page.tsx
+++ b/dev-packages/e2e-tests/test-applications/nextjs-app-dir/app/server-action/page.tsx
@@ -1,5 +1,6 @@
 import * as Sentry from '@sentry/nextjs';
 import { headers } from 'next/headers';
+import { notFound } from 'next/navigation';
 
 export default function ServerComponent() {
   async function myServerAction(formData: FormData) {
@@ -14,11 +15,29 @@ export default function ServerComponent() {
     );
   }
 
+  async function notFoundServerAction(formData: FormData) {
+    'use server';
+    return await Sentry.withServerActionInstrumentation(
+      'notFoundServerAction',
+      { formData, headers: headers(), recordResponse: true },
+      () => {
+        notFound();
+      },
+    );
+  }
+
   return (
-    // @ts-ignore
-    <form action={myServerAction}>
-      <input type="text" defaultValue={'some-default-value'} name="some-text-value" />
-      <button type="submit">Run Action</button>
-    </form>
+    <>
+      {/* @ts-ignore */}
+      <form action={myServerAction}>
+        <input type="text" defaultValue={'some-default-value'} name="some-text-value" />
+        <button type="submit">Run Action</button>
+      </form>
+      {/* @ts-ignore */}
+      <form action={notFoundServerAction}>
+        <input type="text" defaultValue={'some-default-value'} name="some-text-value" />
+        <button type="submit">Run NotFound Action</button>
+      </form>
+    </>
   );
 }
diff --git a/dev-packages/e2e-tests/test-applications/nextjs-app-dir/tests/transactions.test.ts b/dev-packages/e2e-tests/test-applications/nextjs-app-dir/tests/transactions.test.ts
index 3532c5c64746..6c99733381b6 100644
--- a/dev-packages/e2e-tests/test-applications/nextjs-app-dir/tests/transactions.test.ts
+++ b/dev-packages/e2e-tests/test-applications/nextjs-app-dir/tests/transactions.test.ts
@@ -140,6 +140,22 @@ test('Should send a transaction for instrumented server actions', async ({ page
   expect(Object.keys((await serverComponentTransactionPromise).request?.headers || {}).length).toBeGreaterThan(0);
 });
 
+test('Should set not_found status for server actions calling notFound()', async ({ page }) => {
+  const nextjsVersion = packageJson.dependencies.next;
+  const nextjsMajor = Number(nextjsVersion.split('.')[0]);
+  test.skip(!isNaN(nextjsMajor) && nextjsMajor < 14, 'only applies to nextjs apps >= version 14');
+
+  const serverComponentTransactionPromise = waitForTransaction('nextjs-13-app-dir', async transactionEvent => {
+    return transactionEvent?.transaction === 'serverAction/notFoundServerAction';
+  });
+
+  await page.goto('/server-action');
+  await page.getByText('Run NotFound Action').click();
+
+  expect(await serverComponentTransactionPromise).toBeDefined();
+  expect(await (await serverComponentTransactionPromise).contexts?.trace?.status).toBe('not_found');
+});
+
 test('Will not include spans in pageload transaction with faulty timestamps for slow loading pages', async ({
   page,
 }) => {
diff --git a/packages/nextjs/src/common/withServerActionInstrumentation.ts b/packages/nextjs/src/common/withServerActionInstrumentation.ts
index 0d0e6968a3b1..2fe1fd714b96 100644
--- a/packages/nextjs/src/common/withServerActionInstrumentation.ts
+++ b/packages/nextjs/src/common/withServerActionInstrumentation.ts
@@ -10,6 +10,7 @@ import {
 import { logger, tracingContextFromHeaders } from '@sentry/utils';
 
 import { DEBUG_BUILD } from './debug-build';
+import { isNotFoundNavigationError, isRedirectNavigationError } from './nextNavigationErrorUtils';
 import { platformSupportsStreaming } from './utils/platformSupportsStreaming';
 import { flushQueue } from './utils/responseEnd';
 
@@ -101,7 +102,19 @@ async function withServerActionInstrumentationImplementation<A extends (...args:
         },
         async span => {
           const result = await handleCallbackErrors(callback, error => {
-            captureException(error, { mechanism: { handled: false } });
+            if (isNotFoundNavigationError(error)) {
+              // We don't want to report "not-found"s
+              span?.setStatus('not_found');
+            } else if (isRedirectNavigationError(error)) {
+              // Don't do anything for redirects
+            } else {
+              span?.setStatus('internal_error');
+              captureException(error, {
+                mechanism: {
+                  handled: false,
+                },
+              });
+            }
           });
 
           if (options.recordResponse !== undefined ? options.recordResponse : sendDefaultPii) {