diff --git a/CHANGELOG.md b/CHANGELOG.md
index 8cddd98c048..6004c0d1a12 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -9,10 +9,10 @@ This project adheres to [Semantic Versioning](http://semver.org/).
 
  - #2887, Add Preference `max-affected` to limit affected resources - @taimoorzaeem
  - #3171, Add an ability to dump config via admin API - @skywriter
- - #3061, Apply all function settings as transaction-scoped settings - @taimoorzaeem
  - #3171, #3046, Log schema cache stats to stderr - @steve-chavez
  - #3210, Dump schema cache through admin API - @taimoorzaeem
  - #2676, Performance improvement on bulk json inserts, around 10% increase on requests per second by removing `json_typeof` from write queries - @steve-chavez
+ - #3242. Add config `db-hoisted-tx-settings` to apply only hoisted function settings - @taimoorzaeem
 
 ### Fixed
 
diff --git a/docs/references/configuration.rst b/docs/references/configuration.rst
index 2067f38be5c..a3acebd11aa 100644
--- a/docs/references/configuration.rst
+++ b/docs/references/configuration.rst
@@ -298,6 +298,21 @@ db-extra-search-path
 
   Multiple schemas can be added in a comma-separated string, e.g. ``public, extensions``.
 
+.. _db-hoisted-tx-settings:
+
+db-hoisted-tx-settings
+----------------------
+
+  =============== ==================================================================================
+  **Type**        String
+  **Default**     statement_timeout, plan_filter.statement_cost_limit, default_transaction_isolation
+  **Reloadable**  Y
+  **Environment** PGRST_DB_HOISTED_TX_SETTINGS
+  **In-Database** pgrst.db_hoisted_tx_settings
+  =============== ==================================================================================
+
+  Hoisted settings are allowed to be applied as transaction-scoped function settings. Multiple settings can be added in a comma-separated string, e.g. ``work_mem, statement_timeout``.
+
 .. _db-max-rows:
 
 db-max-rows
diff --git a/docs/references/transactions.rst b/docs/references/transactions.rst
index a6922eb0a74..6bef2b74b69 100644
--- a/docs/references/transactions.rst
+++ b/docs/references/transactions.rst
@@ -303,7 +303,7 @@ When calling the above function (see :ref:`functions`), the statement timeout wi
 
 .. note::
 
-   Currently, only ``statement_timeout`` is applied for functions.
+   Only the transactions that are hoisted by config :ref:`db-hoisted-tx-settings` will be applied.
 
 .. _main_query:
 
diff --git a/src/PostgREST/Config.hs b/src/PostgREST/Config.hs
index 6d4de526da7..aa05b310df4 100644
--- a/src/PostgREST/Config.hs
+++ b/src/PostgREST/Config.hs
@@ -74,6 +74,7 @@ data AppConfig = AppConfig
   , configDbChannel                :: Text
   , configDbChannelEnabled         :: Bool
   , configDbExtraSearchPath        :: [Text]
+  , configDbHoistedTxSettings      :: [Text]
   , configDbMaxRows                :: Maybe Integer
   , configDbPlanEnabled            :: Bool
   , configDbPoolSize               :: Int
@@ -145,6 +146,7 @@ toText conf =
       ,("db-channel",                q . configDbChannel)
       ,("db-channel-enabled",            T.toLower . show . configDbChannelEnabled)
       ,("db-extra-search-path",      q . T.intercalate "," . configDbExtraSearchPath)
+      ,("db-hoisted-tx-settings",    q . T.intercalate "," . configDbHoistedTxSettings)
       ,("db-max-rows",                   maybe "\"\"" show . configDbMaxRows)
       ,("db-plan-enabled",               T.toLower . show . configDbPlanEnabled)
       ,("db-pool",                       show . configDbPoolSize)
@@ -240,6 +242,7 @@ parser optPath env dbSettings roleSettings roleIsolationLvl =
     <*> (fromMaybe "pgrst" <$> optString "db-channel")
     <*> (fromMaybe True <$> optBool "db-channel-enabled")
     <*> (maybe ["public"] splitOnCommas <$> optValue "db-extra-search-path")
+    <*> (maybe defaultHoistedAllowList splitOnCommas <$> optValue "db-hoisted-tx-settings")
     <*> optWithAlias (optInt "db-max-rows")
                      (optInt "max-rows")
     <*> (fromMaybe False <$> optBool "db-plan-enabled")
@@ -416,6 +419,8 @@ parser optPath env dbSettings roleSettings roleIsolationLvl =
     splitOnCommas (C.String s) = T.strip <$> T.splitOn "," s
     splitOnCommas _            = []
 
+    defaultHoistedAllowList = ["statement_timeout","plan_filter.statement_cost_limit","default_transaction_isolation"]
+
 -- | Read the JWT secret from a file if configJwtSecret is actually a
 -- filepath(has @ as its prefix). To check if the JWT secret is provided is
 -- in fact a file path, it must be decoded as 'Text' to be processed.
diff --git a/src/PostgREST/Query.hs b/src/PostgREST/Query.hs
index dee6f9c270d..a4f555b293a 100644
--- a/src/PostgREST/Query.hs
+++ b/src/PostgREST/Query.hs
@@ -256,7 +256,7 @@ setPgLocals actPlan AppConfig{..} claims role ApiRequest{..} = lift $
     roleSettingsSql = setConfigWithDynamicName <$> HM.toList (fromMaybe mempty $ HM.lookup role configRoleSettings)
     appSettingsSql = setConfigWithDynamicName <$> (join bimap toUtf8 <$> configAppSettings)
     timezoneSql = maybe mempty (\(PreferTimezone tz) -> [setConfigWithConstantName ("timezone", tz)]) $ preferTimezone iPreferences
-    funcSettingsSql = setConfigWithDynamicName <$> (join bimap toUtf8 <$> funcSettings)
+    funcSettingsSql = setConfigWithDynamicName <$> (join bimap toUtf8 <$> filter (\(a,_) -> a `elem` configDbHoistedTxSettings) funcSettings)
     searchPathSql =
       let schemas = escapeIdentList (iSchema : configDbExtraSearchPath) in
       setConfigWithConstantName ("search_path", schemas)
diff --git a/test/io/configs/expected/aliases.config b/test/io/configs/expected/aliases.config
index bf2df05a115..00d9414e05b 100644
--- a/test/io/configs/expected/aliases.config
+++ b/test/io/configs/expected/aliases.config
@@ -3,6 +3,7 @@ db-anon-role = ""
 db-channel = "pgrst"
 db-channel-enabled = true
 db-extra-search-path = "public"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit,default_transaction_isolation"
 db-max-rows = 1000
 db-plan-enabled = false
 db-pool = 10
diff --git a/test/io/configs/expected/boolean-numeric.config b/test/io/configs/expected/boolean-numeric.config
index 1359f09fef3..5c025e0c167 100644
--- a/test/io/configs/expected/boolean-numeric.config
+++ b/test/io/configs/expected/boolean-numeric.config
@@ -3,6 +3,7 @@ db-anon-role = ""
 db-channel = "pgrst"
 db-channel-enabled = true
 db-extra-search-path = "public"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit,default_transaction_isolation"
 db-max-rows = ""
 db-plan-enabled = false
 db-pool = 10
diff --git a/test/io/configs/expected/boolean-string.config b/test/io/configs/expected/boolean-string.config
index 1359f09fef3..5c025e0c167 100644
--- a/test/io/configs/expected/boolean-string.config
+++ b/test/io/configs/expected/boolean-string.config
@@ -3,6 +3,7 @@ db-anon-role = ""
 db-channel = "pgrst"
 db-channel-enabled = true
 db-extra-search-path = "public"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit,default_transaction_isolation"
 db-max-rows = ""
 db-plan-enabled = false
 db-pool = 10
diff --git a/test/io/configs/expected/defaults.config b/test/io/configs/expected/defaults.config
index aefd98aa0d4..1d0c095d618 100644
--- a/test/io/configs/expected/defaults.config
+++ b/test/io/configs/expected/defaults.config
@@ -3,6 +3,7 @@ db-anon-role = ""
 db-channel = "pgrst"
 db-channel-enabled = true
 db-extra-search-path = "public"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit,default_transaction_isolation"
 db-max-rows = ""
 db-plan-enabled = false
 db-pool = 10
diff --git a/test/io/configs/expected/no-defaults-with-db-other-authenticator.config b/test/io/configs/expected/no-defaults-with-db-other-authenticator.config
index ffa9fd5280c..d203891143c 100644
--- a/test/io/configs/expected/no-defaults-with-db-other-authenticator.config
+++ b/test/io/configs/expected/no-defaults-with-db-other-authenticator.config
@@ -3,6 +3,7 @@ db-anon-role = "pre_config_role"
 db-channel = "postgrest"
 db-channel-enabled = false
 db-extra-search-path = "public,extensions,other"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit"
 db-max-rows = 100
 db-plan-enabled = true
 db-pool = 1
diff --git a/test/io/configs/expected/no-defaults-with-db.config b/test/io/configs/expected/no-defaults-with-db.config
index a78347593c6..0f31856ac82 100644
--- a/test/io/configs/expected/no-defaults-with-db.config
+++ b/test/io/configs/expected/no-defaults-with-db.config
@@ -3,6 +3,7 @@ db-anon-role = "anonymous"
 db-channel = "postgrest"
 db-channel-enabled = false
 db-extra-search-path = "public,extensions,private"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit"
 db-max-rows = 500
 db-plan-enabled = false
 db-pool = 1
diff --git a/test/io/configs/expected/no-defaults.config b/test/io/configs/expected/no-defaults.config
index 2a45b21df00..b6ebf4426c1 100644
--- a/test/io/configs/expected/no-defaults.config
+++ b/test/io/configs/expected/no-defaults.config
@@ -3,6 +3,7 @@ db-anon-role = "root"
 db-channel = "postgrest"
 db-channel-enabled = false
 db-extra-search-path = "public,test"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit"
 db-max-rows = 1000
 db-plan-enabled = true
 db-pool = 1
diff --git a/test/io/configs/expected/types.config b/test/io/configs/expected/types.config
index e6d0328b657..b363c94bb41 100644
--- a/test/io/configs/expected/types.config
+++ b/test/io/configs/expected/types.config
@@ -3,6 +3,7 @@ db-anon-role = ""
 db-channel = "pgrst"
 db-channel-enabled = true
 db-extra-search-path = "public"
+db-hoisted-tx-settings = "statement_timeout,plan_filter.statement_cost_limit,default_transaction_isolation"
 db-max-rows = ""
 db-plan-enabled = false
 db-pool = 10
diff --git a/test/io/configs/no-defaults-env.yaml b/test/io/configs/no-defaults-env.yaml
index 4f03111a28d..5b57f71714c 100644
--- a/test/io/configs/no-defaults-env.yaml
+++ b/test/io/configs/no-defaults-env.yaml
@@ -5,6 +5,7 @@ PGRST_DB_ANON_ROLE: root
 PGRST_DB_CHANNEL: postgrest
 PGRST_DB_CHANNEL_ENABLED: false
 PGRST_DB_EXTRA_SEARCH_PATH: public, test
+PGRST_DB_HOISTED_TX_SETTINGS: statement_timeout, plan_filter.statement_cost_limit
 PGRST_DB_MAX_ROWS: 1000
 PGRST_DB_PLAN_ENABLED: true
 PGRST_DB_POOL: 1
diff --git a/test/io/configs/no-defaults.config b/test/io/configs/no-defaults.config
index d9944c352a3..462e51cdfc7 100644
--- a/test/io/configs/no-defaults.config
+++ b/test/io/configs/no-defaults.config
@@ -3,6 +3,7 @@ db-anon-role = "root"
 db-channel = "postgrest"
 db-channel-enabled = false
 db-extra-search-path = "public, test"
+db-hoisted-tx-settings = "statement_timeout, plan_filter.statement_cost_limit"
 db-max-rows = 1000
 db-plan-enabled = true
 db-pool = 1
diff --git a/test/io/fixtures.sql b/test/io/fixtures.sql
index 636505664d5..be449990177 100644
--- a/test/io/fixtures.sql
+++ b/test/io/fixtures.sql
@@ -213,3 +213,18 @@ create or replace function multiple_func_settings_test() returns setof record as
 $$ language sql
 set work_mem = '5000'
 set statement_timeout = '10s';
+
+-- used with computed fields
+create function rpc_with_one_hoisted_setting() returns items as $$
+  select 1
+$$ language sql
+set work_mem = '5000'
+set statement_timeout = '5s';
+
+create function get_work_mem(items) returns text as $$
+  select current_setting('work_mem', true) as work_mem
+$$ language sql;
+
+create function get_statement_timeout(items) returns text as $$
+  select current_setting('statement_timeout', true) as statement_timeout
+$$ language sql;
diff --git a/test/io/test_io.py b/test/io/test_io.py
index bf48ddb1605..2ad4221bd8b 100644
--- a/test/io/test_io.py
+++ b/test/io/test_io.py
@@ -1394,7 +1394,12 @@ def test_function_setting_statement_timeout_passes(defaultenv):
 def test_function_setting_work_mem(defaultenv):
     "check function setting work_mem is applied"
 
-    with run(env=defaultenv) as postgrest:
+    env = {
+        **defaultenv,
+        "PGRST_DB_HOISTED_TX_SETTINGS": "work_mem",
+    }
+
+    with run(env=env) as postgrest:
         response = postgrest.session.post("/rpc/work_mem_test")
 
         assert response.text == '"6000kB"'
@@ -1403,7 +1408,28 @@ def test_function_setting_work_mem(defaultenv):
 def test_multiple_func_settings(defaultenv):
     "check multiple function settings are applied"
 
-    with run(env=defaultenv) as postgrest:
+    env = {
+        **defaultenv,
+        "PGRST_DB_HOISTED_TX_SETTINGS": "work_mem,statement_timeout",
+    }
+
+    with run(env=env) as postgrest:
         response = postgrest.session.post("/rpc/multiple_func_settings_test")
 
         assert response.text == '[{"work_mem":"5000kB","statement_timeout":"10s"}]'
+
+
+def test_only_hoisted_settings_are_applied(defaultenv):
+    "test that only hoisted function settings are applied"
+
+    env = {
+        **defaultenv,
+        "PGRST_DB_HOISTED_TX_SETTINGS": "work_mem",  # only work_mem is hoisted
+    }
+
+    with run(env=env) as postgrest:
+        response = postgrest.session.get(
+            "/rpc/rpc_with_one_hoisted_setting?select=get_work_mem,get_statement_timeout"
+        )
+
+        assert response.text == '{"get_work_mem":"5000kB","get_statement_timeout":"2s"}'
diff --git a/test/spec/SpecHelper.hs b/test/spec/SpecHelper.hs
index 0717ef12b4d..5175822f90c 100644
--- a/test/spec/SpecHelper.hs
+++ b/test/spec/SpecHelper.hs
@@ -103,6 +103,7 @@ baseCfg = let secret = Just $ encodeUtf8 "reallyreallyreallyreallyverysafe" in
   , configDbChannel                 = mempty
   , configDbChannelEnabled          = True
   , configDbExtraSearchPath         = []
+  , configDbHoistedTxSettings       = []
   , configDbMaxRows                 = Nothing
   , configDbPlanEnabled             = False
   , configDbPoolSize                = 10