diff --git a/packages/federation-sdk/src/index.ts b/packages/federation-sdk/src/index.ts
index 3ef2a6288..369758c66 100644
--- a/packages/federation-sdk/src/index.ts
+++ b/packages/federation-sdk/src/index.ts
@@ -90,6 +90,7 @@ export {
 	type BaseEventType,
 } from './utils/event-schemas';
 export { errCodes } from './utils/response-codes';
+export { NotAllowedError } from './services/invite.service';
 
 export { EventRepository } from './repositories/event.repository';
 export { RoomRepository } from './repositories/room.repository';
@@ -163,6 +164,10 @@ export type HomeserverEventSignatures = {
 		last_active_ago?: number;
 		origin?: string;
 	};
+	'homeserver.matrix.encryption': {
+		event_id: EventID;
+		event: PduForType<'m.room.encryption'>;
+	};
 	'homeserver.matrix.encrypted': {
 		event_id: EventID;
 		event: PduForType<'m.room.encrypted'>;
diff --git a/packages/federation-sdk/src/services/config.service.ts b/packages/federation-sdk/src/services/config.service.ts
index 908a02636..5e21b2d29 100644
--- a/packages/federation-sdk/src/services/config.service.ts
+++ b/packages/federation-sdk/src/services/config.service.ts
@@ -31,6 +31,10 @@ export interface AppConfig {
 			downloadPerMinute: number;
 		};
 	};
+	invite: {
+		allowedEncryptedRooms: boolean;
+		allowedNonPrivateRooms: boolean;
+	};
 }
 
 export const AppConfigSchema = z.object({
@@ -69,6 +73,10 @@ export const AppConfigSchema = z.object({
 				.min(1, 'Download rate limit must be at least 1'),
 		}),
 	}),
+	invite: z.object({
+		allowedEncryptedRooms: z.boolean(),
+		allowedNonPrivateRooms: z.boolean(),
+	}),
 });
 
 export class ConfigService {
@@ -113,6 +121,10 @@ export class ConfigService {
 		return this.config.media;
 	}
 
+	getInviteConfig(): AppConfig['invite'] {
+		return this.config.invite;
+	}
+
 	async getSigningKey() {
 		// If config contains a signing key, use it
 		if (!this.config.signingKey) {
diff --git a/packages/federation-sdk/src/services/invite.service.ts b/packages/federation-sdk/src/services/invite.service.ts
index 1e0d46e3a..8ec2bb791 100644
--- a/packages/federation-sdk/src/services/invite.service.ts
+++ b/packages/federation-sdk/src/services/invite.service.ts
@@ -25,6 +25,13 @@ export type ProcessInviteEvent = {
 	room_version: string;
 };
 
+export class NotAllowedError extends Error {
+	constructor(message: string) {
+		super(message);
+		this.name = 'NotAllowedError';
+	}
+}
+
 @singleton()
 export class InviteService {
 	private readonly logger = createLogger('InviteService');
@@ -142,6 +149,42 @@ export class InviteService {
 		};
 	}
 
+	private async shouldProcessInvite(
+		event: PduForType<'m.room.member'>,
+	): Promise<void> {
+		const isRoomNonPrivate = event.unsigned.invite_room_state.some(
+			(
+				stateEvent: PersistentEventBase<
+					RoomVersion,
+					'm.room.join_rules'
+				>['event'],
+			) =>
+				stateEvent.type === 'm.room.join_rules' &&
+				stateEvent.content.join_rule === 'public',
+		);
+
+		const isRoomEncrypted = event.unsigned.invite_room_state.some(
+			(
+				stateEvent: PersistentEventBase<
+					RoomVersion,
+					'm.room.encryption'
+				>['event'],
+			) => stateEvent.type === 'm.room.encryption',
+		);
+
+		const { allowedEncryptedRooms, allowedNonPrivateRooms } =
+			this.configService.getInviteConfig();
+
+		const shouldRejectInvite =
+			(!allowedEncryptedRooms && isRoomEncrypted) ||
+			(!allowedNonPrivateRooms && isRoomNonPrivate);
+		if (shouldRejectInvite) {
+			throw new NotAllowedError(
+				`Could not process invite due to room being ${isRoomEncrypted ? 'encrypted' : 'public'}`,
+			);
+		}
+	}
+
 	async processInvite(
 		event: PduForType<'m.room.member'>,
 		roomId: RoomID,
@@ -150,6 +193,7 @@ export class InviteService {
 		authenticatedServer: string,
 	) {
 		// SPEC: when a user invites another user on a different homeserver, a request to that homeserver to have the event signed and verified must be made
+		await this.shouldProcessInvite(event);
 
 		const residentServer = roomId.split(':').pop();
 		if (!residentServer) {
diff --git a/packages/federation-sdk/src/services/room.service.ts b/packages/federation-sdk/src/services/room.service.ts
index 8c7b52013..4f3673d05 100644
--- a/packages/federation-sdk/src/services/room.service.ts
+++ b/packages/federation-sdk/src/services/room.service.ts
@@ -845,7 +845,7 @@ export class RoomService {
 
 		// trying to join room from another server
 		const makeJoinResponse = await federationService.makeJoin(
-			residentServer as string,
+			residentServer,
 			roomId,
 			userId,
 			roomVersion, // NOTE: check the comment in the called method
diff --git a/packages/federation-sdk/src/services/staging-area.service.ts b/packages/federation-sdk/src/services/staging-area.service.ts
index 4cde494fc..96894fbcc 100644
--- a/packages/federation-sdk/src/services/staging-area.service.ts
+++ b/packages/federation-sdk/src/services/staging-area.service.ts
@@ -308,6 +308,12 @@ export class StagingAreaService {
 					},
 				});
 				break;
+			case event.event.type === 'm.room.encryption':
+				this.eventEmitterService.emit('homeserver.matrix.encryption', {
+					event_id: eventId,
+					event: event.event,
+				});
+				break;
 			case event.event.type === 'm.room.encrypted':
 				this.eventEmitterService.emit('homeserver.matrix.encrypted', {
 					event_id: eventId,
diff --git a/packages/homeserver/src/controllers/federation/invite.controller.ts b/packages/homeserver/src/controllers/federation/invite.controller.ts
index 0f81c0ca2..22359f183 100644
--- a/packages/homeserver/src/controllers/federation/invite.controller.ts
+++ b/packages/homeserver/src/controllers/federation/invite.controller.ts
@@ -2,11 +2,17 @@ import { EventID, RoomID } from '@rocket.chat/federation-room';
 import {
 	EventAuthorizationService,
 	InviteService,
+	NotAllowedError,
 } from '@rocket.chat/federation-sdk';
 import { isAuthenticatedMiddleware } from '@rocket.chat/homeserver/middlewares/isAuthenticated';
 import { Elysia, t } from 'elysia';
 import { container } from 'tsyringe';
-import { ProcessInviteParamsDto, RoomVersionDto } from '../../dtos';
+import {
+	FederationErrorResponseDto,
+	ProcessInviteParamsDto,
+	ProcessInviteResponseDto,
+	RoomVersionDto,
+} from '../../dtos';
 
 export const invitePlugin = (app: Elysia) => {
 	const inviteService = container.resolve(InviteService);
@@ -14,18 +20,38 @@ export const invitePlugin = (app: Elysia) => {
 
 	return app.use(isAuthenticatedMiddleware(eventAuthService)).put(
 		'/_matrix/federation/v2/invite/:roomId/:eventId',
-		async ({ body, params: { roomId, eventId }, authenticatedServer }) => {
+		async ({ body, set, params: { roomId, eventId }, authenticatedServer }) => {
 			if (!authenticatedServer) {
 				throw new Error('Missing authenticated server from request');
 			}
 
-			return inviteService.processInvite(
-				body.event,
-				roomId as RoomID,
-				eventId as EventID,
-				body.room_version,
-				authenticatedServer,
-			);
+			try {
+				return await inviteService.processInvite(
+					body.event,
+					roomId as RoomID,
+					eventId as EventID,
+					body.room_version,
+					authenticatedServer,
+				);
+			} catch (error) {
+				if (error instanceof NotAllowedError) {
+					set.status = 403;
+					return {
+						errcode: 'M_FORBIDDEN',
+						error:
+							'This server does not allow joining this type of room based on federation settings.',
+					};
+				}
+
+				set.status = 500;
+				return {
+					errcode: 'M_UNKNOWN',
+					error:
+						error instanceof Error
+							? error.message
+							: 'Internal server error while processing request',
+				};
+			}
 		},
 		{
 			params: ProcessInviteParamsDto,
@@ -34,6 +60,11 @@ export const invitePlugin = (app: Elysia) => {
 				room_version: RoomVersionDto,
 				invite_room_state: t.Any(),
 			}),
+			response: {
+				200: ProcessInviteResponseDto,
+				403: FederationErrorResponseDto,
+				500: FederationErrorResponseDto,
+			},
 			detail: {
 				tags: ['Federation'],
 				summary: 'Process room invite',
diff --git a/packages/homeserver/src/dtos/federation/error.dto.ts b/packages/homeserver/src/dtos/federation/error.dto.ts
new file mode 100644
index 000000000..2b9674a1c
--- /dev/null
+++ b/packages/homeserver/src/dtos/federation/error.dto.ts
@@ -0,0 +1,15 @@
+import { type Static, t } from 'elysia';
+
+export const FederationErrorResponseDto = t.Object({
+	errcode: t.Enum({
+		M_UNRECOGNIZED: 'M_UNRECOGNIZED',
+		M_UNAUTHORIZED: 'M_UNAUTHORIZED',
+		M_FORBIDDEN: 'M_FORBIDDEN',
+		M_UNKNOWN: 'M_UNKNOWN',
+	}),
+	error: t.String(),
+});
+
+export type FederationErrorResponseDto = Static<
+	typeof FederationErrorResponseDto
+>;
diff --git a/packages/homeserver/src/dtos/index.ts b/packages/homeserver/src/dtos/index.ts
index c1143a5fa..b0d13338a 100644
--- a/packages/homeserver/src/dtos/index.ts
+++ b/packages/homeserver/src/dtos/index.ts
@@ -12,6 +12,7 @@ export * from './federation/state-ids.dto';
 export * from './federation/state.dto';
 export * from './federation/transactions.dto';
 export * from './federation/versions.dto';
+export * from './federation/error.dto';
 
 // Internal DTOs
 export * from './internal/invite.dto';
diff --git a/packages/homeserver/src/homeserver.module.ts b/packages/homeserver/src/homeserver.module.ts
index 3710c7b1b..c5665ef8b 100644
--- a/packages/homeserver/src/homeserver.module.ts
+++ b/packages/homeserver/src/homeserver.module.ts
@@ -88,6 +88,12 @@ export async function setup(options?: HomeserverSetupOptions) {
 				),
 			},
 		},
+		invite: {
+			allowedEncryptedRooms:
+				process.env.INVITE_ALLOWED_ENCRYPTED_ROOMS === 'true',
+			allowedNonPrivateRooms:
+				process.env.INVITE_ALLOWED_NON_PRIVATE_ROOMS === 'true',
+		},
 	});
 
 	const containerOptions: FederationContainerOptions = {
diff --git a/packages/room/src/types/v3-11.ts b/packages/room/src/types/v3-11.ts
index 1e2b8321e..d0ae6cdd9 100644
--- a/packages/room/src/types/v3-11.ts
+++ b/packages/room/src/types/v3-11.ts
@@ -537,6 +537,13 @@ const EncryptedContentSchema = BaseTimelineContentSchema.extend({
 		.optional(),
 });
 
+export const PduEncryptionEventContentSchema = z.object({
+	algorithm: z
+		.enum(['m.megolm.v1.aes-sha2'])
+		.describe('The algorithm used to encrypt the content.'),
+	ciphertext: z.string().describe('The encrypted content.'),
+});
+
 export type PduMessageEventContent = z.infer<
 	typeof PduMessageEventContentSchema
 >;
@@ -706,6 +713,12 @@ const EventPduTypeRoomEncrypted = z.object({
 	content: EncryptedContentSchema,
 });
 
+const EventPduTypeRoomEncryption = z.object({
+	...PduNoContentEmptyStateKeyStateEventSchema,
+	type: z.literal('m.room.encryption'),
+	content: PduEncryptionEventContentSchema,
+});
+
 const EventPduTypeRoomMessage = z.object({
 	...PduNoContentTimelineEventSchema,
 	type: z.literal('m.room.message'),
@@ -749,6 +762,8 @@ export const PduStateEventSchema = z.discriminatedUnion('type', [
 	EventPduTypeRoomServerAcl,
 
 	EventPduTypeRoomTombstone,
+
+	EventPduTypeRoomEncryption,
 ]);
 
 export const PduTimelineSchema = z.discriminatedUnion('type', [