diff --git a/onnxscript/optimizer/_constant_folding.py b/onnxscript/optimizer/_constant_folding.py
index deb1be9e9e..3b91e378d2 100644
--- a/onnxscript/optimizer/_constant_folding.py
+++ b/onnxscript/optimizer/_constant_folding.py
@@ -874,7 +874,8 @@ def get_type(value: ir.Value) -> onnx.TypeProto | None:
                     e,
                 )
 
-    def new_constant(self, irvalue: ir.Value, value):
+    def new_constant(self, node: ir.Node, value):
+        irvalue = node.outputs[0]
         if not isinstance(value, np.ndarray):
             # ONNX does not have a way to represent non-tensor constants, eg. a sequence.
             # So, a constant-value of type sequence is not folded, but it can be used
@@ -891,12 +892,22 @@ def new_constant(self, irvalue: ir.Value, value):
         irvalue.const_value = tensor
 
         if value.nbytes > self._output_size_limit:
-            logger.info(
-                "Skip storing constant folded nvalue %s due to large size %s.",
-                irvalue.name,
-                value.nbytes,
-            )
-            return None
+            # Handle examples like Transpose(weight) to be folded even if the size is large,
+            # as long as weight has no other uses. This won't increase model size.
+            removed_input_size = 0
+            for input in node.inputs:
+                if (input is not None) and (len(input.uses()) == 1):
+                    array = _get_numpy_value(input)
+                    if array is not None:
+                        removed_input_size += array.nbytes
+            increased_size = value.nbytes - removed_input_size
+            if increased_size > 0:
+                logger.info(
+                    "Skip storing constant folded nvalue %s due to large size %s.",
+                    irvalue.name,
+                    value.nbytes,
+                )
+                return None
 
         logger.debug(
             "New constant for value %s dtype: %s shape: %s",
@@ -979,7 +990,7 @@ def convert(av):
         if outputs is None:
             return None
         if len(node.outputs) == 1 and not isinstance(outputs, (tuple, list)):
-            replacement = self.new_constant(node.outputs[0], outputs)
+            replacement = self.new_constant(node, outputs)
             if is_onnx_op(node, "ConstantOfShape") or replacement is None:
                 return None
             return Replacement(replacement.outputs, [replacement])
diff --git a/onnxscript/optimizer/_constant_folding_test.py b/onnxscript/optimizer/_constant_folding_test.py
index b0df4dd546..d4124d3b21 100644
--- a/onnxscript/optimizer/_constant_folding_test.py
+++ b/onnxscript/optimizer/_constant_folding_test.py
@@ -1,7 +1,10 @@
 # Copyright (c) Microsoft Corporation.
 # Licensed under the MIT License.
+from __future__ import annotations
+
 import unittest
 
+import numpy as np
 import onnx
 import parameterized
 import pytest
@@ -397,10 +400,12 @@ def test_split_to_sequence_and_concat_from_sequence_with_new_axis_1(
 
 
 class FoldConstantsIrTest(unittest.TestCase):
-    def _fold(self, model_text: str, onnx_shape_inference=False) -> ir.Model:
-        model_proto = onnx.parser.parse_model(model_text)
-        model = serde.deserialize_model(model_proto)
-        _constant_folding.fold_constants(model, onnx_shape_inference=onnx_shape_inference)
+    def _fold(self, model: str | onnx.ModelProto | ir.Model, **kwargs) -> ir.Model:
+        if isinstance(model, str):
+            model = onnx.parser.parse_model(model)
+        if isinstance(model, onnx.ModelProto):
+            model = serde.deserialize_model(model)
+        _constant_folding.fold_constants(model, **kwargs)
         optimizer.remove_unused_nodes(model)
         return model
 
@@ -557,6 +562,32 @@ def test_gather_symdim(self):
         optimized = self._fold(model)
         self.assertEqual(optimized.graph.node(-1).op_type, "Identity")
 
+    def test_large_transpose(self):
+        model = """
+            <ir_version: 7, opset_import: [ "" : 17]>
+            agraph (float[M, 256] x) => (float[M, 512] z)
+            <float[1, 1] w = {1.0}> # placeholder for large initializer of shape [512, 256]
+            {
+                wt = Transpose (w)
+                z = MatMul (x, wt)
+            }
+        """
+        irmodel = serde.deserialize_model(onnx.parser.parse_model(model))
+        w = irmodel.graph.initializers["w"]
+        w.shape = ir.Shape([512, 256])
+        w.const_value = ir.tensor(np.random.random((512, 256)).astype(np.float32))
+
+        # Input size limit will prevent folding of Transpose op
+        optimized = self._fold(irmodel, input_size_limit=3 * 512 * 256)
+        ops = [node.op_type for node in optimized.graph]
+        self.assertEqual(ops, ["Transpose", "MatMul"])
+
+        # Input size limit will allow folding of Transpose op
+        # Since there is no increase in model-size, output-size is not a concern.
+        optimized = self._fold(irmodel, input_size_limit=4 * 512 * 256)
+        ops = [node.op_type for node in optimized.graph]
+        self.assertEqual(ops, ["Constant", "MatMul"])
+
 
 if __name__ == "__main__":
     unittest.main()