We consider a lattice model of active matter with exclusion and derive its hydrodynamic description exactly. The hydrodynamic limit leads to an integro-differential equation for the density of particles with a given orientation. Volume exclusion results in nonlinear mobility dependent on spatial density. Such models of active matter can support motility-induced phase separation, which occurs despite the absence of attractive interactions. We study the onset of phase separation with linear stability analysis and numerical simulations.