So I want to generate procedural rocks for a game and I have this massive rectangular 2D rock texture. Is there any way I can cut out small random rocks out of the texture and place them on the map? I want them to have different shapes like pointy, circular etc but I am stuck on the cutting a small section from a texture part.

Yes, you can use the clip children option on a Sprite in Godot 4.0 to act similar to a layer mask in Photoshop.