diff --git a/drivers/gpu/drm/amd/display/dc/dc_dsc.h b/drivers/gpu/drm/amd/display/dc/dc_dsc.h
index ec55b77727d5..e99273bff46d 100644
--- a/drivers/gpu/drm/amd/display/dc/dc_dsc.h
+++ b/drivers/gpu/drm/amd/display/dc/dc_dsc.h
@@ -51,6 +51,7 @@ struct dc_dsc_policy {
 	int min_slice_height; // Must not be less than 8
 	uint32_t max_target_bpp;
 	uint32_t min_target_bpp;
+	uint32_t preferred_bpp_x16;
 	bool enable_dsc_when_not_needed;
 };
 
@@ -62,8 +63,8 @@ bool dc_dsc_parse_dsc_dpcd(const struct dc *dc,
 bool dc_dsc_compute_bandwidth_range(
 		const struct display_stream_compressor *dsc,
 		uint32_t dsc_min_slice_height_override,
-		uint32_t min_bpp,
-		uint32_t max_bpp,
+		uint32_t min_bpp_x16,
+		uint32_t max_bpp_x16,
 		const struct dsc_dec_dpcd_caps *dsc_sink_caps,
 		const struct dc_crtc_timing *timing,
 		struct dc_dsc_bw_range *range);
@@ -78,7 +79,7 @@ bool dc_dsc_compute_config(
 		struct dc_dsc_config *dsc_cfg);
 
 void dc_dsc_get_policy_for_timing(const struct dc_crtc_timing *timing,
-		uint32_t max_target_bpp_limit_override,
+		uint32_t max_target_bpp_limit_override_x16,
 		struct dc_dsc_policy *policy);
 
 void dc_dsc_policy_set_max_target_bpp_limit(uint32_t limit);
diff --git a/drivers/gpu/drm/amd/display/dc/dc_hw_types.h b/drivers/gpu/drm/amd/display/dc/dc_hw_types.h
index b41e6367b15e..09e8be5f7a1e 100644
--- a/drivers/gpu/drm/amd/display/dc/dc_hw_types.h
+++ b/drivers/gpu/drm/amd/display/dc/dc_hw_types.h
@@ -769,6 +769,7 @@ struct dc_crtc_timing {
 #endif
 
 	struct dc_crtc_timing_flags flags;
+	uint32_t dsc_fixed_bits_per_pixel_x16; /* DSC target bitrate in 1/16 of bpp (e.g. 128 -> 8bpp) */
 	struct dc_dsc_config dsc_cfg;
 };
 
diff --git a/drivers/gpu/drm/amd/display/dc/dsc/dc_dsc.c b/drivers/gpu/drm/amd/display/dc/dsc/dc_dsc.c
index c62d0eddc9c6..82a805088204 100644
--- a/drivers/gpu/drm/amd/display/dc/dsc/dc_dsc.c
+++ b/drivers/gpu/drm/amd/display/dc/dsc/dc_dsc.c
@@ -369,6 +369,11 @@ static bool decide_dsc_target_bpp_x16(
 		/* enough bandwidth without dsc */
 		*target_bpp_x16 = 0;
 		should_use_dsc = false;
+	} else if (policy->preferred_bpp_x16 > 0 &&
+			policy->preferred_bpp_x16 <= range.max_target_bpp_x16 &&
+			policy->preferred_bpp_x16 >= range.min_target_bpp_x16) {
+		*target_bpp_x16 = policy->preferred_bpp_x16;
+		should_use_dsc = true;
 	} else if (target_bandwidth_kbps >= range.max_kbps) {
 		/* use max target bpp allowed */
 		*target_bpp_x16 = range.max_target_bpp_x16;
@@ -545,7 +550,7 @@ static bool setup_dsc_config(
 		int target_bandwidth_kbps,
 		const struct dc_crtc_timing *timing,
 		int min_slice_height_override,
-		int max_dsc_target_bpp_limit_override,
+		int max_dsc_target_bpp_limit_override_x16,
 		struct dc_dsc_config *dsc_cfg)
 {
 	struct dsc_enc_caps dsc_common_caps;
@@ -564,7 +569,7 @@ static bool setup_dsc_config(
 
 	memset(dsc_cfg, 0, sizeof(struct dc_dsc_config));
 
-	dc_dsc_get_policy_for_timing(timing, max_dsc_target_bpp_limit_override, &policy);
+	dc_dsc_get_policy_for_timing(timing, max_dsc_target_bpp_limit_override_x16, &policy);
 	pic_width = timing->h_addressable + timing->h_border_left + timing->h_border_right;
 	pic_height = timing->v_addressable + timing->v_border_top + timing->v_border_bottom;
 
@@ -865,8 +870,8 @@ bool dc_dsc_parse_dsc_dpcd(const struct dc *dc, const uint8_t *dpcd_dsc_basic_da
 bool dc_dsc_compute_bandwidth_range(
 		const struct display_stream_compressor *dsc,
 		uint32_t dsc_min_slice_height_override,
-		uint32_t min_bpp,
-		uint32_t max_bpp,
+		uint32_t min_bpp_x16,
+		uint32_t max_bpp_x16,
 		const struct dsc_dec_dpcd_caps *dsc_sink_caps,
 		const struct dc_crtc_timing *timing,
 		struct dc_dsc_bw_range *range)
@@ -883,10 +888,10 @@ bool dc_dsc_compute_bandwidth_range(
 
 	if (is_dsc_possible)
 		is_dsc_possible = setup_dsc_config(dsc_sink_caps, &dsc_enc_caps, 0, timing,
-				dsc_min_slice_height_override, max_bpp, &config);
+				dsc_min_slice_height_override, max_bpp_x16, &config);
 
 	if (is_dsc_possible)
-		get_dsc_bandwidth_range(min_bpp, max_bpp, &dsc_common_caps, timing, range);
+		get_dsc_bandwidth_range(min_bpp_x16, max_bpp_x16, &dsc_common_caps, timing, range);
 
 	return is_dsc_possible;
 }
@@ -895,7 +900,7 @@ bool dc_dsc_compute_config(
 		const struct display_stream_compressor *dsc,
 		const struct dsc_dec_dpcd_caps *dsc_sink_caps,
 		uint32_t dsc_min_slice_height_override,
-		uint32_t max_target_bpp_limit_override,
+		uint32_t max_target_bpp_limit_override_x16,
 		uint32_t target_bandwidth_kbps,
 		const struct dc_crtc_timing *timing,
 		struct dc_dsc_config *dsc_cfg)
@@ -908,11 +913,11 @@ bool dc_dsc_compute_config(
 			&dsc_enc_caps,
 			target_bandwidth_kbps,
 			timing, dsc_min_slice_height_override,
-			max_target_bpp_limit_override, dsc_cfg);
+			max_target_bpp_limit_override_x16, dsc_cfg);
 	return is_dsc_possible;
 }
 
-void dc_dsc_get_policy_for_timing(const struct dc_crtc_timing *timing, uint32_t max_target_bpp_limit_override, struct dc_dsc_policy *policy)
+void dc_dsc_get_policy_for_timing(const struct dc_crtc_timing *timing, uint32_t max_target_bpp_limit_override_x16, struct dc_dsc_policy *policy)
 {
 	uint32_t bpc = 0;
 
@@ -967,13 +972,15 @@ void dc_dsc_get_policy_for_timing(const struct dc_crtc_timing *timing, uint32_t
 		return;
 	}
 
+	policy->preferred_bpp_x16 = timing->dsc_fixed_bits_per_pixel_x16;
+
 	/* internal upper limit, default 16 bpp */
 	if (policy->max_target_bpp > dsc_policy_max_target_bpp_limit)
 		policy->max_target_bpp = dsc_policy_max_target_bpp_limit;
 
 	/* apply override */
-	if (max_target_bpp_limit_override && policy->max_target_bpp > max_target_bpp_limit_override)
-		policy->max_target_bpp = max_target_bpp_limit_override;
+	if (max_target_bpp_limit_override_x16 && policy->max_target_bpp > max_target_bpp_limit_override_x16 / 16)
+		policy->max_target_bpp = max_target_bpp_limit_override_x16 / 16;
 
 	/* enable DSC when not needed, default false */
 	if (dsc_policy_enable_dsc_when_not_needed)