diff --git a/src/main/java/net/minestom/server/instance/palette/AdaptivePalette.java b/src/main/java/net/minestom/server/instance/palette/AdaptivePalette.java
index 4de00254c..b5016e132 100644
--- a/src/main/java/net/minestom/server/instance/palette/AdaptivePalette.java
+++ b/src/main/java/net/minestom/server/instance/palette/AdaptivePalette.java
@@ -1,5 +1,8 @@
 package net.minestom.server.instance.palette;
 
+import it.unimi.dsi.fastutil.ints.IntOpenHashSet;
+import it.unimi.dsi.fastutil.ints.IntSet;
+import net.minestom.server.utils.MathUtils;
 import net.minestom.server.utils.binary.BinaryWriter;
 import org.jetbrains.annotations.NotNull;
 
@@ -15,7 +18,7 @@ final class AdaptivePalette implements Palette {
     final int defaultBitsPerEntry;
     final int bitsIncrement;
 
-    private SpecializedPalette palette;
+    SpecializedPalette palette;
 
     AdaptivePalette(int dimension, int maxBitsPerEntry, int bitsPerEntry, int bitsIncrement) {
         this.dimensionBitCount = validateDimension(dimension);
@@ -121,11 +124,16 @@ final class AdaptivePalette implements Palette {
             final int count = flexiblePalette.count();
             if (count == 0) {
                 return (this.palette = new FilledPalette(dimension, 0));
-            } else if (count == flexiblePalette.maxSize()) {
-                var palette = flexiblePalette.paletteToValueList;
-                if (palette.size() == 2 && palette.getInt(0) == 0) {
-                    // first element is air, second should be the value the palette is filled with
-                    return (this.palette = new FilledPalette(dimension, palette.getInt(1)));
+            } else {
+                // Find all entries and compress the palette
+                IntSet entries = new IntOpenHashSet(flexiblePalette.paletteToValueList.size());
+                currentPalette.getAll((x, y, z, value) -> entries.add(value));
+                final int bitsPerEntry = MathUtils.bitsToRepresent(entries.size());
+                if (bitsPerEntry == 1) {
+                    return (this.palette = new FilledPalette(dimension, entries.iterator().nextInt()));
+                } else {
+                    flexiblePalette.resize(bitsPerEntry);
+                    return flexiblePalette;
                 }
             }
         }
diff --git a/src/main/java/net/minestom/server/instance/palette/FlexiblePalette.java b/src/main/java/net/minestom/server/instance/palette/FlexiblePalette.java
index cb75e8cd6..3fb9a937d 100644
--- a/src/main/java/net/minestom/server/instance/palette/FlexiblePalette.java
+++ b/src/main/java/net/minestom/server/instance/palette/FlexiblePalette.java
@@ -311,7 +311,7 @@ final class FlexiblePalette implements SpecializedPalette, Cloneable {
         }
     }
 
-    private void resize(int newBitsPerEntry) {
+    void resize(int newBitsPerEntry) {
         FlexiblePalette palette = new FlexiblePalette(adaptivePalette, fixBitsPerEntry(newBitsPerEntry));
         palette.lastPaletteIndex = lastPaletteIndex;
         palette.paletteToValueList = paletteToValueList;
diff --git a/src/test/java/net/minestom/server/instance/palette/PaletteOptimizationTest.java b/src/test/java/net/minestom/server/instance/palette/PaletteOptimizationTest.java
new file mode 100644
index 000000000..3604ca643
--- /dev/null
+++ b/src/test/java/net/minestom/server/instance/palette/PaletteOptimizationTest.java
@@ -0,0 +1,74 @@
+package net.minestom.server.instance.palette;
+
+import net.minestom.server.utils.binary.BinaryWriter;
+import org.junit.jupiter.api.Test;
+
+import java.util.Random;
+
+import static org.junit.jupiter.api.Assertions.assertEquals;
+import static org.junit.jupiter.api.Assertions.assertTrue;
+
+public class PaletteOptimizationTest {
+
+    @Test
+    public void empty() {
+        var palette = createPalette();
+        paletteEquals(palette.palette, palette.optimizedPalette());
+    }
+
+    @Test
+    public void single() {
+        var palette = createPalette();
+        palette.set(0, 0, 0, 1);
+        paletteEquals(palette.palette, palette.optimizedPalette());
+    }
+
+    @Test
+    public void random() {
+        var random = new Random(12345);
+        var palette = createPalette();
+        palette.setAll((x, y, z) -> random.nextInt(256));
+        paletteEquals(palette.palette, palette.optimizedPalette());
+        palette.setAll((x, y, z) -> random.nextInt(2));
+        paletteEquals(palette.palette, palette.optimizedPalette());
+    }
+
+    @Test
+    public void manualFill() {
+        var palette = createPalette();
+        palette.setAll((x, y, z) -> 1);
+        paletteEquals(palette.palette, palette.optimizedPalette());
+        palette.setAll((x, y, z) -> 2);
+        paletteEquals(palette.palette, palette.optimizedPalette());
+        palette.setAll((x, y, z) -> 0);
+        paletteEquals(palette.palette, palette.optimizedPalette());
+    }
+
+    AdaptivePalette createPalette() {
+        return (AdaptivePalette) Palette.blocks();
+    }
+
+    void paletteEquals(Palette palette, Palette optimized) {
+        // Verify content
+        assertEquals(palette.dimension(), optimized.dimension());
+        for (int y = 0; y < palette.dimension(); y++) {
+            for (int z = 0; z < palette.dimension(); z++) {
+                for (int x = 0; x < palette.dimension(); x++) {
+                    assertEquals(palette.get(x, y, z), optimized.get(x, y, z));
+                }
+            }
+        }
+        // Verify size
+        {
+            var writer = new BinaryWriter(4096);
+            palette.write(writer);
+            int length1 = writer.toByteArray().length;
+            writer = new BinaryWriter(4096);
+            optimized.write(writer);
+            int length2 = writer.toByteArray().length;
+
+            System.out.println("debug: " + Thread.currentThread().getStackTrace()[2].getMethodName() + " " + length1 + " " + length2);
+            assertTrue(length1 >= length2, "Optimized palette is bigger than the original one: " + length1 + " : " + length2);
+        }
+    }
+}
diff --git a/src/test/java/net/minestom/server/instance/PaletteTest.java b/src/test/java/net/minestom/server/instance/palette/PaletteTest.java
similarity index 99%
rename from src/test/java/net/minestom/server/instance/PaletteTest.java
rename to src/test/java/net/minestom/server/instance/palette/PaletteTest.java
index 998243dc8..7c17db3c9 100644
--- a/src/test/java/net/minestom/server/instance/PaletteTest.java
+++ b/src/test/java/net/minestom/server/instance/palette/PaletteTest.java
@@ -1,8 +1,7 @@
-package net.minestom.server.instance;
+package net.minestom.server.instance.palette;
 
 import net.minestom.server.coordinate.Point;
 import net.minestom.server.coordinate.Vec;
-import net.minestom.server.instance.palette.Palette;
 import org.junit.jupiter.api.Test;
 
 import java.util.HashSet;