diff --git a/benches/reductions.rs b/benches/reductions.rs
index e0b3f265..251c165c 100644
--- a/benches/reductions.rs
+++ b/benches/reductions.rs
@@ -257,7 +257,7 @@ fn reductions_palette_8_to_grayscale_8(b: &mut Bencher) {
     ));
     let png = PngData::new(&input, &Options::default()).unwrap();
 
-    b.iter(|| color::indexed_to_channels(&png.raw, true));
+    b.iter(|| color::indexed_to_channels(&png.raw, true, false));
 }
 
 #[bench]
diff --git a/src/reduction/color.rs b/src/reduction/color.rs
index 8992d1c7..fe11d048 100644
--- a/src/reduction/color.rs
+++ b/src/reduction/color.rs
@@ -138,15 +138,30 @@ pub fn reduced_rgb_to_grayscale(png: &PngImage) -> Option<PngImage> {
 
 /// Attempt to convert indexed to a different color type, returning the resulting image if successful
 #[must_use]
-pub fn indexed_to_channels(png: &PngImage, allow_grayscale: bool) -> Option<PngImage> {
+pub fn indexed_to_channels(
+    png: &PngImage,
+    allow_grayscale: bool,
+    optimize_alpha: bool,
+) -> Option<PngImage> {
     if png.ihdr.bit_depth != BitDepth::Eight {
         return None;
     }
-    let palette = match &png.ihdr.color_type {
-        ColorType::Indexed { palette } => palette,
+    let mut palette = match &png.ihdr.color_type {
+        ColorType::Indexed { palette } => palette.clone(),
         _ => return None,
     };
 
+    // Ensure fully transparent colors are black, which can help with grayscale conversion
+    if optimize_alpha {
+        for color in &mut palette {
+            if color.a == 0 {
+                color.r = 0;
+                color.g = 0;
+                color.b = 0;
+            }
+        }
+    }
+
     // Determine which channels are required
     let is_gray = if allow_grayscale {
         palette.iter().all(|c| c.r == c.g && c.g == c.b)
diff --git a/src/reduction/mod.rs b/src/reduction/mod.rs
index 9b860c5f..dc6202a1 100644
--- a/src/reduction/mod.rs
+++ b/src/reduction/mod.rs
@@ -106,7 +106,9 @@ pub(crate) fn perform_reductions(
     // Attempt to convert from indexed to channels
     // This may give a better result due to dropping the PLTE chunk
     if !cheap && opts.color_type_reduction && !deadline.passed() {
-        if let Some(reduced) = indexed_to_channels(&png, opts.grayscale_reduction) {
+        if let Some(reduced) =
+            indexed_to_channels(&png, opts.grayscale_reduction, opts.optimize_alpha)
+        {
             // This result should not be passed on to subsequent reductions
             eval.try_image(Arc::new(reduced));
             evaluation_added = true;
diff --git a/tests/files/palette_2_should_be_grayscale_alpha_8.png b/tests/files/palette_2_should_be_grayscale_alpha_8.png
new file mode 100644
index 00000000..c83f2543
Binary files /dev/null and b/tests/files/palette_2_should_be_grayscale_alpha_8.png differ
diff --git a/tests/reduction.rs b/tests/reduction.rs
index 88f7fc0a..4e33f7e2 100644
--- a/tests/reduction.rs
+++ b/tests/reduction.rs
@@ -578,6 +578,18 @@ fn palette_8_should_be_grayscale_8() {
     );
 }
 
+#[test]
+fn palette_2_should_be_grayscale_alpha_8() {
+    test_it_converts(
+        "tests/files/palette_2_should_be_grayscale_alpha_8.png",
+        true,
+        INDEXED,
+        BitDepth::Two,
+        GRAYSCALE_ALPHA,
+        BitDepth::Eight,
+    );
+}
+
 #[test]
 fn palette_8_should_be_rgb() {
     test_it_converts(