diff --git a/src/libraries/Microsoft.Extensions.Caching.Memory/src/MemoryCache.cs b/src/libraries/Microsoft.Extensions.Caching.Memory/src/MemoryCache.cs
index ed711c0ffa0e9f..6a798ec5e1d7bf 100644
--- a/src/libraries/Microsoft.Extensions.Caching.Memory/src/MemoryCache.cs
+++ b/src/libraries/Microsoft.Extensions.Caching.Memory/src/MemoryCache.cs
@@ -200,6 +200,29 @@ internal void SetEntry(CacheEntry entry)
 
                 priorEntry?.InvokeEvictionCallbacks();
             }
+            else if (_options.HasSizeLimit && priorEntry != null && priorEntry.Size >= entry.Size)
+            {
+                bool entryAdded = coherentState._entries.TryUpdate(entry.Key, entry, priorEntry);
+
+                if (entryAdded)
+                {
+                    long newSizeIncrement = entry.Size - priorEntry.Size;
+
+                    if (newSizeIncrement < 0)
+                    {
+                        Interlocked.Add(ref coherentState._cacheSize, newSizeIncrement);
+                    }
+
+                    entry.AttachTokens();
+                }
+                else
+                {
+                    entry.SetExpired(EvictionReason.Replaced);
+                    entry.InvokeEvictionCallbacks();
+                }
+
+                priorEntry.InvokeEvictionCallbacks();
+            }
             else
             {
                 entry.SetExpired(EvictionReason.Capacity);
diff --git a/src/libraries/Microsoft.Extensions.Caching.Memory/tests/CapacityTests.cs b/src/libraries/Microsoft.Extensions.Caching.Memory/tests/CapacityTests.cs
index 2be2a66bd60e6b..ef6a43fa4190f0 100644
--- a/src/libraries/Microsoft.Extensions.Caching.Memory/tests/CapacityTests.cs
+++ b/src/libraries/Microsoft.Extensions.Caching.Memory/tests/CapacityTests.cs
@@ -293,6 +293,31 @@ public void AddingReplacementExceedsCapacityRemovesOldEntry()
             AssertCacheSize(0, cache); // addition was rejected due to size, and previous item with the same key removed
         }
 
+        [Theory]
+        [InlineData(6)]
+        [InlineData(5)]
+        [InlineData(2)]
+        public void ReplaceOldEntryWithSameSizeOrLessNewEntryAtSizeLimitCapacity(int newValueSize)
+        {
+            var cache = new MemoryCache(new MemoryCacheOptions
+            {
+                SizeLimit = 6
+            });
+
+            AssertCacheSize(0, cache);
+
+            cache.Set("key", "oldValue", new MemoryCacheEntryOptions { Size = 6 });
+
+            Assert.Equal("oldValue", cache.Get("key"));
+
+            AssertCacheSize(6, cache);
+
+            cache.Set("key", "newValue", new MemoryCacheEntryOptions { Size = newValueSize });
+
+            Assert.Equal("newValue", cache.Get("key"));
+            AssertCacheSize(newValueSize, cache);
+        }
+
         [Fact]
         public void RemovingEntryDecreasesCacheSize()
         {