diff --git a/Tests/images/palette.dds b/Tests/images/palette.dds
new file mode 100644
index 000000000..7171cb1f2
Binary files /dev/null and b/Tests/images/palette.dds differ
diff --git a/Tests/test_file_dds.py b/Tests/test_file_dds.py
index ae4831d48..bb9af7967 100644
--- a/Tests/test_file_dds.py
+++ b/Tests/test_file_dds.py
@@ -298,6 +298,11 @@ def test_dxt5_colorblock_alpha_issue_4142():
         assert px[2] != 0
 
 
+def test_palette():
+    with Image.open("Tests/images/palette.dds") as im:
+        assert_image_equal_tofile(im, "Tests/images/transparent.gif")
+
+
 def test_unimplemented_pixel_format():
     with pytest.raises(NotImplementedError):
         with Image.open("Tests/images/unimplemented_pixel_format.dds"):
diff --git a/src/PIL/DdsImagePlugin.py b/src/PIL/DdsImagePlugin.py
index 4da33332e..54f358c7f 100644
--- a/src/PIL/DdsImagePlugin.py
+++ b/src/PIL/DdsImagePlugin.py
@@ -13,7 +13,7 @@ Full text of the CC0 license:
 import struct
 from io import BytesIO
 
-from . import Image, ImageFile
+from . import Image, ImageFile, ImagePalette
 from ._binary import o32le as o32
 
 # Magic ("DDS ")
@@ -157,6 +157,10 @@ class DdsImageFile(ImageFile.ImageFile):
             rawmode += masks[0xFF0000] + masks[0xFF00] + masks[0xFF]
 
             self.tile = [("raw", (0, 0) + self.size, 0, (rawmode[::-1], 0, 1))]
+        elif pfflags & DDPF_PALETTEINDEXED8:
+            self._mode = "P"
+            self.palette = ImagePalette.raw("RGBA", self.fp.read(1024))
+            self.tile = [("raw", (0, 0) + self.size, 0, "L")]
         else:
             data_start = header_size + 4
             n = 0