diff --git a/homeassistant/components/mqtt/camera.py b/homeassistant/components/mqtt/camera.py
index 0e387023a39..176e8e86b6b 100644
--- a/homeassistant/components/mqtt/camera.py
+++ b/homeassistant/components/mqtt/camera.py
@@ -1,6 +1,7 @@
 """Camera that loads a picture from an MQTT topic."""
 from __future__ import annotations
 
+from base64 import b64decode
 import functools
 
 import voluptuous as vol
@@ -16,7 +17,7 @@ from homeassistant.helpers.typing import ConfigType, DiscoveryInfoType
 
 from . import subscription
 from .. import mqtt
-from .const import CONF_QOS, CONF_TOPIC
+from .const import CONF_ENCODING, CONF_QOS, CONF_TOPIC
 from .debug_info import log_messages
 from .mixins import (
     MQTT_ENTITY_COMMON_SCHEMA,
@@ -102,7 +103,10 @@ class MqttCamera(MqttEntity, Camera):
         @log_messages(self.hass, self.entity_id)
         def message_received(msg):
             """Handle new MQTT messages."""
-            self._last_image = msg.payload
+            if self._config[CONF_ENCODING] == "b64":
+                self._last_image = b64decode(msg.payload)
+            else:
+                self._last_image = msg.payload
 
         self._sub_state = subscription.async_prepare_subscribe_topics(
             self.hass,
diff --git a/tests/components/mqtt/test_camera.py b/tests/components/mqtt/test_camera.py
index 07fd7dc2c14..48f73a504bf 100644
--- a/tests/components/mqtt/test_camera.py
+++ b/tests/components/mqtt/test_camera.py
@@ -1,4 +1,5 @@
 """The tests for mqtt camera component."""
+from base64 import b64encode
 from http import HTTPStatus
 import json
 from unittest.mock import patch
@@ -64,6 +65,34 @@ async def test_run_camera_setup(hass, hass_client_no_auth, mqtt_mock):
     assert body == "beer"
 
 
+async def test_run_camera_b64_encoded(hass, hass_client_no_auth, mqtt_mock):
+    """Test that it fetches the given encoded payload."""
+    topic = "test/camera"
+    await async_setup_component(
+        hass,
+        "camera",
+        {
+            "camera": {
+                "platform": "mqtt",
+                "topic": topic,
+                "name": "Test Camera",
+                "encoding": "b64",
+            }
+        },
+    )
+    await hass.async_block_till_done()
+
+    url = hass.states.get("camera.test_camera").attributes["entity_picture"]
+
+    async_fire_mqtt_message(hass, topic, b64encode(b"grass"))
+
+    client = await hass_client_no_auth()
+    resp = await client.get(url)
+    assert resp.status == HTTPStatus.OK
+    body = await resp.text()
+    assert body == "grass"
+
+
 async def test_availability_when_connection_lost(hass, mqtt_mock):
     """Test availability after MQTT disconnection."""
     await help_test_availability_when_connection_lost(