diff --git a/esphome/components/json/__init__.py b/esphome/components/json/__init__.py
index 6a0e4c50d2..399cf708f6 100644
--- a/esphome/components/json/__init__.py
+++ b/esphome/components/json/__init__.py
@@ -12,6 +12,6 @@ CONFIG_SCHEMA = cv.All(
 
 @coroutine_with_priority(1.0)
 async def to_code(config):
-    cg.add_library("bblanchon/ArduinoJson", "6.18.5")
+    cg.add_library("bblanchon/ArduinoJson", "7.4.1")
     cg.add_define("USE_JSON")
     cg.add_global(json_ns.using)
diff --git a/esphome/components/json/json_util.cpp b/esphome/components/json/json_util.cpp
index 6c66476dc1..f5b662d543 100644
--- a/esphome/components/json/json_util.cpp
+++ b/esphome/components/json/json_util.cpp
@@ -6,30 +6,39 @@ namespace json {
 
 static const char *const TAG = "json";
 
-static std::vector<char> global_json_build_buffer;  // NOLINT
-static const auto ALLOCATOR = RAMAllocator<uint8_t>(RAMAllocator<uint8_t>::ALLOC_INTERNAL);
+static auto ALLOCATOR = RAMAllocator<uint8_t>(
+    RAMAllocator<uint8_t>::NONE);  // Attempt to allocate in PSRAM before falling back into internal
+
+// Build an allocator for the JSON Library using the RAMAllocator class
+struct SpiRamAllocator : ArduinoJson::Allocator {
+  void *allocate(size_t size) { return ALLOCATOR.allocate(size); }
+
+  void deallocate(void *pointer) {
+    free(pointer);  // NOLINT(cppcoreguidelines-owning-memory,cppcoreguidelines-no-malloc)
+  }
+
+  void *reallocate(void *ptr, size_t new_size) { return ALLOCATOR.reallocate(static_cast<uint8_t *>(ptr), new_size); }
+};
+
+static auto DOC_ALLOCATOR = SpiRamAllocator();
 
 std::string build_json(const json_build_t &f) {
   // Here we are allocating up to 5kb of memory,
   // with the heap size minus 2kb to be safe if less than 5kb
   // as we can not have a true dynamic sized document.
   // The excess memory is freed below with `shrinkToFit()`
-  auto free_heap = ALLOCATOR.get_max_free_block_size();
-  size_t request_size = std::min(free_heap, (size_t) 512);
   while (true) {
     ESP_LOGV(TAG, "Attempting to allocate %zu bytes for JSON serialization", request_size);
     DynamicJsonDocument json_document(request_size);
     if (json_document.capacity() == 0) {
-      ESP_LOGE(TAG, "Could not allocate memory for document! Requested %zu bytes, largest free heap block: %zu bytes",
-               request_size, free_heap);
+      ESP_LOGE(TAG, "Could not allocate memory for JSON document!");
       return "{}";
     }
     JsonObject root = json_document.to<JsonObject>();
     f(root);
     if (json_document.overflowed()) {
       if (request_size == free_heap) {
-        ESP_LOGE(TAG, "Could not allocate memory for document! Overflowed largest free heap block: %zu bytes",
-                 free_heap);
+        ESP_LOGE(TAG, "Could not allocate memory for JSON document!");
         return "{}";
       }
       request_size = std::min(request_size * 2, free_heap);
@@ -48,30 +57,21 @@ bool parse_json(const std::string &data, const json_parse_t &f) {
   // with the heap size minus 2kb to be safe if less than that
   // as we can not have a true dynamic sized document.
   // The excess memory is freed below with `shrinkToFit()`
-  auto free_heap = ALLOCATOR.get_max_free_block_size();
-  size_t request_size = std::min(free_heap, (size_t) (data.size() * 1.5));
   while (true) {
     DynamicJsonDocument json_document(request_size);
     if (json_document.capacity() == 0) {
-      ESP_LOGE(TAG, "Could not allocate memory for document! Requested %zu bytes, free heap: %zu", request_size,
-               free_heap);
+      ESP_LOGE(TAG, "Could not allocate memory for JSON document!");
       return false;
     }
     DeserializationError err = deserializeJson(json_document, data);
-    json_document.shrinkToFit();
 
     JsonObject root = json_document.as<JsonObject>();
 
     if (err == DeserializationError::Ok) {
       return f(root);
     } else if (err == DeserializationError::NoMemory) {
-      if (request_size * 2 >= free_heap) {
-        ESP_LOGE(TAG, "Can not allocate more memory for deserialization. Consider making source string smaller");
-        return false;
-      }
-      ESP_LOGV(TAG, "Increasing memory allocation.");
-      request_size *= 2;
-      continue;
+      ESP_LOGE(TAG, "Can not allocate more memory for deserialization. Consider making source string smaller");
+      return false;
     } else {
       ESP_LOGE(TAG, "Parse error: %s", err.c_str());
       return false;
diff --git a/platformio.ini b/platformio.ini
index 54c72eb28d..b2478d356e 100644
--- a/platformio.ini
+++ b/platformio.ini
@@ -35,7 +35,7 @@ build_flags =
 lib_deps =
     esphome/noise-c@0.1.10                  ; api
     improv/Improv@1.2.4                    ; improv_serial / esp32_improv
-    bblanchon/ArduinoJson@6.18.5           ; json
+    bblanchon/ArduinoJson@7.4.1            ; json
     wjtje/qr-code-generator-library@1.7.0  ; qr_code
     functionpointer/arduino-MLX90393@1.0.2 ; mlx90393
     pavlodn/HaierProtocol@0.9.31           ; haier