diff --git a/kotlinx-coroutines-core/common/src/CoroutineDispatcher.kt b/kotlinx-coroutines-core/common/src/CoroutineDispatcher.kt
index e74e9bedea..fe8b3ec4d6 100644
--- a/kotlinx-coroutines-core/common/src/CoroutineDispatcher.kt
+++ b/kotlinx-coroutines-core/common/src/CoroutineDispatcher.kt
@@ -87,7 +87,7 @@ public abstract class CoroutineDispatcher :
      * private val fileWriterDispatcher = backgroundDispatcher.limitedParallelism(1)
      * ```
      * Note how in this example, the application have the executor with 4 threads, but the total sum of all limits
-     * is 5. Yet at most 4 coroutines can be executed simultaneously as each view limits only its own parallelism.
+     * is 6. Yet at most 4 coroutines can be executed simultaneously as each view limits only its own parallelism.
      */
     @ExperimentalCoroutinesApi
     public open fun limitedParallelism(parallelism: Int): CoroutineDispatcher {
diff --git a/kotlinx-coroutines-core/common/src/internal/LimitedDispatcher.kt b/kotlinx-coroutines-core/common/src/internal/LimitedDispatcher.kt
index 5cbd5b8eef..acb65c53b5 100644
--- a/kotlinx-coroutines-core/common/src/internal/LimitedDispatcher.kt
+++ b/kotlinx-coroutines-core/common/src/internal/LimitedDispatcher.kt
@@ -23,9 +23,11 @@ internal class LimitedDispatcher(
 
     private val queue = LockFreeTaskQueue<Runnable>(singleConsumer = false)
 
-    @InternalCoroutinesApi
-    override fun dispatchYield(context: CoroutineContext, block: Runnable) {
-        dispatcher.dispatchYield(context, block)
+    @ExperimentalCoroutinesApi
+    override fun limitedParallelism(parallelism: Int): CoroutineDispatcher {
+        parallelism.checkParallelism()
+        if (parallelism >= this.parallelism) return this
+        return super.limitedParallelism(parallelism)
     }
 
     override fun run() {
@@ -59,25 +61,47 @@ internal class LimitedDispatcher(
     }
 
     override fun dispatch(context: CoroutineContext, block: Runnable) {
-        // Add task to queue so running workers will be able to see that
-        queue.addLast(block)
-        if (runningWorkers >= parallelism) {
-            return
+        dispatchInternal(block) {
+            if (dispatcher.isDispatchNeeded(EmptyCoroutineContext)) {
+                dispatcher.dispatch(EmptyCoroutineContext, this)
+            } else {
+                run()
+            }
+        }
+    }
+
+    @InternalCoroutinesApi
+    override fun dispatchYield(context: CoroutineContext, block: Runnable) {
+        dispatchInternal(block) {
+            dispatcher.dispatchYield(context, this)
         }
+    }
 
+    private inline fun dispatchInternal(block: Runnable, dispatch: () -> Unit) {
+        // Add task to queue so running workers will be able to see that
+        if (tryAdd(block)) return
         /*
-         * Protect against race when the worker is finished right after our check.
+         * Protect against the race when the number of workers is enough,
+         * but one (because of synchronized serialization) attempts to complete,
+         * and we just observed the number of running workers smaller than the actual
+         * number (hit right between `--runningWorkers` and `++runningWorkers` in `run()`)
          */
+        if (enoughWorkers()) return
+        dispatch()
+    }
+
+    private fun enoughWorkers(): Boolean {
         @Suppress("CAST_NEVER_SUCCEEDS")
         synchronized(this as SynchronizedObject) {
-            if (runningWorkers >= parallelism) return
+            if (runningWorkers >= parallelism) return true
             ++runningWorkers
+            return false
         }
-        if (dispatcher.isDispatchNeeded(EmptyCoroutineContext)) {
-            dispatcher.dispatch(EmptyCoroutineContext, this)
-        } else {
-            run()
-        }
+    }
+
+    private fun tryAdd(block: Runnable): Boolean {
+        queue.addLast(block)
+        return runningWorkers >= parallelism
     }
 }
 
diff --git a/kotlinx-coroutines-core/jvm/test/LimitedParallelismStressTest.kt b/kotlinx-coroutines-core/jvm/test/LimitedParallelismStressTest.kt
index eb1c693639..d994e85330 100644
--- a/kotlinx-coroutines-core/jvm/test/LimitedParallelismStressTest.kt
+++ b/kotlinx-coroutines-core/jvm/test/LimitedParallelismStressTest.kt
@@ -33,7 +33,7 @@ class LimitedParallelismStressTest(private val targetParallelism: Int) : TestBas
     }
 
     @Test
-    fun testLimited() = runTest {
+    fun testLimitedExecutor() = runTest {
         val view = executor.limitedParallelism(targetParallelism)
         repeat(iterations) {
             launch(view) {
@@ -42,6 +42,27 @@ class LimitedParallelismStressTest(private val targetParallelism: Int) : TestBas
         }
     }
 
+    @Test
+    fun testLimitedDispatchersIo() = runTest {
+        val view = Dispatchers.IO.limitedParallelism(targetParallelism)
+        repeat(iterations) {
+            launch(view) {
+                checkParallelism()
+            }
+        }
+    }
+
+    @Test
+    fun testLimitedDispatchersIoDispatchYield() = runTest {
+        val view = Dispatchers.IO.limitedParallelism(targetParallelism)
+        repeat(iterations) {
+            launch(view) {
+                yield()
+                checkParallelism()
+            }
+        }
+    }
+
     @Test
     fun testUnconfined() = runTest {
         val view = Dispatchers.Unconfined.limitedParallelism(targetParallelism)