diff --git a/NEWS b/NEWS
index f17112179cf..0b46c1ad5c7 100644
--- a/NEWS
+++ b/NEWS
@@ -19,6 +19,8 @@ PHP                                                                        NEWS
 - Standard:
   . Fixed bug #81618 (dns_get_record fails on FreeBSD for missing type).
     (fsbruva)
+  . Fixed bug #81659 (stream_get_contents() may unnecessarily overallocate).
+    (cmb)
 
 18 Nov 2021, PHP 7.4.26
 
diff --git a/ext/standard/tests/streams/bug81659.phpt b/ext/standard/tests/streams/bug81659.phpt
new file mode 100644
index 00000000000..62e0cbad181
--- /dev/null
+++ b/ext/standard/tests/streams/bug81659.phpt
@@ -0,0 +1,24 @@
+--TEST--
+Bug #81659 (stream_get_contents() may unnecessarily overallocate)
+--FILE--
+<?php
+$stream = fopen(__DIR__ . "/81659.txt", "w+");
+
+for ($i = 0; $i < 1024; $i++) {
+    fwrite($stream, str_repeat("*", 1024));
+}
+
+fseek($stream, 1023 * 1024);
+
+$m0 = memory_get_peak_usage();
+var_dump(strlen(stream_get_contents($stream)));
+$m1 = memory_get_peak_usage();
+var_dump($m1 < $m0 + 512 * 1024);
+?>
+--CLEAN--
+<?php
+@unlink(__DIR__ . "/81659.txt");
+?>
+--EXPECT--
+int(1024)
+bool(true)
diff --git a/main/streams/streams.c b/main/streams/streams.c
index d2ee3371c9e..a320a90b525 100644
--- a/main/streams/streams.c
+++ b/main/streams/streams.c
@@ -1502,9 +1502,9 @@ PHPAPI zend_string *_php_stream_copy_to_mem(php_stream *src, size_t maxlen, int
 	 * result may be inaccurate, as the filter may inflate or deflate the
 	 * number of bytes that we can read.  In order to avoid an upsize followed
 	 * by a downsize of the buffer, overestimate by the step size (which is
-	 * 2K).  */
+	 * 8K).  */
 	if (php_stream_stat(src, &ssbuf) == 0 && ssbuf.sb.st_size > 0) {
-		max_len = ssbuf.sb.st_size + step;
+		max_len = MAX(ssbuf.sb.st_size - src->position, 0) + step;
 	} else {
 		max_len = step;
 	}