diff --git a/Source/Engine/Content/Assets/ModelBase.cpp b/Source/Engine/Content/Assets/ModelBase.cpp
index 0946e6160..599caa810 100644
--- a/Source/Engine/Content/Assets/ModelBase.cpp
+++ b/Source/Engine/Content/Assets/ModelBase.cpp
@@ -3,6 +3,7 @@
 #include "ModelBase.h"
 #include "Engine/Core/Log.h"
 #include "Engine/Core/Math/Transform.h"
+#include "Engine/Core/Config/BuildSettings.h"
 #include "Engine/Content/WeakAssetReference.h"
 #include "Engine/Serialization/MemoryReadStream.h"
 #include "Engine/Profiler/ProfilerMemory.h"
@@ -666,11 +667,42 @@ bool ModelBase::SaveLOD(WriteStream& stream, const ModelData& modelData, int32 l
             return true;
         }
 
+        // Process mesh data if need to decide vertex buffer on format dynamically
+        auto positionFormat = modelData.PositionFormat;
+        if (positionFormat == ModelData::PositionFormats::Automatic)
+        {
+            const float maxPositionError = BuildSettings::Get()->MaxMeshPositionError; // In world-units
+            const float maxPositionErrorSq = maxPositionError * maxPositionError;
+            if (maxPositionErrorSq > 0.0f)
+            {
+                positionFormat = ModelData::PositionFormats::Float16;
+                const Float3* positions = mesh.Positions.Get();
+                for (int32 i = 0; i < mesh.Positions.Count(); i++)
+                {
+                    // Encode to Half3 and decode back to see the position error
+                    Float3 position = positions[i];
+                    Half3 encoded(position);
+                    Float3 decoded = encoded.ToFloat3();
+                    if (Float3::DistanceSquared(position, decoded) > maxPositionErrorSq)
+                    {
+                        // Cannot use lower quality so go back to full precision
+                        positionFormat = ModelData::PositionFormats::Float32;
+                        break;
+                    }
+                }
+            }
+            else
+            {
+                // Full precision as default
+                positionFormat = ModelData::PositionFormats::Float32;
+            }
+        }
+
         // Define vertex buffers layout and packing
         Array<GPUVertexLayout::Elements, FixedAllocation<MODEL_MAX_VB>> vbElements;
         const bool useSeparatePositions = !isSkinned;
         const bool useSeparateColors = !isSkinned;
-        PixelFormat positionsFormat = modelData.PositionFormat == ModelData::PositionFormats::Float32 ? PixelFormat::R32G32B32_Float : PixelFormat::R16G16B16A16_Float;
+        PixelFormat positionsFormat = positionFormat == ModelData::PositionFormats::Float32 ? PixelFormat::R32G32B32_Float : PixelFormat::R16G16B16A16_Float;
         PixelFormat texCoordsFormat = modelData.TexCoordFormat == ModelData::TexCoordFormats::Float16 ? PixelFormat::R16G16_Float : PixelFormat::R8G8_UNorm;
         PixelFormat blendIndicesFormat = PixelFormat::R8G8B8A8_UInt;
         PixelFormat blendWeightsFormat = PixelFormat::R8G8B8A8_UNorm;
@@ -684,7 +716,6 @@ bool ModelBase::SaveLOD(WriteStream& stream, const ModelData& modelData, int32 l
         }
         {
             byte vbIndex = 0;
-            // TODO: add option to quantize vertex attributes (eg. 8-bit blend weights, 8-bit texcoords)
 
             // Position
             if (useSeparatePositions)
diff --git a/Source/Engine/Core/Config/BuildSettings.h b/Source/Engine/Core/Config/BuildSettings.h
index 4251798c1..54700278e 100644
--- a/Source/Engine/Core/Config/BuildSettings.h
+++ b/Source/Engine/Core/Config/BuildSettings.h
@@ -89,6 +89,12 @@ public:
     API_FIELD(Attributes="EditorOrder(2100), EditorDisplay(\"Content\")")
     bool SkipDefaultFonts = false;
 
+    /// <summary>
+    /// The maximum acceptable mesh vertex position error (in world units) for data quantization. Use 0 to disable this feature. Affects meshes during import (or reimpport).
+    /// </summary>
+    API_FIELD(Attributes="EditorOrder(2200), EditorDisplay(\"Content\"), ValueCategory(Utils.ValueCategory.Distance)")
+    float MaxMeshPositionError = 0.5f;
+
     /// <summary>
     /// If checked, .NET Runtime won't be packaged with a game and will be required by user to be installed on system upon running game build. Available only on supported platforms such as Windows, Linux and macOS.
     /// </summary>
diff --git a/Source/Engine/Graphics/Models/ModelData.h b/Source/Engine/Graphics/Models/ModelData.h
index 8e401b973..27943942b 100644
--- a/Source/Engine/Graphics/Models/ModelData.h
+++ b/Source/Engine/Graphics/Models/ModelData.h
@@ -434,7 +434,8 @@ public:
     {
         Float32,
         Float16,
-    } PositionFormat = PositionFormats::Float32;
+        Automatic,
+    } PositionFormat = PositionFormats::Automatic;
 
     // See ModelTool::TexCoordFormats
     enum class TexCoordFormats
diff --git a/Source/Engine/Tools/ModelTool/ModelTool.h b/Source/Engine/Tools/ModelTool/ModelTool.h
index b09583471..d7545b92e 100644
--- a/Source/Engine/Tools/ModelTool/ModelTool.h
+++ b/Source/Engine/Tools/ModelTool/ModelTool.h
@@ -148,9 +148,11 @@ public:
     API_ENUM(Attributes="HideInEditor") enum class PositionFormat
     {
         // XYZ channels with 32-bit precision (12 bytes per vertex).
-        Float32,
-        // XYZ(W) channels with 12-bit precision (8 bytes per vertex).
-        Float16,
+        Float32 = 0,
+        // XYZ(W) channels with 16-bit precision (8 bytes per vertex).
+        Float16 = 1,
+        // Selects the most memory-efficient format that can represent positions within a max error defined in project Build Settings.
+        Automatic = 2,
     };
 
     /// <summary>
@@ -159,9 +161,9 @@ public:
     API_ENUM(Attributes="HideInEditor") enum class TexCoordFormats
     {
         // XY channels with 16-bit precision (4 bytes per vertex).
-        Float16,
+        Float16 = 0,
         // XY channels with 8-bit precision (2 bytes per vertex). Valid only for normalized UVs within range [0; 1], scaled or negative UVs won't work.
-        UNorm8,
+        UNorm8 = 1,
     };
 
     /// <summary>
@@ -226,7 +228,7 @@ public:
     public:
         // The imported vertex positions data format to use by meshes. Changing this affects memory usage of the mesh data, performance and overall quality.
         API_FIELD(Attributes = "EditorOrder(200), EditorDisplay(\"Data Format\"), VisibleIf(nameof(ShowGeometry))")
-        PositionFormat PositionFormat = PositionFormat::Float32;
+        PositionFormat PositionFormat = PositionFormat::Automatic;
         // The imported vertex texture coordinates data format to use by meshes. Changing this affects memory usage of the mesh data, performance and overall quality.
         API_FIELD(Attributes = "EditorOrder(205), EditorDisplay(\"Data Format\"), VisibleIf(nameof(ShowGeometry))")
         TexCoordFormats TexCoordFormat = TexCoordFormats::Float16;