diff --git a/packages/extra/etcd/templates/etcd-defrag.yaml b/packages/extra/etcd/templates/etcd-defrag.yaml
index 0afcd6d18..52cc63518 100644
--- a/packages/extra/etcd/templates/etcd-defrag.yaml
+++ b/packages/extra/etcd/templates/etcd-defrag.yaml
@@ -44,6 +44,14 @@ spec:
             - --cert=/etc/etcd/pki/client/cert/tls.crt
             - --key=/etc/etcd/pki/client/cert/tls.key
             - --cluster
+            # etcd compacts itself (periodic, 5m retention, see etcd-cluster.yaml).
+            # Compacting again to the latest revision either fails because nothing
+            # was written since, or drops the history that retention keeps for
+            # watchers to resume from.
+            - --compaction=false
+            # dbQuotaUsage below is dbSize over this value, and the tool assumes
+            # 2 GiB unless told the quota the cluster actually runs with.
+            - --etcd-storage-quota-bytes={{ include "calculateQuotaBackendBytes" .Values.size }}
             - --defrag-rule
             - "dbQuotaUsage > 0.8 || dbSize - dbSizeInUse > 200*1024*1024"
             volumeMounts:
diff --git a/packages/extra/etcd/tests/defrag_test.yaml b/packages/extra/etcd/tests/defrag_test.yaml
new file mode 100644
index 000000000..8d74e1a6b
--- /dev/null
+++ b/packages/extra/etcd/tests/defrag_test.yaml
@@ -0,0 +1,43 @@
+suite: etcd defrag CronJob leaves compaction to etcd and knows the real quota
+
+release:
+  name: etcd
+  namespace: tenant-test
+
+templates:
+  - templates/etcd-defrag.yaml
+  - templates/etcd-cluster.yaml
+
+set:
+  _cluster: {}
+
+tests:
+  - it: does not compact before defragmenting
+    template: templates/etcd-defrag.yaml
+    asserts:
+      - contains:
+          path: spec.jobTemplate.spec.template.spec.containers[0].args
+          content: --compaction=false
+
+  - it: evaluates dbQuotaUsage against the default 4Gi cluster quota
+    template: templates/etcd-defrag.yaml
+    asserts:
+      - contains:
+          path: spec.jobTemplate.spec.template.spec.containers[0].args
+          content: --etcd-storage-quota-bytes=4080218931
+
+  - it: passes the defrag tool the same quota the EtcdCluster gets
+    set:
+      size: 10Gi
+    asserts:
+      - contains:
+          path: spec.jobTemplate.spec.template.spec.containers[0].args
+          content: --etcd-storage-quota-bytes=10200547328
+        template: templates/etcd-defrag.yaml
+      - equal:
+          path: spec.options.quotaBackendBytes
+          value: 10200547328
+        template: templates/etcd-cluster.yaml
+        documentSelector:
+          path: kind
+          value: EtcdCluster