diff --git a/esphome/components/wifi/__init__.py b/esphome/components/wifi/__init__.py
index 65bd5f775cf..69544f36367 100644
--- a/esphome/components/wifi/__init__.py
+++ b/esphome/components/wifi/__init__.py
@@ -116,6 +116,7 @@ VALIDATE_WIFI_MIN_AUTH_MODE = cv.enum(WIFI_MIN_AUTH_MODES, upper=True)
 
 WiFi8266PhyMode = wifi_ns.enum("WiFi8266PhyMode")
 WIFI_8266_PHY_MODES = {
+    "AUTO": WiFi8266PhyMode.WIFI_8266_PHY_MODE_AUTO,
     "11B": WiFi8266PhyMode.WIFI_8266_PHY_MODE_11B,
     "11G": WiFi8266PhyMode.WIFI_8266_PHY_MODE_11G,
     "11N": WiFi8266PhyMode.WIFI_8266_PHY_MODE_11N,
diff --git a/esphome/components/wifi/wifi_component.h b/esphome/components/wifi/wifi_component.h
index ef301e3d4f2..0437267a1f0 100644
--- a/esphome/components/wifi/wifi_component.h
+++ b/esphome/components/wifi/wifi_component.h
@@ -346,8 +346,10 @@ enum WifiMinAuthMode : uint8_t {
 };
 
 #ifdef USE_WIFI_PHY_MODE
-// Values match ESP8266 SDK phy_mode_t (PHY_MODE_11B=1, PHY_MODE_11G=2, PHY_MODE_11N=3).
+// Values 1-3 match ESP8266 SDK phy_mode_t (PHY_MODE_11B=1, PHY_MODE_11G=2, PHY_MODE_11N=3).
+// AUTO leaves the SDK at its default (no wifi_set_phy_mode() call).
 enum WiFi8266PhyMode : uint8_t {
+  WIFI_8266_PHY_MODE_AUTO = 0,
   WIFI_8266_PHY_MODE_11B = 1,
   WIFI_8266_PHY_MODE_11G = 2,
   WIFI_8266_PHY_MODE_11N = 3,
@@ -827,7 +829,7 @@ class WiFiComponent final : public Component {
   wifi_band_mode_t band_mode_{WIFI_BAND_MODE_AUTO};
 #endif
 #ifdef USE_WIFI_PHY_MODE
-  WiFi8266PhyMode phy_mode_{WIFI_8266_PHY_MODE_11N};
+  WiFi8266PhyMode phy_mode_{WIFI_8266_PHY_MODE_AUTO};
 #endif
   WifiMinAuthMode min_auth_mode_{WIFI_MIN_AUTH_MODE_WPA2};
   WiFiRetryPhase retry_phase_{WiFiRetryPhase::INITIAL_CONNECT};
diff --git a/esphome/components/wifi/wifi_component_esp8266.cpp b/esphome/components/wifi/wifi_component_esp8266.cpp
index f2ae69f5965..9d2c1bb1be0 100644
--- a/esphome/components/wifi/wifi_component_esp8266.cpp
+++ b/esphome/components/wifi/wifi_component_esp8266.cpp
@@ -633,6 +633,8 @@ bool WiFiComponent::wifi_sta_pre_setup_() {
 
 #ifdef USE_WIFI_PHY_MODE
 bool WiFiComponent::wifi_apply_phy_mode_() {
+  if (this->phy_mode_ == WIFI_8266_PHY_MODE_AUTO)
+    return true;
   // Values of WiFi8266PhyMode are aligned with the SDK's phy_mode_t enum.
   return wifi_set_phy_mode(static_cast<phy_mode_t>(this->phy_mode_));
 }