diff --git a/crates/bevy_pbr/src/decal/forward.rs b/crates/bevy_pbr/src/decal/forward.rs
index c90c1f00f049c..f2d126fea51bf 100644
--- a/crates/bevy_pbr/src/decal/forward.rs
+++ b/crates/bevy_pbr/src/decal/forward.rs
@@ -11,7 +11,6 @@ use bevy_math::{prelude::Rectangle, Quat, Vec2, Vec3};
 use bevy_mesh::{Mesh, Mesh3d, MeshBuilder, MeshVertexBufferLayoutRef, Meshable};
 use bevy_reflect::{Reflect, TypePath};
 use bevy_render::{
-    alpha::AlphaMode,
     render_asset::RenderAssets,
     render_resource::{
         AsBindGroup, AsBindGroupShaderType, CompareFunction, RenderPipelineDescriptor, ShaderType,
@@ -47,7 +46,7 @@ impl Plugin for ForwardDecalPlugin {
     }
 }
 
-/// A decal that renders via a 1x1 transparent quad mesh, smoothly alpha-blending with the underlying
+/// A decal that renders via a 1x1 quad mesh, smoothly alpha-blending with the underlying
 /// geometry towards the edges.
 ///
 /// Because forward decals are meshes, you can use arbitrary materials to control their appearance.
@@ -91,6 +90,8 @@ pub struct ForwardDecalMaterialExt {
     /// blending with more distant surfaces.
     ///
     /// Units are in meters.
+    ///
+    /// This has no effect if alpha mode is `Opaque`.
     pub depth_fade_factor: f32,
 }
 
@@ -111,8 +112,8 @@ impl AsBindGroupShaderType<ForwardDecalMaterialExtUniform> for ForwardDecalMater
 }
 
 impl MaterialExtension for ForwardDecalMaterialExt {
-    fn alpha_mode() -> Option<AlphaMode> {
-        Some(AlphaMode::Blend)
+    fn enable_prepass() -> bool {
+        false // This is needed if alpha mode is `Opaque`.
     }
 
     fn enable_shadows() -> bool {
diff --git a/crates/bevy_pbr/src/render/mesh.rs b/crates/bevy_pbr/src/render/mesh.rs
index 3e3842a23faf5..fdc22f47a3b6e 100644
--- a/crates/bevy_pbr/src/render/mesh.rs
+++ b/crates/bevy_pbr/src/render/mesh.rs
@@ -2462,8 +2462,9 @@ impl SpecializedMeshPipeline for MeshPipeline {
         let (mut is_opaque, mut alpha_to_coverage_enabled) = (false, false);
         if key.contains(MeshPipelineKey::OIT_ENABLED) && pass == MeshPipelineKey::BLEND_ALPHA {
             label = "oit_mesh_pipeline".into();
-            // TODO tail blending would need alpha blending
-            blend = None;
+            // TODO tail blending would need to return color in shader to do alpha blending
+            // Alpha blending is also needed by forward decals.
+            blend = Some(BlendState::ALPHA_BLENDING);
             shader_defs.push("OIT_ENABLED".into());
             // TODO it should be possible to use this to combine MSAA and OIT
             // alpha_to_coverage_enabled = true;
diff --git a/crates/bevy_pbr/src/render/pbr.wgsl b/crates/bevy_pbr/src/render/pbr.wgsl
index ea2b33ee0ac11..4beb3949191e5 100644
--- a/crates/bevy_pbr/src/render/pbr.wgsl
+++ b/crates/bevy_pbr/src/render/pbr.wgsl
@@ -89,6 +89,11 @@ fn fragment(
     out.color = main_pass_post_lighting_processing(pbr_input, out.color);
 #endif
 
+#ifdef FORWARD_DECAL
+        out.color.a = min(forward_decal_info.alpha, out.color.a);
+#else
+// Forward decal is incompatible with OIT as it needs to be rendered
+// even it's occluded by opaque objects, but OIT will exclude the fragments.
 #ifdef OIT_ENABLED
     let alpha_mode = pbr_input.material.flags & pbr_types::STANDARD_MATERIAL_FLAGS_ALPHA_MODE_RESERVED_BITS;
     if alpha_mode != pbr_types::STANDARD_MATERIAL_FLAGS_ALPHA_MODE_OPAQUE {
@@ -97,9 +102,6 @@ fn fragment(
         discard;
     }
 #endif // OIT_ENABLED
-
-#ifdef FORWARD_DECAL
-        out.color.a = min(forward_decal_info.alpha, out.color.a);
 #endif
 
         return out;
diff --git a/examples/3d/decal.rs b/examples/3d/decal.rs
index 623227cf2ffd9..79e269d8cb7e6 100644
--- a/examples/3d/decal.rs
+++ b/examples/3d/decal.rs
@@ -27,18 +27,58 @@ fn setup(
 ) {
     // Spawn the forward decal
     commands.spawn((
-        Name::new("Decal"),
+        Name::new("Decal Red"),
         ForwardDecal,
         MeshMaterial3d(decal_standard_materials.add(ForwardDecalMaterial {
             base: StandardMaterial {
                 base_color_texture: Some(asset_server.load("textures/uv_checker_bw.png")),
+                base_color: Color::srgba(1.0, 0.0, 0.0, 0.5),
+                // Alpha mode for decals. Other alpha modes are also supported.
+                alpha_mode: AlphaMode::Blend,
+                depth_bias: 0.0,
                 ..default()
             },
             extension: ForwardDecalMaterialExt {
                 depth_fade_factor: 1.0,
             },
         })),
-        Transform::from_scale(Vec3::splat(4.0)),
+        Transform::from_scale(Vec3::splat(4.0)).with_translation(Vec3::new(1.0, 0.0, -1.0)),
+    ));
+
+    commands.spawn((
+        Name::new("Decal Green"),
+        ForwardDecal,
+        MeshMaterial3d(decal_standard_materials.add(ForwardDecalMaterial {
+            base: StandardMaterial {
+                base_color_texture: Some(asset_server.load("textures/uv_checker_bw.png")),
+                base_color: Color::srgba(0.0, 1.0, 0.0, 0.5),
+                alpha_mode: AlphaMode::Blend,
+                depth_bias: 2.0,
+                ..default()
+            },
+            extension: ForwardDecalMaterialExt {
+                depth_fade_factor: 1.0,
+            },
+        })),
+        Transform::from_scale(Vec3::splat(4.0)).with_translation(Vec3::new(-1.0, 0.0, -1.0)),
+    ));
+
+    commands.spawn((
+        Name::new("Decal Blue"),
+        ForwardDecal,
+        MeshMaterial3d(decal_standard_materials.add(ForwardDecalMaterial {
+            base: StandardMaterial {
+                base_color_texture: Some(asset_server.load("textures/uv_checker_bw.png")),
+                base_color: Color::srgba(0.0, 0.0, 1.0, 0.5),
+                alpha_mode: AlphaMode::Blend,
+                depth_bias: 4.0,
+                ..default()
+            },
+            extension: ForwardDecalMaterialExt {
+                depth_fade_factor: 1.0,
+            },
+        })),
+        Transform::from_scale(Vec3::splat(4.0)).with_translation(Vec3::new(0.0, 0.0, 1.0)),
     ));
 
     commands.spawn((