diff --git a/apps/studio/components/layouts/ProjectLayout/index.tsx b/apps/studio/components/layouts/ProjectLayout/index.tsx
index eff94d559a0..73f3e2b38d1 100644
--- a/apps/studio/components/layouts/ProjectLayout/index.tsx
+++ b/apps/studio/components/layouts/ProjectLayout/index.tsx
@@ -38,11 +38,16 @@ import { RestoringState } from './RestoringState'
 import { UpgradingState } from './UpgradingState'
 import { CreateBranchModal } from '@/components/interfaces/BranchManagement/CreateBranchModal'
 import { ProjectAPIDocs } from '@/components/interfaces/ProjectAPIDocs/ProjectAPIDocs'
+import { BannerFreeMicroUpgrade } from '@/components/ui/BannerStack/Banners/BannerFreeMicroUpgrade'
+import { useBannerStack } from '@/components/ui/BannerStack/BannerStackProvider'
 import { ResourceExhaustionWarningBanner } from '@/components/ui/ResourceExhaustionWarningBanner/ResourceExhaustionWarningBanner'
 import { useCustomContent } from '@/hooks/custom-content/useCustomContent'
+import { useCheckEntitlements } from '@/hooks/misc/useCheckEntitlements'
+import { useLocalStorageQuery } from '@/hooks/misc/useLocalStorage'
 import { useSelectedOrganizationQuery } from '@/hooks/misc/useSelectedOrganization'
 import { useSelectedProjectQuery } from '@/hooks/misc/useSelectedProject'
 import { withAuth } from '@/hooks/misc/withAuth'
+import { LOCAL_STORAGE_KEYS } from 'common'
 import { PROJECT_STATUS } from '@/lib/constants'
 import { buildStudioPageTitle } from '@/lib/page-title'
 import { getPathnameWithoutQuery } from '@/lib/pathname.utils'
@@ -110,6 +115,16 @@ export const ProjectLayout = forwardRef<HTMLDivElement, PropsWithChildren<Projec
     const router = useRouter()
     const { data: selectedOrganization } = useSelectedOrganizationQuery()
     const { data: selectedProject } = useSelectedProjectQuery()
+    const { addBanner, dismissBanner } = useBannerStack()
+    const { hasAccess: entitledUpdateCompute } = useCheckEntitlements(
+      'instances.compute_update_available_sizes'
+    )
+    const isEligibleForFreeUpgrade =
+      entitledUpdateCompute && selectedProject?.infra_compute_size === 'nano'
+    const [isFreeMicroUpgradeBannerDismissed] = useLocalStorageQuery(
+      LOCAL_STORAGE_KEYS.FREE_MICRO_UPGRADE_BANNER_DISMISSED(selectedProject?.ref ?? ''),
+      false
+    )
     const { showSidebar } = useAppStateSnapshot()
     const { setContent: setMobileSheetContent, registerOpenMenu } = useMobileSheet()
 
@@ -153,6 +168,19 @@ export const ProjectLayout = forwardRef<HTMLDivElement, PropsWithChildren<Projec
       router.pathname.includes('/project/[ref]/logs')
     const showPausedState = isPaused && !ignorePausedState
 
+    useEffect(() => {
+      if (isEligibleForFreeUpgrade && !isFreeMicroUpgradeBannerDismissed) {
+        addBanner({
+          id: 'free-micro-upgrade-banner',
+          isDismissed: false,
+          content: <BannerFreeMicroUpgrade />,
+          priority: 2,
+        })
+      } else {
+        dismissBanner('free-micro-upgrade-banner')
+      }
+    }, [isEligibleForFreeUpgrade, isFreeMicroUpgradeBannerDismissed, addBanner, dismissBanner])
+
     useLayoutEffect(() => {
       const unregister = registerOpenMenu(() => {
         setMobileSheetContent(
diff --git a/apps/studio/components/ui/BannerStack/BannerStackProvider.tsx b/apps/studio/components/ui/BannerStack/BannerStackProvider.tsx
index 86b27f9a729..8ec5aaf054b 100644
--- a/apps/studio/components/ui/BannerStack/BannerStackProvider.tsx
+++ b/apps/studio/components/ui/BannerStack/BannerStackProvider.tsx
@@ -5,6 +5,7 @@ const BANNER_ID = {
   INDEX_ADVISOR: 'index-advisor-banner',
   TABLE_EDITOR_QUEUE_OPERATIONS: 'table-editor-queue-operations-banner',
   RLS_EVENT_TRIGGER: 'rls-event-trigger-banner',
+  FREE_MICRO_UPGRADE: 'free-micro-upgrade-banner',
 } as const
 
 export type BannerId = (typeof BANNER_ID)[keyof typeof BANNER_ID]
diff --git a/apps/studio/components/ui/BannerStack/Banners/BannerFreeMicroUpgrade.tsx b/apps/studio/components/ui/BannerStack/Banners/BannerFreeMicroUpgrade.tsx
new file mode 100644
index 00000000000..5930c4bf4b1
--- /dev/null
+++ b/apps/studio/components/ui/BannerStack/Banners/BannerFreeMicroUpgrade.tsx
@@ -0,0 +1,92 @@
+import { LOCAL_STORAGE_KEYS } from 'common'
+import { useParams } from 'common/hooks'
+import { useLocalStorageQuery } from 'hooks/misc/useLocalStorage'
+import { useTrack } from 'lib/telemetry/track'
+import Link from 'next/link'
+import { Button } from 'ui'
+import { ComputeBadge } from 'ui-patterns/ComputeBadge'
+
+import { BannerCard } from '../BannerCard'
+import { useBannerStack } from '../BannerStackProvider'
+
+const ChevronsUpAnimated = () => (
+  <svg
+    width={10}
+    height={10}
+    viewBox="0 0 24 24"
+    fill="none"
+    stroke="currentColor"
+    strokeWidth="2.5"
+    strokeLinecap="round"
+    strokeLinejoin="round"
+  >
+    <polyline
+      points="17 18 12 13 7 18"
+      className="animate-chevron-up"
+      style={{ animationDelay: '0s' }}
+    />
+    <polyline
+      points="17 11 12 6 7 11"
+      className="animate-chevron-up"
+      style={{ animationDelay: '0.3s' }}
+    />
+  </svg>
+)
+
+export const BannerFreeMicroUpgrade = () => {
+  const { ref } = useParams()
+  const track = useTrack()
+  const { dismissBanner } = useBannerStack()
+  const [, setIsDismissed] = useLocalStorageQuery(
+    LOCAL_STORAGE_KEYS.FREE_MICRO_UPGRADE_BANNER_DISMISSED(ref ?? ''),
+    false
+  )
+
+  return (
+    <BannerCard
+      onDismiss={() => {
+        setIsDismissed(true)
+        dismissBanner('free-micro-upgrade-banner')
+        track('free_micro_upgrade_banner_dismissed')
+      }}
+    >
+      <div className="flex flex-col gap-y-4">
+        <div className="flex flex-col gap-y-2 items-start">
+          <div className="animate-badge-pulse">
+            <div className="relative inline-flex overflow-hidden rounded">
+              <ComputeBadge
+                infraComputeSize="nano"
+                icon={<ChevronsUpAnimated />}
+                className="text-brand-600 border-brand-500 bg-brand/10 gap-1"
+              />
+              <span className="animate-badge-shimmer pointer-events-none absolute inset-0 bg-gradient-to-br from-transparent via-brand/20 to-transparent blur-md" />
+            </div>
+          </div>
+        </div>
+        <div className="flex flex-col gap-y-1 mb-2">
+          <p className="text-sm font-medium">Free upgrade to Micro available</p>
+          <p className="text-xs text-foreground-lighter text-balance">
+            Your Pro plan includes a free upgrade from Nano to Micro — double the memory at no extra
+            cost.
+          </p>
+        </div>
+        <div className="flex gap-2">
+          <Button
+            type="primary"
+            size="tiny"
+            asChild
+            onClick={() => {
+              setIsDismissed(true)
+              dismissBanner('free-micro-upgrade-banner')
+              track('free_micro_upgrade_banner_cta_clicked')
+            }}
+          >
+            <Link href={`/project/${ref}/settings/compute-and-disk?upgrade=micro`}>
+              Upgrade for free
+            </Link>
+          </Button>
+        </div>
+      </div>
+    </BannerCard>
+  )
+}
diff --git a/packages/common/constants/local-storage.ts b/packages/common/constants/local-storage.ts
index 13be858ebf0..235cffb2443 100644
--- a/packages/common/constants/local-storage.ts
+++ b/packages/common/constants/local-storage.ts
@@ -116,6 +116,8 @@ export const LOCAL_STORAGE_KEYS = {
 
   TABLE_EDITOR_QUEUE_OPERATIONS_BANNER_DISMISSED: (ref: string) =>
     `table-editor-queue-operations-banner-dismissed-${ref}`,
+  FREE_MICRO_UPGRADE_BANNER_DISMISSED: (ref: string) =>
+    `free-micro-upgrade-banner-dismissed-${ref}`,
   PRIVACY_NOTICE_ACKNOWLEDGED: 'privacy-notice-acknowledged-2026-03',
 
   /**
diff --git a/packages/common/telemetry-constants.ts b/packages/common/telemetry-constants.ts
index b8cb22bbe4b..2b46ced7ad9 100644
--- a/packages/common/telemetry-constants.ts
+++ b/packages/common/telemetry-constants.ts
@@ -2946,6 +2946,28 @@ export interface ComputeBadgeUpgradeClickedEvent {
   groups: TelemetryGroups
 }
 
+/**
+ * User dismissed the free Micro upgrade banner.
+ *
+ * @group Events
+ * @source studio
+ */
+export interface FreeMicroUpgradeBannerDismissedEvent {
+  action: 'free_micro_upgrade_banner_dismissed'
+  groups: TelemetryGroups
+}
+
+/**
+ * User clicked the CTA on the free Micro upgrade banner.
+ *
+ * @group Events
+ * @source studio
+ */
+export interface FreeMicroUpgradeBannerCtaClickedEvent {
+  action: 'free_micro_upgrade_banner_cta_clicked'
+  groups: TelemetryGroups
+}
+
 /**
  * User clicked the Navigate action in the storage explorer header.
  *
@@ -3136,3 +3158,5 @@ export type TelemetryEvent =
   | OrgMenuBackClickedEvent
   | OrgMenuItemClickedEvent
   | ComputeBadgeUpgradeClickedEvent
+  | FreeMicroUpgradeBannerDismissedEvent
+  | FreeMicroUpgradeBannerCtaClickedEvent