diff --git a/cmds/installd/otapreopt_parameters.cpp b/cmds/installd/otapreopt_parameters.cpp
index 802d5d7..d56aec9 100644
--- a/cmds/installd/otapreopt_parameters.cpp
+++ b/cmds/installd/otapreopt_parameters.cpp
@@ -133,6 +133,9 @@
 
     // The compilation reason is ab-ota (match the system property pm.dexopt.ab-ota)
     compilation_reason = "ab-ota";
+
+    // Flag is enabled by default for A/B otas.
+    dexopt_flags = DEXOPT_GENERATE_COMPACT_DEX;
 }
 
 bool OTAPreoptParameters::ReadArgumentsV1(const char** argv) {
@@ -146,6 +149,8 @@
         return false;
     }
 
+    SetDefaultsForPostV1Arguments();
+
     size_t param_index = 0;
     for (;; ++param_index) {
         const char* param = argv[3 + param_index];
@@ -193,8 +198,9 @@
                 constexpr int OLD_DEXOPT_BOOTCOMPLETE   = 1 << 4;
                 constexpr int OLD_DEXOPT_PROFILE_GUIDED = 1 << 5;
                 constexpr int OLD_DEXOPT_OTA            = 1 << 6;
+                static_assert(DEXOPT_GENERATE_COMPACT_DEX > OLD_DEXOPT_OTA, "must not overlap");
                 int input = atoi(param);
-                dexopt_flags =
+                dexopt_flags |=
                         ReplaceMask(input, OLD_DEXOPT_PUBLIC, DEXOPT_PUBLIC) |
                         ReplaceMask(input, OLD_DEXOPT_DEBUGGABLE, DEXOPT_DEBUGGABLE) |
                         ReplaceMask(input, OLD_DEXOPT_BOOTCOMPLETE, DEXOPT_BOOTCOMPLETE) |
@@ -226,8 +232,6 @@
         return false;
     }
 
-    SetDefaultsForPostV1Arguments();
-
     return true;
 }
 
@@ -239,7 +243,9 @@
         case 4: num_args_expected = 13; break;
         case 5: num_args_expected = 14; break;
         case 6: num_args_expected = 15; break;
-        case 7: num_args_expected = 16; break;
+        case 7:
+        // Version 8 adds a new dexopt flag: DEXOPT_GENERATE_COMPACT_DEX
+        case 8: num_args_expected = 16; break;
         default:
             LOG(ERROR) << "Don't know how to read arguments for version " << version;
             return false;
@@ -302,6 +308,10 @@
 
             case 6:
                 dexopt_flags = atoi(param);
+                // Add CompactDex generation flag for versions less than 8 since it wasn't passed
+                // from the package manager. Only conditionally set the flag here so that it can
+                // be fully controlled by the package manager.
+                dexopt_flags |= (version < 8) ? DEXOPT_GENERATE_COMPACT_DEX : 0u;
                 break;
 
             case 7:
diff --git a/cmds/installd/tests/installd_otapreopt_test.cpp b/cmds/installd/tests/installd_otapreopt_test.cpp
index 82bf932..63426cb 100644
--- a/cmds/installd/tests/installd_otapreopt_test.cpp
+++ b/cmds/installd/tests/installd_otapreopt_test.cpp
@@ -20,6 +20,7 @@
 #include <android-base/logging.h>
 #include <gtest/gtest.h>
 
+#include "installd_constants.h"
 #include "otapreopt_parameters.h"
 
 namespace android {
@@ -61,7 +62,7 @@
         ASSERT_STREQ(params.instruction_set, args[i++]);
         ASSERT_EQ(params.dexopt_needed, atoi(args[i++]));
         ASSERT_STREQ(params.oat_dir, args[i++]);
-        ASSERT_EQ(params.dexopt_flags, atoi(args[i++]));
+        const int dexopt_flags = atoi(args[i++]);
         ASSERT_STREQ(params.compiler_filter, args[i++]);
         ASSERT_STREQ(params.volume_uuid, ParseNull(args[i++]));
         ASSERT_STREQ(params.shared_libraries, ParseNull(args[i++]));
@@ -78,7 +79,7 @@
         if (version > 3) {
             ASSERT_EQ(params.target_sdk_version, atoi(args[i++]));
         } else {
-             ASSERT_EQ(params.target_sdk_version, 0);
+            ASSERT_EQ(params.target_sdk_version, 0);
         }
         if (version > 4) {
             ASSERT_STREQ(params.profile_name, ParseNull(args[i++]));
@@ -95,6 +96,11 @@
         } else {
             ASSERT_STREQ(params.compilation_reason, "ab-ota");
         }
+        if (version > 7) {
+            ASSERT_EQ(params.dexopt_flags, dexopt_flags);
+        } else {
+            ASSERT_EQ(params.dexopt_flags, dexopt_flags | DEXOPT_GENERATE_COMPACT_DEX);
+        }
     }
 
     const char* getVersionCStr(uint32_t version) {
@@ -106,6 +112,7 @@
             case 5: return "5";
             case 6: return "6";
             case 7: return "7";
+            case 8: return "8";
         }
         return nullptr;
     }