diff --git a/CHANGELOG.md b/CHANGELOG.md
index e1332dc5..78c2abc4 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,3 +1,7 @@
+## 3.2.5
+
+* Set compressed flag correctly for grpc-encoding = identity. Fixes [#669](https://github.com/grpc/grpc-dart/issues/669) (https://github.com/grpc/grpc-dart/pull/693)
+
 ## 3.2.4
 
 * Forward internal `GrpcError` on when throwing while sending a request.
diff --git a/lib/src/shared/message.dart b/lib/src/shared/message.dart
index d9d64db1..0533c555 100644
--- a/lib/src/shared/message.dart
+++ b/lib/src/shared/message.dart
@@ -68,7 +68,8 @@ List<int> frame(List<int> rawPayload, [Codec? codec]) {
   final payloadLength = compressedPayload.length;
   final bytes = Uint8List(payloadLength + 5);
   final header = bytes.buffer.asByteData(0, 5);
-  header.setUint8(0, codec == null ? 0 : 1);
+  header.setUint8(
+      0, (codec == null || codec.encodingName == 'identity') ? 0 : 1);
   header.setUint32(1, payloadLength);
   bytes.setRange(5, bytes.length, compressedPayload);
   return bytes;
diff --git a/pubspec.yaml b/pubspec.yaml
index a01ce0ec..e57074a2 100644
--- a/pubspec.yaml
+++ b/pubspec.yaml
@@ -1,6 +1,6 @@
 name: grpc
 description: Dart implementation of gRPC, a high performance, open-source universal RPC framework.
-version: 3.2.4
+version: 3.2.5
 
 repository: https://github.com/grpc/grpc-dart
 
diff --git a/test/grpc_compression_flag_test.dart b/test/grpc_compression_flag_test.dart
new file mode 100644
index 00000000..adf2999a
--- /dev/null
+++ b/test/grpc_compression_flag_test.dart
@@ -0,0 +1,26 @@
+import 'package:grpc/src/shared/codec.dart';
+import 'package:grpc/src/shared/message.dart';
+import 'package:test/test.dart';
+
+void main() {
+  group('GRPC Compression Flag', () {
+    test('compression flag 0 with null codec', () {
+      final rawPayload = <int>[1, 2, 3, 4];
+      final Codec? codec = null;
+      final data = frame(rawPayload, codec);
+      expect(data[0], 0);
+    });
+    test('compression flag 0 with grpc-encoding identity', () {
+      final rawPayload = <int>[1, 2, 3, 4];
+      final Codec codec = IdentityCodec();
+      final data = frame(rawPayload, codec);
+      expect(data[0], 0);
+    });
+    test('compression flag 1 with grpc-encoding gzip', () {
+      final rawPayload = <int>[1, 2, 3, 4];
+      final Codec codec = GzipCodec();
+      final data = frame(rawPayload, codec);
+      expect(data[0], 1);
+    });
+  });
+}