diff --git a/src/main/java/com/microsoft/sqlserver/jdbc/SQLServerCallableStatement.java b/src/main/java/com/microsoft/sqlserver/jdbc/SQLServerCallableStatement.java
index e6e42ada6..9e59c6691 100644
--- a/src/main/java/com/microsoft/sqlserver/jdbc/SQLServerCallableStatement.java
+++ b/src/main/java/com/microsoft/sqlserver/jdbc/SQLServerCallableStatement.java
@@ -23,6 +23,7 @@
 import java.sql.SQLXML;
 import java.sql.Time;
 import java.sql.Timestamp;
+import java.sql.ParameterMetaData;
 import java.text.MessageFormat;
 import java.time.LocalDateTime;
 import java.util.Calendar;
@@ -150,6 +151,21 @@ public void registerOutParameter(int index, int sqlType) throws SQLServerExcepti
             case microsoft.sql.Types.DATETIMEOFFSET:
                 param.setOutScale(7);
                 break;
+            case java.sql.Types.DECIMAL:
+                // Dynamically handle the scale for DECIMAL output parameters.
+                // The scale for the DECIMAL type is fetched from the ParameterMetaData.
+                // This provides flexibility to automatically apply the correct scale as per the database metadata.
+                ParameterMetaData parameterMetaData = this.getParameterMetaData();
+                if (parameterMetaData != null) {
+                    try {
+                        // Fetch scale from metadata for DECIMAL type
+                        int scale = parameterMetaData.getScale(index);
+                        param.setOutScale(scale);
+                    } catch (SQLException e) {
+                        loggerExternal.warning("Failed to fetch scale for DECIMAL type parameter at index " + index + ": " + e.getMessage());
+                    }
+                } 
+                break;
             default:
                 break;
         }
diff --git a/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/BigDecimalPrecisionTest.java b/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/BigDecimalPrecisionTest.java
new file mode 100644
index 000000000..3aac27300
--- /dev/null
+++ b/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/BigDecimalPrecisionTest.java
@@ -0,0 +1,94 @@
+package com.microsoft.sqlserver.jdbc.unit.statement;
+
+import static org.junit.jupiter.api.Assertions.assertEquals;
+
+import java.math.BigDecimal;
+import java.sql.CallableStatement;
+import java.sql.Connection;
+import java.sql.SQLException;
+import java.sql.Statement;
+import java.sql.Types;
+
+import org.junit.jupiter.api.AfterEach;
+import org.junit.jupiter.api.BeforeAll;
+import org.junit.jupiter.api.BeforeEach;
+import org.junit.jupiter.api.Tag;
+import org.junit.jupiter.api.Test;
+
+import com.microsoft.sqlserver.jdbc.RandomUtil;
+import com.microsoft.sqlserver.testframework.AbstractSQLGenerator;
+import com.microsoft.sqlserver.testframework.AbstractTest;
+
+public class BigDecimalPrecisionTest extends AbstractTest {
+
+    String procName1 = AbstractSQLGenerator.escapeIdentifier(RandomUtil.getIdentifier("test_bigdecimal_3"));
+    String procName2 = AbstractSQLGenerator.escapeIdentifier(RandomUtil.getIdentifier("test_bigdecimal_5"));
+
+    @BeforeEach
+    public void init() throws SQLException {
+        try (Connection connection = getConnection()) {
+            String dropProcedureSQL = "DROP PROCEDURE IF EXISTS " + procName1 + ", " + procName2;
+            try (Statement stmt = connection.createStatement()) {
+                stmt.execute(dropProcedureSQL);
+            }
+            
+            String createProcedureSQL1 = "CREATE PROCEDURE " + procName1 + "\n" +
+                    "    @big_decimal_type      decimal(15, 3),\n" +
+                    "    @big_decimal_type_o    decimal(15, 3) OUTPUT\n" +
+                    "AS\n" +
+                    "BEGIN\n" +
+                    "    SET @big_decimal_type_o = @big_decimal_type;\n" +
+                    "END;";
+            String createProcedureSQL2 = "CREATE PROCEDURE " + procName2 + "\n" +
+                    "    @big_decimal_type      decimal(15, 5),\n" +
+                    "    @big_decimal_type_o    decimal(15, 5) OUTPUT\n" +
+                    "AS\n" +
+                    "BEGIN\n" +
+                    "    SET @big_decimal_type_o = @big_decimal_type;\n" +
+                    "END;";
+            try (Statement stmt = connection.createStatement()) {
+                stmt.execute(createProcedureSQL1);
+                stmt.execute(createProcedureSQL2);
+            }
+        }
+    }
+
+    @AfterEach
+    public void terminate() throws SQLException {
+        try (Connection connection = getConnection()) {
+            try (Statement stmt = connection.createStatement()) {
+                String dropProcedureSQL = "DROP PROCEDURE IF EXISTS " + procName1 + ", " + procName2;
+                stmt.execute(dropProcedureSQL);
+            }
+        }
+    }
+
+    @Test
+    @Tag("BigDecimal")
+    public void testBigDecimalPrecision() throws SQLException {
+        try (Connection connection = getConnection()) {
+            // Test for DECIMAL(15, 3)
+            String callSQL1 = "{call " + procName1 + "(100.241, ?)}";
+            try (CallableStatement call = connection.prepareCall(callSQL1)) {
+                call.registerOutParameter(1, Types.DECIMAL);
+                call.execute();
+                BigDecimal actual1 = call.getBigDecimal(1);
+                assertEquals(new BigDecimal("100.241"), actual1);
+            }
+
+            // Test for DECIMAL(15, 5)
+            String callSQL2 = "{call " + procName2 + "(100.24112, ?)}";
+            try (CallableStatement call = connection.prepareCall(callSQL2)) {
+                call.registerOutParameter(1, Types.DECIMAL);
+                call.execute();
+                BigDecimal actual2 = call.getBigDecimal(1);
+                assertEquals(new BigDecimal("100.24112"), actual2);
+            }
+        }
+    }
+    
+    @BeforeAll
+    public static void setupTests() throws Exception {
+        setConnection();
+    }
+}
diff --git a/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/StatementTest.java b/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/StatementTest.java
index 9c814916d..b7fea527d 100644
--- a/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/StatementTest.java
+++ b/src/test/java/com/microsoft/sqlserver/jdbc/unit/statement/StatementTest.java
@@ -1195,15 +1195,14 @@ public void testJdbc41CallableStatementMethods() throws Exception {
                     assertEquals("2017-05-19 10:47:15.1234567 +02:00",
                             cstmt.getObject("col14Value", microsoft.sql.DateTimeOffset.class).toString());
 
-                    // BigDecimal#equals considers the number of decimal places (OutParams always return 4 decimal
-                    // digits rounded up)
-                    assertEquals(0, cstmt.getObject(15, BigDecimal.class).compareTo(new BigDecimal("0.1235")));
+                    // BigDecimal#equals considers the number of decimal places (OutParams always return full precision as specified in the DB schema)
+                    assertEquals(0, cstmt.getObject(15, BigDecimal.class).compareTo(new BigDecimal("0.123456789")));
                     assertEquals(0,
-                            cstmt.getObject("col15Value", BigDecimal.class).compareTo(new BigDecimal("0.1235")));
+                            cstmt.getObject("col15Value", BigDecimal.class).compareTo(new BigDecimal("0.123456789")));
 
-                    assertEquals(0, cstmt.getObject(16, BigDecimal.class).compareTo(new BigDecimal("0.1235")));
+                    assertEquals(0, cstmt.getObject(16, BigDecimal.class).compareTo(new BigDecimal("0.1234567890123456789012345678901234567")));
                     assertEquals(0,
-                            cstmt.getObject("col16Value", BigDecimal.class).compareTo(new BigDecimal("0.1235")));
+                            cstmt.getObject("col16Value", BigDecimal.class).compareTo(new BigDecimal("0.1234567890123456789012345678901234567")));
                 }
             }
         }