diff --git a/python/ray/data/_internal/block_batching/iter_batches.py b/python/ray/data/_internal/block_batching/iter_batches.py
index d0f19f96f983..d9ce3df8860e 100644
--- a/python/ray/data/_internal/block_batching/iter_batches.py
+++ b/python/ray/data/_internal/block_batching/iter_batches.py
@@ -4,6 +4,7 @@
 from typing import Any, Callable, Dict, Iterator, Optional
 
 import ray
+from ray._private.ray_constants import env_integer
 from ray.data._internal.block_batching.interfaces import Batch, BlockPrefetcher
 from ray.data._internal.block_batching.util import (
     ActorBlockPrefetcher,
@@ -22,6 +23,10 @@
 from ray.data.context import DataContext
 from ray.types import ObjectRef
 
+DEFAULT_FORMAT_THREADPOOL_NUM_WORKERS = env_integer(
+    "RAY_DATA_MAX_FORMAT_THREADPOOL_NUM_WORKERS", 4
+)
+
 
 class BatchIterator:
     """Defines an iterator pipeline to convert a stream of block object references
@@ -174,12 +179,15 @@ def _blocks_to_batches(self, blocks: Iterator[Block]) -> Iterator[Batch]:
         )
 
     def _format_batches(self, batches: Iterator[Batch]) -> Iterator[Batch]:
+        num_threadpool_workers = min(
+            DEFAULT_FORMAT_THREADPOOL_NUM_WORKERS, self._prefetch_batches
+        )
         return _format_in_threadpool(
             batch_iter=batches,
             stats=self._stats,
             batch_format=self._batch_format,
             collate_fn=self._collate_fn,
-            num_threadpool_workers=self._prefetch_batches,
+            num_threadpool_workers=num_threadpool_workers,
         )
 
     def _finalize_batches(
@@ -226,6 +234,7 @@ def _iter_batches(self) -> Iterator[DataBatch]:
             fn=self._pipeline,
             num_workers=1,
             preserve_ordering=False,
+            buffer_size=max(self._prefetch_batches, 1),
         )
 
         self.before_epoch_start()