diff --git a/CHANGELOG.md b/CHANGELOG.md
index b6998446bd..1448c755c4 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,7 @@
 
 #### Features
 
+* [#2196](https://github.com/ruby-grape/grape/pull/2196): Add support for `passwords_hashed` param for `digest_auth` - [@lHydra](https://github.com/lhydra).
 * Your contribution here.
 
 #### Fixes
diff --git a/README.md b/README.md
index a2b7f31363..4716597438 100644
--- a/README.md
+++ b/README.md
@@ -3297,12 +3297,20 @@ http_basic do |username, password|
 end
 ```
 
+Digest auth supports clear-text passwords and password hashes.
+
 ```ruby
 http_digest({ realm: 'Test Api', opaque: 'app secret' }) do |username|
   # lookup the user's password here
 end
 ```
 
+```ruby
+http_digest(realm: { realm: 'Test Api', opaque: 'app secret', passwords_hashed: true }) do |username|
+  # lookup the user's password hash here
+end
+```
+
 ### Register custom middleware for authentication
 
 Grape can use custom Middleware for authentication. How to implement these
diff --git a/lib/grape/middleware/auth/dsl.rb b/lib/grape/middleware/auth/dsl.rb
index 1b2e8f4568..d85171fc59 100644
--- a/lib/grape/middleware/auth/dsl.rb
+++ b/lib/grape/middleware/auth/dsl.rb
@@ -32,7 +32,13 @@ def http_basic(options = {}, &block)
 
           def http_digest(options = {}, &block)
             options[:realm] ||= 'API Authorization'
-            options[:opaque] ||= 'secret'
+
+            if options[:realm].respond_to?(:values_at)
+              options[:realm][:opaque] ||= 'secret'
+            else
+              options[:opaque] ||= 'secret'
+            end
+
             auth :http_digest, options, &block
           end
         end
diff --git a/spec/grape/middleware/auth/dsl_spec.rb b/spec/grape/middleware/auth/dsl_spec.rb
index 41169a3bf6..5e694d08eb 100644
--- a/spec/grape/middleware/auth/dsl_spec.rb
+++ b/spec/grape/middleware/auth/dsl_spec.rb
@@ -16,7 +16,7 @@
   end
 
   describe '.auth' do
-    it 'stets auth parameters' do
+    it 'sets auth parameters' do
       expect(subject.base_instance).to receive(:use).with(Grape::Middleware::Auth::Base, settings)
 
       subject.auth :http_digest, realm: settings[:realm], opaque: settings[:opaque], &settings[:proc]
@@ -38,16 +38,25 @@
   end
 
   describe '.http_basic' do
-    it 'stets auth parameters' do
+    it 'sets auth parameters' do
       subject.http_basic realm: 'my_realm', &settings[:proc]
       expect(subject.auth).to eq(realm: 'my_realm', type: :http_basic, proc: block)
     end
   end
 
   describe '.http_digest' do
-    it 'stets auth parameters' do
-      subject.http_digest realm: 'my_realm', opaque: 'my_opaque', &settings[:proc]
-      expect(subject.auth).to eq(realm: 'my_realm', type: :http_digest, proc: block, opaque: 'my_opaque')
+    context 'when realm is a hash' do
+      it 'sets auth parameters' do
+        subject.http_digest realm: { realm: 'my_realm', opaque: 'my_opaque' }, &settings[:proc]
+        expect(subject.auth).to eq(realm: { realm: 'my_realm', opaque: 'my_opaque' }, type: :http_digest, proc: block)
+      end
+    end
+
+    context 'when realm is not hash' do
+      it 'sets auth parameters' do
+        subject.http_digest realm: 'my_realm', opaque: 'my_opaque', &settings[:proc]
+        expect(subject.auth).to eq(realm: 'my_realm', type: :http_digest, proc: block, opaque: 'my_opaque')
+      end
     end
   end
 end
diff --git a/spec/grape/middleware/auth/strategies_spec.rb b/spec/grape/middleware/auth/strategies_spec.rb
index 954c996315..fcbe9e7bda 100644
--- a/spec/grape/middleware/auth/strategies_spec.rb
+++ b/spec/grape/middleware/auth/strategies_spec.rb
@@ -42,7 +42,17 @@ def app
     end
 
     module StrategiesSpec
-      class Test < Grape::API
+      class PasswordHashed < Grape::API
+        http_digest(realm: { realm: 'Test Api', opaque: 'secret', passwords_hashed: true }) do |username|
+          { 'foo' => Digest::MD5.hexdigest(['foo', 'Test Api', 'bar'].join(':')) }[username]
+        end
+
+        get '/test' do
+          [{ hey: 'you' }, { there: 'bar' }, { foo: 'baz' }]
+        end
+      end
+
+      class PasswordIsNotHashed < Grape::API
         http_digest(realm: 'Test Api', opaque: 'secret') do |username|
           { 'foo' => 'bar' }[username]
         end
@@ -53,30 +63,60 @@ class Test < Grape::API
       end
     end
 
-    def app
-      StrategiesSpec::Test
-    end
+    context 'when password is hashed' do
+      def app
+        StrategiesSpec::PasswordHashed
+      end
 
-    it 'is a digest authentication challenge' do
-      get '/test'
-      expect(last_response).to be_challenge
-    end
+      it 'is a digest authentication challenge' do
+        get '/test'
+        expect(last_response).to be_challenge
+      end
 
-    it 'throws a 401 if no auth is given' do
-      get '/test'
-      expect(last_response.status).to eq(401)
-    end
+      it 'throws a 401 if no auth is given' do
+        get '/test'
+        expect(last_response.status).to eq(401)
+      end
 
-    it 'authenticates if given valid creds' do
-      digest_authorize 'foo', 'bar'
-      get '/test'
-      expect(last_response.status).to eq(200)
+      it 'authenticates if given valid creds' do
+        digest_authorize 'foo', 'bar'
+        get '/test'
+        expect(last_response.status).to eq(200)
+      end
+
+      it 'throws a 401 if given invalid creds' do
+        digest_authorize 'bar', 'foo'
+        get '/test'
+        expect(last_response.status).to eq(401)
+      end
     end
 
-    it 'throws a 401 if given invalid creds' do
-      digest_authorize 'bar', 'foo'
-      get '/test'
-      expect(last_response.status).to eq(401)
+    context 'when password is not hashed' do
+      def app
+        StrategiesSpec::PasswordIsNotHashed
+      end
+
+      it 'is a digest authentication challenge' do
+        get '/test'
+        expect(last_response).to be_challenge
+      end
+
+      it 'throws a 401 if no auth is given' do
+        get '/test'
+        expect(last_response.status).to eq(401)
+      end
+
+      it 'authenticates if given valid creds' do
+        digest_authorize 'foo', 'bar'
+        get '/test'
+        expect(last_response.status).to eq(200)
+      end
+
+      it 'throws a 401 if given invalid creds' do
+        digest_authorize 'bar', 'foo'
+        get '/test'
+        expect(last_response.status).to eq(401)
+      end
     end
   end
 end