diff --git a/Sources/iDither/ContentView.swift b/Sources/iDither/ContentView.swift
index db8e6dc..d1d6565 100644
--- a/Sources/iDither/ContentView.swift
+++ b/Sources/iDither/ContentView.swift
@@ -20,6 +20,7 @@ struct ContentView: View {
         .onChange(of: viewModel.brightness) { _, _ in viewModel.processImage() }
         .onChange(of: viewModel.contrast) { _, _ in viewModel.processImage() }
         .onChange(of: viewModel.pixelScale) { _, _ in viewModel.processImage() }
+        .onChange(of: viewModel.colorDepth) { _, _ in viewModel.processImage() }
         .onChange(of: viewModel.selectedAlgorithm) { _, _ in viewModel.processImage() }
         .onChange(of: viewModel.isGrayscale) { _, _ in viewModel.processImage() }
         // File Importer at the very top level
@@ -143,6 +144,17 @@ struct SidebarView: View {
                     }
                     Slider(value: $viewModel.pixelScale, in: 1.0...20.0, step: 1.0)
                 }
+                
+                VStack(alignment: .leading) {
+                    HStack {
+                        Text("Color Depth")
+                        Spacer()
+                        Text("\(Int(viewModel.colorDepth))")
+                            .monospacedDigit()
+                            .foregroundStyle(.secondary)
+                    }
+                    Slider(value: $viewModel.colorDepth, in: 1.0...32.0, step: 1.0)
+                }
             }
         }
         .formStyle(.grouped)
diff --git a/Sources/iDither/Renderer/MetalImageRenderer.swift b/Sources/iDither/Renderer/MetalImageRenderer.swift
index 8d4351d..f1975aa 100644
--- a/Sources/iDither/Renderer/MetalImageRenderer.swift
+++ b/Sources/iDither/Renderer/MetalImageRenderer.swift
@@ -6,6 +6,7 @@ struct RenderParameters {
     var brightness: Float
     var contrast: Float
     var pixelScale: Float
+    var colorDepth: Float // New parameter
     var algorithm: Int32 // 0: None, 1: Bayer 8x8, 2: Bayer 4x4
     var isGrayscale: Int32 // 0: false, 1: true
 }
diff --git a/Sources/iDither/Resources/Shaders.metal b/Sources/iDither/Resources/Shaders.metal
index 838ebee..517bedf 100644
--- a/Sources/iDither/Resources/Shaders.metal
+++ b/Sources/iDither/Resources/Shaders.metal
@@ -5,6 +5,7 @@ struct RenderParameters {
     float brightness;
     float contrast;
     float pixelScale;
+    float colorDepth; // New parameter: 1.0 to 32.0 (Levels)
     int algorithm; // 0: None, 1: Bayer 2x2, 2: Bayer 4x4, 3: Bayer 8x8, 4: Cluster 4x4, 5: Cluster 8x8, 6: Blue Noise
     int isGrayscale;
 };
@@ -67,6 +68,16 @@ constant float blueNoise8x8[8][8] = {
     {35.0/64.0, 24.0/64.0,  0.0/64.0, 41.0/64.0, 15.0/64.0, 52.0/64.0, 20.0/64.0, 37.0/64.0}
 };
 
+float ditherChannel(float value, float threshold, float limit) {
+    // Quantization Formula
+    // value: 0.0 to 1.0
+    // threshold: 0.0 to 1.0 (from matrix)
+    // limit: colorDepth (e.g. 4.0)
+    
+    float ditheredValue = value + (threshold - 0.5) * (1.0 / (limit - 1.0));
+    return floor(ditheredValue * (limit - 1.0) + 0.5) / (limit - 1.0);
+}
+
 kernel void ditherShader(texture2d<float, access::read> inputTexture [[texture(0)]],
                          texture2d<float, access::write> outputTexture [[texture(1)]],
                          constant RenderParameters &params [[buffer(0)]],
@@ -104,6 +115,7 @@ kernel void ditherShader(texture2d<float, access::read> inputTexture [[texture(0
     if (shouldDither) {
         uint x, y;
         
+        // Fetch threshold from matrix
         switch (params.algorithm) {
             case 1: // Bayer 2x2
                 x = uint(sourceCoord.x / scale) % 2;
@@ -139,7 +151,18 @@ kernel void ditherShader(texture2d<float, access::read> inputTexture [[texture(0
                 break;
         }
         
-        rgb = (luma > threshold) ? float3(1.0) : float3(0.0);
+        // Apply Quantized Dithering
+        if (params.isGrayscale > 0) {
+            // Apply only to luma (which is already in rgb)
+            rgb.r = ditherChannel(rgb.r, threshold, params.colorDepth);
+            rgb.g = rgb.r;
+            rgb.b = rgb.r;
+        } else {
+            // Apply to each channel
+            rgb.r = ditherChannel(rgb.r, threshold, params.colorDepth);
+            rgb.g = ditherChannel(rgb.g, threshold, params.colorDepth);
+            rgb.b = ditherChannel(rgb.b, threshold, params.colorDepth);
+        }
     }
     
     outputTexture.write(float4(rgb, color.a), gid);
diff --git a/Sources/iDither/ViewModel/DitherViewModel.swift b/Sources/iDither/ViewModel/DitherViewModel.swift
index f57b4d0..66f0cbd 100644
--- a/Sources/iDither/ViewModel/DitherViewModel.swift
+++ b/Sources/iDither/ViewModel/DitherViewModel.swift
@@ -37,7 +37,8 @@ class DitherViewModel {
     var brightness: Double = 0.0
     var contrast: Double = 1.0
     var pixelScale: Double = 4.0
-    var selectedAlgorithm: DitherAlgorithm = .bayer4x4 // Default to Balanced
+    var colorDepth: Double = 4.0 // Default to 4 levels
+    var selectedAlgorithm: DitherAlgorithm = .bayer4x4
     var isGrayscale: Bool = false
     
     private let renderer = MetalImageRenderer()
@@ -67,6 +68,7 @@ class DitherViewModel {
             brightness: Float(brightness),
             contrast: Float(contrast),
             pixelScale: Float(pixelScale),
+            colorDepth: Float(colorDepth),
             algorithm: Int32(selectedAlgorithm.rawValue),
             isGrayscale: isGrayscale ? 1 : 0
         )