diff --git a/src/lightning/fabric/plugins/precision/fsdp.py b/src/lightning/fabric/plugins/precision/fsdp.py
index 0b78ad72a441f..270a67e3a2338 100644
--- a/src/lightning/fabric/plugins/precision/fsdp.py
+++ b/src/lightning/fabric/plugins/precision/fsdp.py
@@ -74,6 +74,12 @@ def __init__(self, precision: _PRECISION_INPUT, scaler: Optional["ShardedGradSca
         }
         self._desired_input_dtype = precision_to_type[self.precision]
 
+    @override
+    def convert_module(self, module: Module) -> Module:
+        if "true" in self.precision:
+            return module.to(dtype=self._desired_input_dtype)
+        return module
+
     @property
     def mixed_precision_config(self) -> "TorchMixedPrecision":
         from torch.distributed.fsdp.fully_sharded_data_parallel import MixedPrecision as TorchMixedPrecision
diff --git a/src/lightning/pytorch/CHANGELOG.md b/src/lightning/pytorch/CHANGELOG.md
index 1b251b8fb06fa..18dc8891144ad 100644
--- a/src/lightning/pytorch/CHANGELOG.md
+++ b/src/lightning/pytorch/CHANGELOG.md
@@ -35,6 +35,7 @@ The format is based on [Keep a Changelog](http://keepachangelog.com/en/1.0.0/).
 - Fixed `_LoggerConnector`'s `_ResultMetric` to move all registered keys to the device of the logged value if needed ([#19814](https://github.com/Lightning-AI/pytorch-lightning/issues/19814))
 - Fixed `_optimizer_to_device` logic for special 'step' key in optimizer state causing performance regression ([#20019](https://github.com/Lightning-AI/lightning/pull/20019))
 - Fixed parameter counts in `ModelSummary` when model has distributed parameters (DTensor) ([#20163](https://github.com/Lightning-AI/pytorch-lightning/pull/20163))
+- Fixed PyTorch Lightning FSDP takes more memory than PyTorch FSDP ([#20323](https://github.com/Lightning-AI/pytorch-lightning/pull/20323))
 
 
 ## [2.3.0] - 2024-06-13
diff --git a/src/lightning/pytorch/plugins/precision/fsdp.py b/src/lightning/pytorch/plugins/precision/fsdp.py
index 7029497c177cc..f3bab3e915e91 100644
--- a/src/lightning/pytorch/plugins/precision/fsdp.py
+++ b/src/lightning/pytorch/plugins/precision/fsdp.py
@@ -17,6 +17,7 @@
 import torch
 from lightning_utilities import apply_to_collection
 from torch import Tensor
+from torch.nn import Module
 from typing_extensions import get_args, override
 
 import lightning.pytorch as pl
@@ -73,6 +74,12 @@ def __init__(self, precision: _PRECISION_INPUT, scaler: Optional["ShardedGradSca
         }
         self._desired_input_dtype = precision_to_type[self.precision]
 
+    @override
+    def convert_module(self, module: Module) -> Module:
+        if "true" in self.precision:
+            return module.to(dtype=self._desired_input_dtype)
+        return module
+
     @override
     def clip_grad_by_norm(self, *_: Any, **__: Any) -> None:
         # see https://pytorch.org/docs/stable/fsdp.html#torch.distributed.fsdp.FullyShardedDataParallel.clip_grad_norm_
diff --git a/tests/tests_fabric/plugins/precision/test_fsdp.py b/tests/tests_fabric/plugins/precision/test_fsdp.py
index e42df493dd725..6a4968736ea86 100644
--- a/tests/tests_fabric/plugins/precision/test_fsdp.py
+++ b/tests/tests_fabric/plugins/precision/test_fsdp.py
@@ -127,3 +127,21 @@ def test_invalid_precision_with_fsdp_precision():
 
     with pytest.raises(ValueError, match="is not supported in FSDP. `precision` must be one of"):
         FSDPPrecision(precision="64-true")
+
+
+@pytest.mark.parametrize(
+    ("precision", "expected_dtype"),
+    [
+        ("32-true", torch.float32),
+        ("bf16-mixed", torch.float32),
+        ("16-mixed", torch.float32),
+        ("bf16-true", torch.bfloat16),
+        ("16-true", torch.float16),
+    ],
+)
+def test_convert_module(precision, expected_dtype):
+    precision = FSDPPrecision(precision=precision)
+    module = torch.nn.Linear(2, 2)
+    assert module.weight.dtype == module.bias.dtype == torch.float32
+    module = precision.convert_module(module)
+    assert module.weight.dtype == module.bias.dtype == expected_dtype
diff --git a/tests/tests_pytorch/plugins/precision/test_fsdp.py b/tests/tests_pytorch/plugins/precision/test_fsdp.py
index 8b595c2c74a32..3ad3af1f1b56b 100644
--- a/tests/tests_pytorch/plugins/precision/test_fsdp.py
+++ b/tests/tests_pytorch/plugins/precision/test_fsdp.py
@@ -40,6 +40,24 @@ def test_fsdp_precision_config(precision, expected):
     assert config.reduce_dtype == expected[2]
 
 
+@pytest.mark.parametrize(
+    ("precision", "expected_dtype"),
+    [
+        ("32-true", torch.float32),
+        ("bf16-mixed", torch.float32),
+        ("16-mixed", torch.float32),
+        ("bf16-true", torch.bfloat16),
+        ("16-true", torch.float16),
+    ],
+)
+def test_convert_module(precision, expected_dtype):
+    precision = FSDPPrecision(precision=precision)
+    module = torch.nn.Linear(2, 2)
+    assert module.weight.dtype == module.bias.dtype == torch.float32
+    module = precision.convert_module(module)
+    assert module.weight.dtype == module.bias.dtype == expected_dtype
+
+
 def test_fsdp_precision_default_scaler():
     from torch.distributed.fsdp.sharded_grad_scaler import ShardedGradScaler