diff --git a/src/Microsoft.TestPlatform.CrossPlatEngine/TestEngine.cs b/src/Microsoft.TestPlatform.CrossPlatEngine/TestEngine.cs
index d903209a5d..ef5dc13cf1 100644
--- a/src/Microsoft.TestPlatform.CrossPlatEngine/TestEngine.cs
+++ b/src/Microsoft.TestPlatform.CrossPlatEngine/TestEngine.cs
@@ -513,28 +513,42 @@ private int VerifyParallelSettingAndCalculateParallelLevel(
         try
         {
             // Check the user parallel setting.
-            int userParallelSetting = RunSettingsUtilities.GetMaxCpuCount(runSettings);
-            parallelLevelToUse = userParallelSetting == 0
+            int maxCpuCount = RunSettingsUtilities.GetMaxCpuCount(runSettings);
+            parallelLevelToUse = maxCpuCount == 0
                 ? _environment.ProcessorCount
-                : userParallelSetting;
+                : maxCpuCount;
 
             EqtTrace.Verbose(
                 "TestEngine: Initializing Parallel Execution as MaxCpuCount is set to: {0}",
                 parallelLevelToUse);
 
-            // TODO: EXPERIMENTAL FEATURE - will need to be removed or strengthen/tested.
-            // A negative value is used to indicate that the value should be used as a percentage of the number of cores.
-            if (parallelLevelToUse < 0)
-            {
-                parallelLevelToUse = (int)Math.Max(1, Math.Round((double)-parallelLevelToUse * _environment.ProcessorCount / 100.0, MidpointRounding.AwayFromZero));
-            }
-
             var enableParallel = parallelLevelToUse > 1;
             // Verify if the number of sources is less than user setting of parallel.
             // We should use number of sources as the parallel level, if sources count is less
             // than parallel level.
             if (enableParallel)
             {
+                // In case of a background discovery we want to reduce the number of cores utilized
+                // to leave enough power for other tasks.
+                var runSettingsEnvVariables = InferRunSettingsHelper.GetEnvironmentVariables(runSettings);
+                string isBackgroundDiscoveryEnabled = null;
+                if (runSettingsEnvVariables is not null
+                    && runSettingsEnvVariables.TryGetValue("VSTEST_BACKGROUND_DISCOVERY", out isBackgroundDiscoveryEnabled)
+                    && isBackgroundDiscoveryEnabled == "1"
+                    && maxCpuCount == 0) // If user specifies a CPU count, respect it
+                {
+                    // Dummy logic based on some observations, might need to be tweaked/improved.
+                    parallelLevelToUse = parallelLevelToUse switch
+                    {
+                        1 => 1,
+                        < 8 => (int)Math.Round(parallelLevelToUse / 2.0, MidpointRounding.AwayFromZero),
+                        _ => (int)Math.Round(0.75 * parallelLevelToUse, MidpointRounding.AwayFromZero),
+                    };
+                }
+
+                EqtTrace.Verbose("TestEngine.VerifyParallelSettingAndCalculateParallelLevel: Parallel execution is enabled (cpu count: {0}, max cpu count is {1}, calculated cpu count is {2}, background mode is {3}, number of sources is {4})", _environment.ProcessorCount, maxCpuCount, parallelLevelToUse, isBackgroundDiscoveryEnabled == "1" ? "enabled" : "disabled", sourceCount);
+
+
                 parallelLevelToUse = Math.Min(sourceCount, parallelLevelToUse);
 
                 // If only one source, no need to use parallel service client.
diff --git a/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DefaultTestHostManager.cs b/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DefaultTestHostManager.cs
index e6bc1da63b..8d9ca315c1 100644
--- a/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DefaultTestHostManager.cs
+++ b/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DefaultTestHostManager.cs
@@ -337,6 +337,7 @@ public void Initialize(IMessageLogger logger, string runsettingsXml)
 
         Shared = !runConfiguration.DisableAppDomain;
         _hostExitedEventRaised = false;
+
         IsInitialized = true;
     }
 
@@ -506,20 +507,24 @@ private bool LaunchHost(TestProcessStartInfo testHostStartInfo, CancellationToke
             return false;
         }
 
-        SetProcessPriority(_testHostProcess, _environmentVariableHelper);
+        AdjustProcessPriorityBasedOnSettings(_testHostProcess, testHostStartInfo.EnvironmentVariables);
         OnHostLaunched(new HostProviderEventArgs("Test Runtime launched", 0, _testHostProcess.Id));
 
         return true;
     }
 
-    internal static void SetProcessPriority(Process testHostProcess, IEnvironmentVariableHelper environmentVariableHelper)
+    internal static void AdjustProcessPriorityBasedOnSettings(Process testHostProcess, IDictionary<string, string?>? testHostEnvironmentVariables)
     {
         ProcessPriorityClass testHostPriority = ProcessPriorityClass.BelowNormal;
         try
         {
-            testHostPriority = environmentVariableHelper.GetEnvironmentVariableAsEnum("VSTEST_HOST_INTERNAL_PRIORITY", testHostPriority);
-            testHostProcess.PriorityClass = testHostPriority;
-            EqtTrace.Verbose("Setting test host process priority to {0}", testHostProcess.PriorityClass);
+            if (testHostEnvironmentVariables is not null
+                && testHostEnvironmentVariables.TryGetValue("VSTEST_BACKGROUND_DISCOVERY", out var isBackgroundDiscoveryEnabled)
+                && isBackgroundDiscoveryEnabled == "1")
+            {
+                testHostProcess.PriorityClass = testHostPriority;
+                EqtTrace.Verbose("Setting test host process priority to {0}", testHostProcess.PriorityClass);
+            }
         }
         // Setting the process Priority can fail with Win32Exception, NotSupportedException or InvalidOperationException.
         catch (Exception ex)
diff --git a/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DotnetTestHostManager.cs b/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DotnetTestHostManager.cs
index cbbdec935f..88825066a4 100644
--- a/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DotnetTestHostManager.cs
+++ b/src/Microsoft.TestPlatform.TestHostProvider/Hosting/DotnetTestHostManager.cs
@@ -748,7 +748,7 @@ private bool LaunchHost(TestProcessStartInfo testHostStartInfo, CancellationToke
             return false;
         }
 
-        DefaultTestHostManager.SetProcessPriority(_testHostProcess, _environmentVariableHelper);
+        DefaultTestHostManager.AdjustProcessPriorityBasedOnSettings(_testHostProcess, testHostStartInfo.EnvironmentVariables);
         OnHostLaunched(new HostProviderEventArgs("Test Runtime launched", 0, _testHostProcess.Id));
         return true;
     }