diff --git a/plugins/GSdx/res/glsl/tfx_fs.glsl b/plugins/GSdx/res/glsl/tfx_fs.glsl
index eac789dcd6..7cead42de9 100644
--- a/plugins/GSdx/res/glsl/tfx_fs.glsl
+++ b/plugins/GSdx/res/glsl/tfx_fs.glsl
@@ -855,17 +855,22 @@ void ps_main()
     return;
 #endif
 
-#if !SW_BLEND && PS_DITHER
+#if !SW_BLEND
     ps_dither(C);
-    // Dither matrix range is [-4,3] but positive values can cause issues when
-    // software blending is not used or is unavailable.
-    C.rgb -= 3.0;
 #endif
 
     ps_blend(C, alpha_blend);
 
     ps_fbmask(C);
 
+// When dithering the bottom 3 bits become meaningless and cause lines in the picture
+// so we need to limit the color depth on dithered items
+// SW_BLEND already deals with this so no need to do in those cases
+#if !SW_BLEND && PS_DITHER && PS_DFMT == FMT_16 && PS_COLCLIP == 0
+    C.rgb = clamp(C.rgb, vec3(0.0f), vec3(255.0f));
+    C.rgb = uvec3(uvec3(C.rgb) & uvec3(0xF8));
+#endif
+
 // #if PS_HDR == 1
     // Use negative value to avoid overflow of the texture (in accumulation mode)
     // Note: code were initially done for an Half-Float texture. Due to overflow
diff --git a/plugins/GSdx/res/tfx.fx b/plugins/GSdx/res/tfx.fx
index c92d769ab2..3c7e8466a5 100644
--- a/plugins/GSdx/res/tfx.fx
+++ b/plugins/GSdx/res/tfx.fx
@@ -675,14 +675,17 @@ void ps_fbmask(inout float4 C, float2 pos_xy)
 
 void ps_dither(inout float3 C, float2 pos_xy)
 {
-#if PS_DITHER
-	#if PS_DITHER == 2
-	int2 fpos = int2(pos_xy);
-	#else
-	int2 fpos = int2(pos_xy / (float)PS_SCALE_FACTOR);
-	#endif
-	C += DitherMatrix[fpos.y&3][fpos.x&3];
-#endif
+	if (PS_DITHER)
+	{
+		int2 fpos;
+
+		if (PS_DITHER == 2)
+			fpos = int2(pos_xy);
+		else
+			fpos = int2(pos_xy / (float)PS_SCALE_FACTOR);
+
+		C += DitherMatrix[fpos.y & 3][fpos.x & 3];
+	}
 }
 
 void ps_blend(inout float4 Color, float As, float2 pos_xy)
@@ -769,17 +772,22 @@ PS_OUTPUT ps_main(PS_INPUT input)
 		if (C.a < A_one) C.a += A_one;
 	}
 
-#if !SW_BLEND && PS_DITHER
-	ps_dither(C.rgb, input.p.xy);
-	// Dither matrix range is [-4,3] but positive values can cause issues when
-	// software blending is not used or is unavailable.
-	C.rgb -= 3.0;
-#endif
-	
+	if (!SW_BLEND)
+		ps_dither(C.rgb, input.p.xy);
+
 	ps_blend(C, alpha_blend, input.p.xy);
 
 	ps_fbmask(C, input.p.xy);
 
+	// When dithering the bottom 3 bits become meaningless and cause lines in the picture
+	// so we need to limit the color depth on dithered items
+	// SW_BLEND already deals with this so no need to do in those cases
+	if (!SW_BLEND && PS_DITHER && PS_DFMT == FMT_16 && !PS_COLCLIP)
+	{
+		C.rgb = clamp(C.rgb, (float3)0.0f, (float3)255.0f);
+		C.rgb = (uint3)((uint3)C.rgb & (uint3)0xF8);
+	}
+
 	output.c0 = C / 255.0f;
 	output.c1 = (float4)(alpha_blend);