diff --git a/Cargo.toml b/Cargo.toml
index 01e1dbb..998a1d8 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -1,6 +1,6 @@
 [package]
 name = "libipld"
-version = "3.3.1"
+version = "3.3.2"
 edition = "2021"
 license = "MIT"
 description = "Python binding to the Rust IPLD library"
diff --git a/pytests/test_dag_cbor.py b/pytests/test_dag_cbor.py
index d2b5046..5c2bff1 100644
--- a/pytests/test_dag_cbor.py
+++ b/pytests/test_dag_cbor.py
@@ -267,3 +267,13 @@ def test_encode_tag_negative_bignum() -> None:
          libipld.encode_dag_cbor(bignum)
 
     assert 'number out of range' in str(exc_info.value).lower()
+
+
+def test_roundtrip_valid_cid_with_short_tag() -> None:
+    encoded_hex = 'd82a582500015512205891b5b522d5df086d0ff0b110fbd9d21bb4fc7163af34d08286a2e846f6be03'
+    encoded_bytes = bytes.fromhex(encoded_hex)
+
+    decoded = libipld.decode_dag_cbor(encoded_bytes)
+    encoded = libipld.encode_dag_cbor(decoded)
+
+    assert encoded == encoded_bytes
diff --git a/src/lib.rs b/src/lib.rs
index 8b19c16..0dfbff2 100644
--- a/src/lib.rs
+++ b/src/lib.rs
@@ -64,6 +64,18 @@ impl<'de> dec::Read<'de> for SliceReader<'de> {
     }
 }
 
+struct PrefixedCidBytes<'a>(&'a [u8]);
+
+impl<'a> Encode for PrefixedCidBytes<'a> {
+    fn encode<W: enc::Write>(&self, w: &mut W) -> Result<(), enc::Error<W::Error>> {
+        // length prefix for bytes: 1 (leading 0) + payload
+        types::Bytes::bounded(1 + self.0.len(), w)?;
+        w.push(&[0x00])?;
+        w.push(self.0)?;
+        Ok(())
+    }
+}
+
 fn cid_hash_to_pydict<'py>(py: Python<'py>, cid: &Cid) -> PyResult<Bound<'py, PyDict>> {
     let hash = cid.hash();
     let dict_obj = PyDict::new(py);
@@ -251,14 +263,19 @@ where
 
             let cid = <types::Bytes<&[u8]>>::decode(r)?.0;
 
-            if cid.len() <= 1 {
-                return Err(anyhow!("CID is empty or too short"));
-            } else if Cid::try_from(&cid[1..]).is_err() {
-                // Parse the CID for validation. They have a zero byte at the front, strip it off.
+            // we expect CIDs to have a leading zero byte
+            if cid.len() <= 1 || cid[0] != 0 {
+                return Err(anyhow!("Invalid CID"));
+            }
+
+            let cid_without_prefix = &cid[1..];
+            if Cid::try_from(cid_without_prefix).is_err() {
                 return Err(anyhow!("Invalid CID"));
             }
 
-            PyBytes::new(py, cid).into_pyobject(py)?.into()
+            PyBytes::new(py, cid_without_prefix)
+                .into_pyobject(py)?
+                .into()
         }
         major::SIMPLE => match byte {
             // FIXME(MarshalX): should be more clear for bool?
@@ -384,11 +401,13 @@ where
         Ok(())
     } else if let Ok(b) = obj.cast::<PyBytes>() {
         // FIXME (MarshalX): it's not efficient to try to parse it as CID
-        let cid = Cid::try_from(b.as_bytes());
+        let bytes = b.as_bytes();
+        let cid = Cid::try_from(bytes);
         if cid.is_ok() {
-            types::Tag(42, b.as_bytes()).encode(w)?;
+            // by providing custom encoding we avoid extra allocation
+            types::Tag(42, PrefixedCidBytes(bytes)).encode(w)?;
         } else {
-            types::Bytes(b.as_bytes()).encode(w)?;
+            types::Bytes(bytes).encode(w)?;
         }
 
         Ok(())