diff --git a/CHANGELOG.md b/CHANGELOG.md
index 9b58ee426a39b..8df705bac21a0 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -170,7 +170,7 @@ The format is based on [Keep a Changelog](http://keepachangelog.com/en/1.0.0/).
 - Stopped `optimizer_zero_grad` from being called after IPU execution ([#12913](https://github.com/PyTorchLightning/pytorch-lightning/pull/12913))
 
 
--
+- Enable mixed precision in `DDPFullyShardedStrategy` when `precision=16` ([#12965](https://github.com/PyTorchLightning/pytorch-lightning/pull/12965))
 
 
 ## [1.6.2] - 2022-04-27
diff --git a/pytorch_lightning/strategies/fully_sharded.py b/pytorch_lightning/strategies/fully_sharded.py
index b61429264d80a..6a902d3e09a3a 100644
--- a/pytorch_lightning/strategies/fully_sharded.py
+++ b/pytorch_lightning/strategies/fully_sharded.py
@@ -163,7 +163,7 @@ def wrap_policy(*args, **kwargs):
             cpu_offload=self.cpu_offload,
             move_grads_to_cpu=self.move_grads_to_cpu,
             flatten_parameters=self.flatten_parameters,
-            mixed_precision=(precision == PrecisionType.MIXED),
+            mixed_precision=(precision in (PrecisionType.MIXED, PrecisionType.HALF)),
             reshard_after_forward=self.reshard_after_forward,
             fp32_reduce_scatter=self.fp32_reduce_scatter,
             compute_dtype=self.compute_dtype,
diff --git a/tests/strategies/test_ddp_fully_sharded_with_full_state_dict.py b/tests/strategies/test_ddp_fully_sharded_with_full_state_dict.py
index 473658c5418ff..f780d88ce148b 100644
--- a/tests/strategies/test_ddp_fully_sharded_with_full_state_dict.py
+++ b/tests/strategies/test_ddp_fully_sharded_with_full_state_dict.py
@@ -90,6 +90,11 @@ def _assert_layer_fsdp_instance(self) -> None:
         assert self.layer.module[0].reshard_after_forward is True
         assert self.layer.module[2].reshard_after_forward is True
 
+        if isinstance(self.trainer.precision_plugin, FullyShardedNativeMixedPrecisionPlugin):
+            assert self.layer.mixed_precision
+            assert self.layer.module[0].mixed_precision
+            assert self.layer.module[2].mixed_precision
+
 
 @RunIf(min_gpus=1, skip_windows=True, standalone=True, fairscale_fully_sharded=True)
 def test_fully_sharded_strategy_checkpoint(tmpdir):