diff --git a/com.unity.render-pipelines.universal/CHANGELOG.md b/com.unity.render-pipelines.universal/CHANGELOG.md
index a37c54efd67..0135a05cbdb 100644
--- a/com.unity.render-pipelines.universal/CHANGELOG.md
+++ b/com.unity.render-pipelines.universal/CHANGELOG.md
@@ -166,6 +166,7 @@ and this project adheres to [Semantic Versioning](http://semver.org/spec/v2.0.0.
 - Fixed artifacts in Speed Tree 8 billboard LODs due to SpeedTree LOD smoothing/crossfading [case 1348407]
 - Support undo of URP Global Settings asset assignation (case 1342987).
 - Removed unsupported fields from Presets of Light and Camera [case 1335979].
+- Fixed graphical artefact when terrain height map is used with rendering layer mask for lighting.
 
 ### Changed
 - Change Asset/Create/Shader/Universal Render Pipeline/Lit Shader Graph to Asset/Create/Shader Graph/URP/Lit Shader Graph
diff --git a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLit.shader b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLit.shader
index c7292cd480f..e7149778059 100644
--- a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLit.shader
+++ b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLit.shader
@@ -86,7 +86,7 @@ Shader "Universal Render Pipeline/Terrain/Lit"
             #pragma multi_compile_fog
             #pragma multi_compile_fragment _ DEBUG_DISPLAY
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
 
             #pragma shader_feature_local_fragment _TERRAIN_BLEND_HEIGHT
             #pragma shader_feature_local _NORMALMAP
@@ -162,7 +162,7 @@ Shader "Universal Render Pipeline/Terrain/Lit"
 
             //#pragma multi_compile_fog
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
 
             #pragma shader_feature_local _TERRAIN_BLEND_HEIGHT
             #pragma shader_feature_local _NORMALMAP
diff --git a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitAdd.shader b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitAdd.shader
index c07e3926919..c37b0a4fee4 100644
--- a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitAdd.shader
+++ b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitAdd.shader
@@ -77,7 +77,7 @@ Shader "Hidden/Universal Render Pipeline/Terrain/Lit (Add Pass)"
             #pragma multi_compile _ LIGHTMAP_ON
             #pragma multi_compile_fog
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
             #pragma multi_compile_fragment _ DEBUG_DISPLAY
 
             #pragma shader_feature_local_fragment _TERRAIN_BLEND_HEIGHT
@@ -124,7 +124,7 @@ Shader "Hidden/Universal Render Pipeline/Terrain/Lit (Add Pass)"
 
             //#pragma multi_compile_fog
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
 
             #pragma shader_feature_local _TERRAIN_BLEND_HEIGHT
             #pragma shader_feature_local _NORMALMAP
diff --git a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitBase.shader b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitBase.shader
index c47038e789b..4b8a96e510b 100644
--- a/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitBase.shader
+++ b/com.unity.render-pipelines.universal/Shaders/Terrain/TerrainLitBase.shader
@@ -57,7 +57,7 @@ Shader "Hidden/Universal Render Pipeline/Terrain/Lit (Base Pass)"
             #pragma multi_compile _ DYNAMICLIGHTMAP_ON
             #pragma multi_compile_fog
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
             #pragma multi_compile_fragment _ DEBUG_DISPLAY
 
             #pragma vertex SplatmapVert
@@ -130,7 +130,7 @@ Shader "Hidden/Universal Render Pipeline/Terrain/Lit (Base Pass)"
             #pragma multi_compile_fragment _ _RENDER_PASS_ENABLED
 
             #pragma multi_compile_instancing
-            #pragma instancing_options renderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
+            #pragma instancing_options norenderinglayer assumeuniformscaling nomatrices nolightprobe nolightmap
 
             #pragma vertex SplatmapVert
             #pragma fragment SplatmapFragment