diff --git a/homeassistant/components/mqtt/__init__.py b/homeassistant/components/mqtt/__init__.py
index b99036efbe3..59f64972f6c 100644
--- a/homeassistant/components/mqtt/__init__.py
+++ b/homeassistant/components/mqtt/__init__.py
@@ -57,6 +57,7 @@ from .const import (
     CONF_BIRTH_MESSAGE,
     CONF_BROKER,
     CONF_COMMAND_TOPIC,
+    CONF_ENCODING,
     CONF_QOS,
     CONF_RETAIN,
     CONF_STATE_TOPIC,
@@ -65,6 +66,7 @@ from .const import (
     DATA_MQTT_CONFIG,
     DEFAULT_BIRTH,
     DEFAULT_DISCOVERY,
+    DEFAULT_ENCODING,
     DEFAULT_PREFIX,
     DEFAULT_QOS,
     DEFAULT_RETAIN,
@@ -200,7 +202,10 @@ CONFIG_SCHEMA = vol.Schema(
     extra=vol.ALLOW_EXTRA,
 )
 
-SCHEMA_BASE = {vol.Optional(CONF_QOS, default=DEFAULT_QOS): _VALID_QOS_SCHEMA}
+SCHEMA_BASE = {
+    vol.Optional(CONF_QOS, default=DEFAULT_QOS): _VALID_QOS_SCHEMA,
+    vol.Optional(CONF_ENCODING, default=DEFAULT_ENCODING): cv.string,
+}
 
 MQTT_BASE_PLATFORM_SCHEMA = cv.PLATFORM_SCHEMA.extend(SCHEMA_BASE)
 
diff --git a/homeassistant/components/mqtt/abbreviations.py b/homeassistant/components/mqtt/abbreviations.py
index 9ad5ca4ce1c..c47b512b727 100644
--- a/homeassistant/components/mqtt/abbreviations.py
+++ b/homeassistant/components/mqtt/abbreviations.py
@@ -46,6 +46,7 @@ ABBREVIATIONS = {
     "dev_cla": "device_class",
     "dock_t": "docked_topic",
     "dock_tpl": "docked_template",
+    "e": "encoding",
     "en": "enabled_by_default",
     "err_t": "error_topic",
     "err_tpl": "error_template",
diff --git a/homeassistant/components/mqtt/binary_sensor.py b/homeassistant/components/mqtt/binary_sensor.py
index 1928f79032d..3d988079c6f 100644
--- a/homeassistant/components/mqtt/binary_sensor.py
+++ b/homeassistant/components/mqtt/binary_sensor.py
@@ -28,7 +28,7 @@ from homeassistant.util import dt as dt_util
 
 from . import PLATFORMS, subscription
 from .. import mqtt
-from .const import CONF_QOS, CONF_STATE_TOPIC, DOMAIN
+from .const import CONF_ENCODING, CONF_QOS, CONF_STATE_TOPIC, DOMAIN
 from .debug_info import log_messages
 from .mixins import (
     MQTT_ENTITY_COMMON_SCHEMA,
@@ -200,6 +200,7 @@ class MqttBinarySensor(MqttEntity, BinarySensorEntity):
                     "topic": self._config[CONF_STATE_TOPIC],
                     "msg_callback": state_message_received,
                     "qos": self._config[CONF_QOS],
+                    "encoding": self._config[CONF_ENCODING] or None,
                 }
             },
         )
diff --git a/homeassistant/components/mqtt/const.py b/homeassistant/components/mqtt/const.py
index c626592b0a3..9c788490ea3 100644
--- a/homeassistant/components/mqtt/const.py
+++ b/homeassistant/components/mqtt/const.py
@@ -13,6 +13,7 @@ CONF_AVAILABILITY = "availability"
 CONF_BROKER = "broker"
 CONF_BIRTH_MESSAGE = "birth_message"
 CONF_COMMAND_TOPIC = "command_topic"
+CONF_ENCODING = "encoding"
 CONF_QOS = ATTR_QOS
 CONF_RETAIN = ATTR_RETAIN
 CONF_STATE_TOPIC = "state_topic"
@@ -24,6 +25,7 @@ DATA_MQTT_CONFIG = "mqtt_config"
 DEFAULT_PREFIX = "homeassistant"
 DEFAULT_BIRTH_WILL_TOPIC = DEFAULT_PREFIX + "/status"
 DEFAULT_DISCOVERY = True
+DEFAULT_ENCODING = "utf-8"
 DEFAULT_QOS = 0
 DEFAULT_PAYLOAD_AVAILABLE = "online"
 DEFAULT_PAYLOAD_NOT_AVAILABLE = "offline"
diff --git a/homeassistant/components/mqtt/sensor.py b/homeassistant/components/mqtt/sensor.py
index 7ddc8ec467a..72f0b339fe2 100644
--- a/homeassistant/components/mqtt/sensor.py
+++ b/homeassistant/components/mqtt/sensor.py
@@ -33,7 +33,7 @@ from homeassistant.util import dt as dt_util
 
 from . import PLATFORMS, subscription
 from .. import mqtt
-from .const import CONF_QOS, CONF_STATE_TOPIC, DOMAIN
+from .const import CONF_ENCODING, CONF_QOS, CONF_STATE_TOPIC, DOMAIN
 from .debug_info import log_messages
 from .mixins import (
     MQTT_ENTITY_COMMON_SCHEMA,
@@ -252,6 +252,7 @@ class MqttSensor(MqttEntity, SensorEntity):
             "topic": self._config[CONF_STATE_TOPIC],
             "msg_callback": message_received,
             "qos": self._config[CONF_QOS],
+            "encoding": self._config[CONF_ENCODING] or None,
         }
 
         @callback
diff --git a/homeassistant/components/mqtt/trigger.py b/homeassistant/components/mqtt/trigger.py
index f9c035dea85..db366010bb2 100644
--- a/homeassistant/components/mqtt/trigger.py
+++ b/homeassistant/components/mqtt/trigger.py
@@ -10,13 +10,10 @@ from homeassistant.core import HassJob, callback
 from homeassistant.helpers import config_validation as cv, template
 
 from .. import mqtt
-from .const import CONF_QOS, CONF_TOPIC
+from .const import CONF_ENCODING, CONF_QOS, CONF_TOPIC, DEFAULT_ENCODING, DEFAULT_QOS
 
 # mypy: allow-untyped-defs
 
-CONF_ENCODING = "encoding"
-DEFAULT_ENCODING = "utf-8"
-DEFAULT_QOS = 0
 
 TRIGGER_SCHEMA = cv.TRIGGER_BASE_SCHEMA.extend(
     {
diff --git a/tests/components/mqtt/test_binary_sensor.py b/tests/components/mqtt/test_binary_sensor.py
index ba601fd094d..6e1bdd60972 100644
--- a/tests/components/mqtt/test_binary_sensor.py
+++ b/tests/components/mqtt/test_binary_sensor.py
@@ -373,6 +373,39 @@ async def test_setting_sensor_value_via_mqtt_message_and_template2(
     assert "template output: 'ILLEGAL'" in caplog.text
 
 
+async def test_setting_sensor_value_via_mqtt_message_and_template_and_raw_state_encoding(
+    hass, mqtt_mock, caplog
+):
+    """Test processing a raw value via MQTT."""
+    assert await async_setup_component(
+        hass,
+        binary_sensor.DOMAIN,
+        {
+            binary_sensor.DOMAIN: {
+                "platform": "mqtt",
+                "name": "test",
+                "encoding": "",
+                "state_topic": "test-topic",
+                "payload_on": "ON",
+                "payload_off": "OFF",
+                "value_template": "{%if value|bitwise_and(1)-%}ON{%else%}OFF{%-endif-%}",
+            }
+        },
+    )
+    await hass.async_block_till_done()
+
+    state = hass.states.get("binary_sensor.test")
+    assert state.state == STATE_OFF
+
+    async_fire_mqtt_message(hass, "test-topic", b"\x01")
+    state = hass.states.get("binary_sensor.test")
+    assert state.state == STATE_ON
+
+    async_fire_mqtt_message(hass, "test-topic", b"\x00")
+    state = hass.states.get("binary_sensor.test")
+    assert state.state == STATE_OFF
+
+
 async def test_setting_sensor_value_via_mqtt_message_empty_template(
     hass, mqtt_mock, caplog
 ):
diff --git a/tests/components/mqtt/test_sensor.py b/tests/components/mqtt/test_sensor.py
index 680bafb3b2b..2ebfdde4a52 100644
--- a/tests/components/mqtt/test_sensor.py
+++ b/tests/components/mqtt/test_sensor.py
@@ -894,6 +894,35 @@ async def test_entity_category(hass, mqtt_mock):
 
 
 async def test_value_template_with_entity_id(hass, mqtt_mock):
+    """Test processing a raw value via MQTT."""
+    assert await async_setup_component(
+        hass,
+        sensor.DOMAIN,
+        {
+            sensor.DOMAIN: {
+                "platform": "mqtt",
+                "name": "test",
+                "encoding": "",
+                "state_topic": "test-topic",
+                "unit_of_measurement": "fav unit",
+                "value_template": "{{ value | bitwise_and(255) }}",
+            }
+        },
+    )
+    await hass.async_block_till_done()
+
+    async_fire_mqtt_message(hass, "test-topic", b"\xff")
+    state = hass.states.get("sensor.test")
+
+    assert state.state == "255"
+
+    async_fire_mqtt_message(hass, "test-topic", b"\x01\x10")
+    state = hass.states.get("sensor.test")
+
+    assert state.state == "16"
+
+
+async def test_value_template_with_raw_data(hass, mqtt_mock):
     """Test the access to attributes in value_template via the entity_id."""
     assert await async_setup_component(
         hass,