diff --git a/credentials/alts/internal/conn/common.go b/credentials/alts/internal/conn/common.go
index 1795d0c9e372..46617132a456 100644
--- a/credentials/alts/internal/conn/common.go
+++ b/credentials/alts/internal/conn/common.go
@@ -54,11 +54,10 @@ func SliceForAppend(in []byte, n int) (head, tail []byte) {
 func ParseFramedMsg(b []byte, maxLen uint32) ([]byte, []byte, error) {
 	// If the size field is not complete, return the provided buffer as
 	// remaining buffer.
-	if len(b) < MsgLenFieldSize {
+	length, sufficientBytes := parseMessageLength(b)
+	if !sufficientBytes {
 		return nil, b, nil
 	}
-	msgLenField := b[:MsgLenFieldSize]
-	length := binary.LittleEndian.Uint32(msgLenField)
 	if length > maxLen {
 		return nil, nil, fmt.Errorf("received the frame length %d larger than the limit %d", length, maxLen)
 	}
@@ -68,3 +67,14 @@ func ParseFramedMsg(b []byte, maxLen uint32) ([]byte, []byte, error) {
 	}
 	return b[:MsgLenFieldSize+length], b[MsgLenFieldSize+length:], nil
 }
+
+// parseMessageLength returns the message length based on frame header. It also
+// returns a boolean indicating if the buffer contains sufficient bytes to parse
+// the length header. If there are insufficient bytes, (0, false) is returned.
+func parseMessageLength(b []byte) (uint32, bool) {
+	if len(b) < MsgLenFieldSize {
+		return 0, false
+	}
+	msgLenField := b[:MsgLenFieldSize]
+	return binary.LittleEndian.Uint32(msgLenField), true
+}
diff --git a/credentials/alts/internal/conn/record.go b/credentials/alts/internal/conn/record.go
index f1ea7bb20811..d9a18b7f74c7 100644
--- a/credentials/alts/internal/conn/record.go
+++ b/credentials/alts/internal/conn/record.go
@@ -63,6 +63,8 @@ const (
 	// The maximum write buffer size. This *must* be multiple of
 	// altsRecordDefaultLength.
 	altsWriteBufferMaxSize = 512 * 1024 // 512KiB
+	// The initial buffer used to read from the network.
+	altsReadBufferInitialSize = 32 * 1024 // 32KiB
 )
 
 var (
@@ -83,7 +85,7 @@ type conn struct {
 	net.Conn
 	crypto ALTSRecordCrypto
 	// buf holds data that has been read from the connection and decrypted,
-	// but has not yet been returned by Read.
+	// but has not yet been returned by Read. It is a sub-slice of protected.
 	buf                []byte
 	payloadLengthLimit int
 	// protected holds data read from the network but have not yet been
@@ -111,21 +113,13 @@ func NewConn(c net.Conn, side core.Side, recordProtocol string, key []byte, prot
 	}
 	overhead := MsgLenFieldSize + msgTypeFieldSize + crypto.EncryptionOverhead()
 	payloadLengthLimit := altsRecordDefaultLength - overhead
-	var protectedBuf []byte
-	if protected == nil {
-		// We pre-allocate protected to be of size
-		// 2*altsRecordDefaultLength-1 during initialization. We only
-		// read from the network into protected when protected does not
-		// contain a complete frame, which is at most
-		// altsRecordDefaultLength-1 (bytes). And we read at most
-		// altsRecordDefaultLength (bytes) data into protected at one
-		// time. Therefore, 2*altsRecordDefaultLength-1 is large enough
-		// to buffer data read from the network.
-		protectedBuf = make([]byte, 0, 2*altsRecordDefaultLength-1)
-	} else {
-		protectedBuf = make([]byte, len(protected))
-		copy(protectedBuf, protected)
-	}
+	// We pre-allocate protected to be of size 32KB during initialization.
+	// We increase the size of the buffer by the required amount if it can't
+	// hold a complete encrypted record.
+	protectedBuf := make([]byte, max(altsReadBufferInitialSize, len(protected)))
+	// Copy additional data from hanshaker service.
+	copy(protectedBuf, protected)
+	protectedBuf = protectedBuf[:len(protected)]
 
 	altsConn := &conn{
 		Conn:               c,
@@ -162,11 +156,21 @@ func (p *conn) Read(b []byte) (n int, err error) {
 		// Check whether a complete frame has been received yet.
 		for len(framedMsg) == 0 {
 			if len(p.protected) == cap(p.protected) {
-				tmp := make([]byte, len(p.protected), cap(p.protected)+altsRecordDefaultLength)
-				copy(tmp, p.protected)
-				p.protected = tmp
+				// We can parse the length header to know exactly how large
+				// the buffer needs to be to hold the entire frame.
+				length, didParse := parseMessageLength(p.protected)
+				if !didParse {
+					// The protected buffer is initialized with a capacity of
+					// larger than 4B. It should always hold the message length
+					// header.
+					panic(fmt.Sprintf("protected buffer length shorter than expected: %d vs %d", len(p.protected), MsgLenFieldSize))
+				}
+				oldProtectedBuf := p.protected
+				p.protected = make([]byte, int(length)+MsgLenFieldSize)
+				copy(p.protected, oldProtectedBuf)
+				p.protected = p.protected[:len(oldProtectedBuf)]
 			}
-			n, err = p.Conn.Read(p.protected[len(p.protected):min(cap(p.protected), len(p.protected)+altsRecordDefaultLength)])
+			n, err = p.Conn.Read(p.protected[len(p.protected):cap(p.protected)])
 			if err != nil {
 				return 0, err
 			}
@@ -185,6 +189,15 @@ func (p *conn) Read(b []byte) (n int, err error) {
 		}
 		ciphertext := msg[msgTypeFieldSize:]
 
+		// Decrypt directly into the buffer, avoiding a copy from p.buf if
+		// possible.
+		if len(b) >= len(ciphertext) {
+			dec, err := p.crypto.Decrypt(b[:0], ciphertext)
+			if err != nil {
+				return 0, err
+			}
+			return len(dec), nil
+		}
 		// Decrypt requires that if the dst and ciphertext alias, they
 		// must alias exactly. Code here used to use msg[:0], but msg
 		// starts MsgLenFieldSize+msgTypeFieldSize bytes earlier than
diff --git a/credentials/alts/internal/conn/record_test.go b/credentials/alts/internal/conn/record_test.go
index c50fb4c82251..e4992489a189 100644
--- a/credentials/alts/internal/conn/record_test.go
+++ b/credentials/alts/internal/conn/record_test.go
@@ -26,6 +26,7 @@ import (
 	"math"
 	"net"
 	"reflect"
+	"strings"
 	"testing"
 
 	core "google.golang.org/grpc/credentials/alts/internal"
@@ -188,6 +189,48 @@ func (s) TestLargeMsg(t *testing.T) {
 	}
 }
 
+// TestLargeRecord writes a very large ALTS record and verifies that the server
+// receives it correctly. The large ALTS record should cause the reader to
+// expand it's read buffer to hold the entire record and store the decrypted
+// message until the receiver reads all of the bytes.
+func (s) TestLargeRecord(t *testing.T) {
+	clientConn, serverConn := newConnPair(rekeyRecordProtocol, nil, nil)
+	msg := []byte(strings.Repeat("a", 2*altsReadBufferInitialSize))
+	// Increase the size of ALTS records written by the client.
+	clientConn.payloadLengthLimit = math.MaxInt32
+	if n, err := clientConn.Write(msg); n != len(msg) || err != nil {
+		t.Fatalf("Write() = %v, %v; want %v, <nil>", n, err, len(msg))
+	}
+	rcvMsg := make([]byte, len(msg))
+	if n, err := io.ReadFull(serverConn, rcvMsg); n != len(rcvMsg) || err != nil {
+		t.Fatalf("Read() = %v, %v; want %v, <nil>", n, err, len(rcvMsg))
+	}
+	if !reflect.DeepEqual(msg, rcvMsg) {
+		t.Fatalf("Write()/Server Read() = %v, want %v", rcvMsg, msg)
+	}
+}
+
+// BenchmarkLargeMessage measures the performance of ALTS conns for sending and
+// receiving a large message.
+func BenchmarkLargeMessage(b *testing.B) {
+	msgLen := 20 * 1024 * 1024 // 20 MiB
+	msg := make([]byte, msgLen)
+	rcvMsg := make([]byte, len(msg))
+	b.ResetTimer()
+	clientConn, serverConn := newConnPair(rekeyRecordProtocol, nil, nil)
+	for range b.N {
+		// Write 20 MiB 5 times to transfer a total of 100 MiB.
+		for range 5 {
+			if n, err := clientConn.Write(msg); n != len(msg) || err != nil {
+				b.Fatalf("Write() = %v, %v; want %v, <nil>", n, err, len(msg))
+			}
+			if n, err := io.ReadFull(serverConn, rcvMsg); n != len(rcvMsg) || err != nil {
+				b.Fatalf("Read() = %v, %v; want %v, <nil>", n, err, len(rcvMsg))
+			}
+		}
+	}
+}
+
 func testIncorrectMsgType(t *testing.T, rp string) {
 	// framedMsg is an empty ciphertext with correct framing but wrong
 	// message type.
diff --git a/credentials/alts/internal/handshaker/handshaker.go b/credentials/alts/internal/handshaker/handshaker.go
index 50721f690acb..becd2f3bdf3e 100644
--- a/credentials/alts/internal/handshaker/handshaker.go
+++ b/credentials/alts/internal/handshaker/handshaker.go
@@ -308,6 +308,7 @@ func (h *altsHandshaker) accessHandshakerService(req *altspb.HandshakerReq) (*al
 // whatever received from the network and send it to the handshaker service.
 func (h *altsHandshaker) processUntilDone(resp *altspb.HandshakerResp, extra []byte) (*altspb.HandshakerResult, []byte, error) {
 	var lastWriteTime time.Time
+	buf := make([]byte, frameLimit)
 	for {
 		if len(resp.OutFrames) > 0 {
 			lastWriteTime = time.Now()
@@ -318,7 +319,6 @@ func (h *altsHandshaker) processUntilDone(resp *altspb.HandshakerResp, extra []b
 		if resp.Result != nil {
 			return resp.Result, extra, nil
 		}
-		buf := make([]byte, frameLimit)
 		n, err := h.conn.Read(buf)
 		if err != nil && err != io.EOF {
 			return nil, nil, err