diff --git a/man/less-variables.xml b/man/less-variables.xml
index 3b32673f39..3d8e200e44 100644
--- a/man/less-variables.xml
+++ b/man/less-variables.xml
@@ -94,10 +94,11 @@
     <varlistentry id='colors'>
       <term><varname>$SYSTEMD_COLORS</varname></term>
 
-      <listitem><para>The value must be a boolean. Controls whether colorized output should be
-      generated. This can be specified to override the decision that <command>systemd</command> makes based
-      on <varname>$TERM</varname> and what the console is connected to.</para>
-      </listitem>
+      <listitem><para>Takes a boolean argument. When true, <command>systemd</command> and related utilities
+      will use colors in their output, otherwise the output will be monochrome. Additionally, the variable can
+      take one of the following special values: <literal>16</literal>, <literal>256</literal> to restrict the use
+      of colors to the base 16 or 256 ANSI colors, respectively. This can be specified to override the automatic
+      decision based on <varname>$TERM</varname> and what the console is connected to.</para></listitem>
     </varlistentry>
 
     <!-- This is not documented on purpose, because it is not clear if $NO_COLOR will become supported
diff --git a/src/basic/terminal-util.c b/src/basic/terminal-util.c
index e00e9e8751..2baf337ab8 100644
--- a/src/basic/terminal-util.c
+++ b/src/basic/terminal-util.c
@@ -48,6 +48,7 @@ static volatile unsigned cached_lines = 0;
 
 static volatile int cached_on_tty = -1;
 static volatile int cached_colors_enabled = -1;
+static volatile int cached_color_mode = _COLOR_INVALID;
 static volatile int cached_underline_enabled = -1;
 
 int chvt(int vt) {
@@ -868,6 +869,7 @@ void reset_terminal_feature_caches(void) {
         cached_lines = 0;
 
         cached_colors_enabled = -1;
+        cached_color_mode = _COLOR_INVALID;
         cached_underline_enabled = -1;
         cached_on_tty = -1;
 }
@@ -1206,38 +1208,67 @@ bool terminal_is_dumb(void) {
         return getenv_terminal_is_dumb();
 }
 
-bool colors_enabled(void) {
+static ColorMode parse_systemd_colors(void) {
+        const char *e;
+        int r;
 
-        /* Returns true if colors are considered supported on our stdout. For that we check $SYSTEMD_COLORS first
-         * (which is the explicit way to turn colors on/off). If that didn't work we turn colors off unless we are on a
-         * TTY. And if we are on a TTY we turn it off if $TERM is set to "dumb". There's one special tweak though: if
-         * we are PID 1 then we do not check whether we are connected to a TTY, because we don't keep /dev/console open
-         * continuously due to fear of SAK, and hence things are a bit weird. */
+        e = getenv("SYSTEMD_COLORS");
+        if (!e)
+                return _COLOR_INVALID;
+        if (streq(e, "16"))
+                return COLOR_16;
+        if (streq(e, "256"))
+                return COLOR_256;
+        r = parse_boolean(e);
+        if (r >= 0)
+                return r > 0 ? COLOR_ON : COLOR_OFF;
+        return _COLOR_INVALID;
+}
 
-        if (cached_colors_enabled < 0) {
-                int val;
+ColorMode get_color_mode(void) {
 
-                val = getenv_bool("SYSTEMD_COLORS");
-                if (val >= 0)
-                        cached_colors_enabled = val;
+        /* Returns the mode used to choose output colors. The possible modes are COLOR_OFF for no colors,
+         * COLOR_16 for only the base 16 ANSI colors, COLOR_256 for more colors and COLOR_ON for unrestricted
+         * color output. For that we check $SYSTEMD_COLORS first (which is the explicit way to
+         * change the mode). If that didn't work we turn colors off unless we are on a TTY. And if we are on a TTY
+         * we turn it off if $TERM is set to "dumb". There's one special tweak though: if we are PID 1 then we do not
+         * check whether we are connected to a TTY, because we don't keep /dev/console open continuously due to fear
+         * of SAK, and hence things are a bit weird. */
+        ColorMode m;
 
+        if (cached_color_mode < 0) {
+                m = parse_systemd_colors();
+                if (m >= 0)
+                        cached_color_mode = m;
                 else if (getenv("NO_COLOR"))
                         /* We only check for the presence of the variable; value is ignored. */
-                        cached_colors_enabled = false;
+                        cached_color_mode = COLOR_OFF;
 
                 else if (getpid_cached() == 1)
-                        /* PID1 outputs to the console without holding it open all the time */
-                        cached_colors_enabled = !getenv_terminal_is_dumb();
+                        /* PID1 outputs to the console without holding it open all the time.
+                         * Also note the Linux console can only handle 16 colors.
+                         */
+                        cached_color_mode = getenv_terminal_is_dumb() ? COLOR_OFF : COLOR_16;
                 else
-                        cached_colors_enabled = !terminal_is_dumb();
+                        cached_color_mode = terminal_is_dumb() ? COLOR_OFF : COLOR_256;
         }
 
+        return cached_color_mode;
+}
+
+bool colors_enabled(void) {
+
+        /* Returns true if colors are considered supported on our stdout. */
+
+        if (cached_colors_enabled < 0)
+                cached_colors_enabled = get_color_mode() != COLOR_OFF;
+
         return cached_colors_enabled;
 }
 
 bool dev_console_colors_enabled(void) {
         _cleanup_free_ char *s = NULL;
-        int b;
+        ColorMode m;
 
         /* Returns true if we assume that color is supported on /dev/console.
          *
@@ -1246,9 +1277,9 @@ bool dev_console_colors_enabled(void) {
          * line. If we find $TERM set we assume color if it's not set to "dumb", similarly to how regular
          * colors_enabled() operates. */
 
-        b = getenv_bool("SYSTEMD_COLORS");
-        if (b >= 0)
-                return b;
+        m = parse_systemd_colors();
+        if (m >= 0)
+                return m;
 
         if (getenv("NO_COLOR"))
                 return false;
diff --git a/src/basic/terminal-util.h b/src/basic/terminal-util.h
index 5cb1e138f3..81a84b9bba 100644
--- a/src/basic/terminal-util.h
+++ b/src/basic/terminal-util.h
@@ -61,6 +61,10 @@
 #define ANSI_HIGHLIGHT "\x1B[0;1;39m"
 #define ANSI_HIGHLIGHT_UNDERLINE "\x1B[0;1;4m"
 
+/* Fallback colors: 256 -> 16 */
+#define ANSI_HIGHLIGHT_GREY_FALLBACK   "\x1B[0;1;90m"
+#define ANSI_HIGHLIGHT_YELLOW_FALLBACK "\x1B[0;1;33m"
+
 /* Reset/clear ANSI styles */
 #define ANSI_NORMAL "\x1B[0m"
 
@@ -93,6 +97,23 @@ typedef enum AcquireTerminalFlags {
         ACQUIRE_TERMINAL_PERMISSIVE = 1 << 2,
 } AcquireTerminalFlags;
 
+/* Limits the use of ANSI colors to a subset. */
+typedef enum ColorMode {
+        /* No colors, monochrome output. */
+        COLOR_OFF = 0,
+
+        /* All colors, no restrictions. */
+        COLOR_ON  = 1,
+
+        /* Only the base 16 colors. */
+        COLOR_16  = 16,
+
+        /* Only 256 colors. */
+        COLOR_256 = 256,
+
+        _COLOR_INVALID = -1,
+} ColorMode;
+
 int acquire_terminal(const char *name, AcquireTerminalFlags flags, usec_t timeout);
 int release_terminal(void);
 
@@ -128,6 +149,7 @@ void reset_terminal_feature_caches(void);
 bool on_tty(void);
 bool terminal_is_dumb(void);
 bool colors_enabled(void);
+ColorMode get_color_mode(void);
 bool underline_enabled(void);
 bool dev_console_colors_enabled(void);
 
@@ -136,10 +158,29 @@ bool dev_console_colors_enabled(void);
                 return colors_enabled() ? ANSI_##NAME : "";     \
         }
 
-#define DEFINE_ANSI_FUNC_UNDERLINE(name, NAME, REPLACEMENT)             \
-        static inline const char *ansi_##name(void) {                   \
-                return underline_enabled() ? ANSI_##NAME :              \
-                        colors_enabled() ? ANSI_##REPLACEMENT : "";     \
+#define DEFINE_ANSI_FUNC_256(name, NAME, FALLBACK)             \
+        static inline const char *ansi_##name(void) {          \
+                switch (get_color_mode()) {                    \
+                        case COLOR_OFF: return "";             \
+                        case COLOR_16: return ANSI_##FALLBACK; \
+                        default : return ANSI_##NAME;          \
+                }                                              \
+        }
+
+#define DEFINE_ANSI_FUNC_UNDERLINE(name, NAME)                            \
+        static inline const char *ansi_##name(void) {                     \
+                return underline_enabled() ? ANSI_##NAME ANSI_UNDERLINE : \
+                        colors_enabled() ? ANSI_##NAME : "";              \
+        }
+
+
+#define DEFINE_ANSI_FUNC_UNDERLINE_256(name, NAME, FALLBACK)                                                           \
+        static inline const char *ansi_##name(void) {                                                                  \
+                switch (get_color_mode()) {                                                                            \
+                        case COLOR_OFF: return "";                                                                     \
+                        case COLOR_16: return underline_enabled() ? ANSI_##FALLBACK ANSI_UNDERLINE : ANSI_##FALLBACK;  \
+                        default : return underline_enabled() ? ANSI_##NAME ANSI_UNDERLINE: ANSI_##NAME;                \
+                }                                                                                                      \
         }
 
 DEFINE_ANSI_FUNC(normal,            NORMAL);
@@ -152,7 +193,7 @@ DEFINE_ANSI_FUNC(blue,              BLUE);
 DEFINE_ANSI_FUNC(magenta,           MAGENTA);
 DEFINE_ANSI_FUNC(cyan,              CYAN);
 DEFINE_ANSI_FUNC(white,             WHITE);
-DEFINE_ANSI_FUNC(grey,              GREY);
+DEFINE_ANSI_FUNC_256(grey,          GREY, BRIGHT_BLACK);
 
 DEFINE_ANSI_FUNC(bright_black,      BRIGHT_BLACK);
 DEFINE_ANSI_FUNC(bright_red,        BRIGHT_RED);
@@ -163,29 +204,29 @@ DEFINE_ANSI_FUNC(bright_magenta,    BRIGHT_MAGENTA);
 DEFINE_ANSI_FUNC(bright_cyan,       BRIGHT_CYAN);
 DEFINE_ANSI_FUNC(bright_white,      BRIGHT_WHITE);
 
-DEFINE_ANSI_FUNC(highlight_black,   HIGHLIGHT_BLACK);
-DEFINE_ANSI_FUNC(highlight_red,     HIGHLIGHT_RED);
-DEFINE_ANSI_FUNC(highlight_green,   HIGHLIGHT_GREEN);
-DEFINE_ANSI_FUNC(highlight_yellow,  HIGHLIGHT_YELLOW);
-DEFINE_ANSI_FUNC(highlight_blue,    HIGHLIGHT_BLUE);
-DEFINE_ANSI_FUNC(highlight_magenta, HIGHLIGHT_MAGENTA);
-DEFINE_ANSI_FUNC(highlight_cyan,    HIGHLIGHT_CYAN);
-DEFINE_ANSI_FUNC(highlight_grey,    HIGHLIGHT_GREY);
-DEFINE_ANSI_FUNC(highlight_white,   HIGHLIGHT_WHITE);
+DEFINE_ANSI_FUNC(highlight_black,       HIGHLIGHT_BLACK);
+DEFINE_ANSI_FUNC(highlight_red,         HIGHLIGHT_RED);
+DEFINE_ANSI_FUNC(highlight_green,       HIGHLIGHT_GREEN);
+DEFINE_ANSI_FUNC_256(highlight_yellow,  HIGHLIGHT_YELLOW, HIGHLIGHT_YELLOW_FALLBACK);
+DEFINE_ANSI_FUNC(highlight_blue,        HIGHLIGHT_BLUE);
+DEFINE_ANSI_FUNC(highlight_magenta,     HIGHLIGHT_MAGENTA);
+DEFINE_ANSI_FUNC(highlight_cyan,        HIGHLIGHT_CYAN);
+DEFINE_ANSI_FUNC_256(highlight_grey,    HIGHLIGHT_GREY, HIGHLIGHT_GREY_FALLBACK);
+DEFINE_ANSI_FUNC(highlight_white,       HIGHLIGHT_WHITE);
 
 static inline const char* _ansi_highlight_yellow(void) {
         return colors_enabled() ? _ANSI_HIGHLIGHT_YELLOW : "";
 }
 
-DEFINE_ANSI_FUNC_UNDERLINE(underline,                   UNDERLINE, NORMAL);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_underline,         HIGHLIGHT_UNDERLINE, HIGHLIGHT);
-DEFINE_ANSI_FUNC_UNDERLINE(grey_underline,              GREY_UNDERLINE, GREY);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_red_underline,     HIGHLIGHT_RED_UNDERLINE, HIGHLIGHT_RED);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_green_underline,   HIGHLIGHT_GREEN_UNDERLINE, HIGHLIGHT_GREEN);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_yellow_underline,  HIGHLIGHT_YELLOW_UNDERLINE, HIGHLIGHT_YELLOW);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_blue_underline,    HIGHLIGHT_BLUE_UNDERLINE, HIGHLIGHT_BLUE);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_magenta_underline, HIGHLIGHT_MAGENTA_UNDERLINE, HIGHLIGHT_MAGENTA);
-DEFINE_ANSI_FUNC_UNDERLINE(highlight_grey_underline,    HIGHLIGHT_GREY_UNDERLINE, HIGHLIGHT_GREY);
+DEFINE_ANSI_FUNC_UNDERLINE(underline,                       NORMAL);
+DEFINE_ANSI_FUNC_UNDERLINE(highlight_underline,             HIGHLIGHT);
+DEFINE_ANSI_FUNC_UNDERLINE_256(grey_underline,              GREY, BRIGHT_BLACK);
+DEFINE_ANSI_FUNC_UNDERLINE(highlight_red_underline,         HIGHLIGHT_RED);
+DEFINE_ANSI_FUNC_UNDERLINE(highlight_green_underline,       HIGHLIGHT_GREEN);
+DEFINE_ANSI_FUNC_UNDERLINE_256(highlight_yellow_underline,  HIGHLIGHT_YELLOW, HIGHLIGHT_YELLOW_FALLBACK);
+DEFINE_ANSI_FUNC_UNDERLINE(highlight_blue_underline,        HIGHLIGHT_BLUE);
+DEFINE_ANSI_FUNC_UNDERLINE(highlight_magenta_underline,     HIGHLIGHT_MAGENTA);
+DEFINE_ANSI_FUNC_UNDERLINE_256(highlight_grey_underline,    HIGHLIGHT_GREY, HIGHLIGHT_GREY_FALLBACK);
 
 int get_ctty_devnr(pid_t pid, dev_t *d);
 int get_ctty(pid_t, dev_t *_devnr, char **r);