diff --git a/docs/misc/xen-command-line.markdown b/docs/misc/xen-command-line.markdown
index 9f51710a46..68ec52b5c2 100644
--- a/docs/misc/xen-command-line.markdown
+++ b/docs/misc/xen-command-line.markdown
@@ -1461,16 +1461,17 @@ constructed into a plain unprivileged PV domain.
 ### shim\_mem (x86)
 > `= List of ( min:<size> | max:<size> | <size> )`
 
-Set the amount of memory that xen-shim reserves for itself. Only has effect
-if pv-shim mode is enabled.
+Set the amount of memory that xen-shim uses. Only has effect if pv-shim mode is
+enabled. Note that this value accounts for the memory used by the shim itself
+plus the free memory slack given to the shim for runtime allocations.
 
 * `min:<size>` specifies the minimum amount of memory. Ignored if greater
-   than max. Default: 10M.
-* `max:<size>` specifies the maximum amount of memory. Default: 128M.
+   than max.
+* `max:<size>` specifies the maximum amount of memory.
 * `<size>` specifies the exact amount of memory. Overrides both min and max.
 
-By default, 1/16th of total HVM container's memory is reserved for xen-shim
-with minimum amount being 10MB and maximum amount 128MB.
+By default, the amount of free memory slack given to the shim for runtime usage
+is 1MB.
 
 ### rcu-idle-timer-period-ms
 > `= <integer>`
diff --git a/xen/arch/x86/dom0_build.c b/xen/arch/x86/dom0_build.c
index bc713fb2b5..d77c6b40de 100644
--- a/xen/arch/x86/dom0_build.c
+++ b/xen/arch/x86/dom0_build.c
@@ -290,17 +290,9 @@ unsigned long __init dom0_compute_nr_pages(
          * for things like DMA buffers. This reservation is clamped to a
          * maximum of 128MB.
          */
-        if ( nr_pages == 0 )
-        {
-            uint64_t rsvd = min(avail / 16, 128UL << (20 - PAGE_SHIFT));
-            if ( pv_shim )
-            {
-                rsvd = pv_shim_mem(avail);
-                printk("Reserved %lu pages for xen-shim\n", rsvd);
-
-            }
-            nr_pages = -rsvd;
-        }
+        if ( !nr_pages )
+            nr_pages = -(pv_shim ? pv_shim_mem(avail)
+                                 : min(avail / 16, 128UL << (20 - PAGE_SHIFT)));
 
         /* Negative specification means "all memory - specified amount". */
         if ( (long)nr_pages  < 0 ) nr_pages  += avail;
diff --git a/xen/arch/x86/pv/shim.c b/xen/arch/x86/pv/shim.c
index 4120cc550e..702249719e 100644
--- a/xen/arch/x86/pv/shim.c
+++ b/xen/arch/x86/pv/shim.c
@@ -57,9 +57,8 @@ static long pv_shim_grant_table_op(unsigned int cmd,
                                    unsigned int count);
 
 /*
- * By default, 1/16th of total HVM container's memory is reserved for xen-shim
- * with minimum amount being 10MB and maximum amount 128MB. Some users may wish
- * to tune this constants for better memory utilization. This can be achieved
+ * By default give the shim 1MB of free memory slack. Some users may wish to
+ * tune this constants for better memory utilization. This can be achieved
  * using the following xen-shim's command line option:
  *
  * shim_mem=[min:<min_amt>,][max:<max_amt>,][<amt>]
@@ -71,8 +70,8 @@ static long pv_shim_grant_table_op(unsigned int cmd,
  *            (overrides both min and max)
  */
 static uint64_t __initdata shim_nrpages;
-static uint64_t __initdata shim_min_nrpages = 10UL << (20 - PAGE_SHIFT);
-static uint64_t __initdata shim_max_nrpages = 128UL << (20 - PAGE_SHIFT);
+static uint64_t __initdata shim_min_nrpages;
+static uint64_t __initdata shim_max_nrpages;
 
 static int __init parse_shim_mem(const char *s)
 {
@@ -91,15 +90,24 @@ custom_param("shim_mem", parse_shim_mem);
 
 uint64_t pv_shim_mem(uint64_t avail)
 {
-    uint64_t rsvd = min(avail / 16, shim_max_nrpages);
+    if ( !shim_nrpages )
+    {
+        shim_nrpages = max(shim_min_nrpages,
+                           total_pages - avail + (1UL << (20 - PAGE_SHIFT)));
+        if ( shim_max_nrpages )
+            shim_max_nrpages = min(shim_nrpages, shim_max_nrpages);
+    }
 
-    if ( shim_nrpages )
-        return shim_nrpages;
+    if ( total_pages - avail > shim_nrpages )
+        panic("pages used by shim > shim_nrpages (%#lx > %#lx)",
+              total_pages - avail, shim_nrpages);
 
-    if ( shim_min_nrpages <= shim_max_nrpages )
-        rsvd = max(rsvd, shim_min_nrpages);
+    shim_nrpages -= total_pages - avail;
 
-    return rsvd;
+    printk("shim used pages %#lx reserving %#lx free pages\n",
+           total_pages - avail, shim_nrpages);
+
+    return shim_nrpages;
 }
 
 #define L1_PROT (_PAGE_PRESENT|_PAGE_RW|_PAGE_ACCESSED|_PAGE_USER| \