diff --git a/include/zephyr/bluetooth/buf.h b/include/zephyr/bluetooth/buf.h
index 534c755591830..470c0f277c338 100644
--- a/include/zephyr/bluetooth/buf.h
+++ b/include/zephyr/bluetooth/buf.h
@@ -151,12 +151,25 @@ static inline enum bt_buf_type bt_buf_type_from_h4(uint8_t h4_type, enum bt_buf_
  * re-assembly into, and if all links are re-assembling, there will be no buffer
  * available for the HCI driver to allocate from.
  */
-#define BT_BUF_ACL_RX_COUNT_EXTRA CONFIG_BT_BUF_ACL_RX_COUNT_EXTRA
-#define BT_BUF_ACL_RX_COUNT       (1 + BT_BUF_ACL_RX_COUNT_EXTRA)
-#else
-#define BT_BUF_ACL_RX_COUNT_EXTRA 0
-#define BT_BUF_ACL_RX_COUNT       0
-#endif /* CONFIG_BT_CONN && CONFIG_BT_HCI_HOST */
+#define BT_BUF_ACL_RX_COUNT_RESERVED     1
+
+/* Host will block unreferencing one Rx buffer per active ACL connection and generate HCI Host
+ * Number of Completed packets for the rest. This means new HCI data packets will be generated by
+ * the Controller minus the minimum number of Rx buffer count blocked unreferencing in the Host.
+ */
+#define BT_BUF_ACL_RX_COUNT_BLOCKED_MIN  1
+#define BT_BUF_ACL_RX_COUNT_BLOCKED_MAX  CONFIG_BT_MAX_CONN
+
+/* To avoid deadlock, account for maximum Rx buffers blocked in the Host */
+#define BT_BUF_ACL_RX_COUNT_EXTRA        MAX(BT_BUF_ACL_RX_COUNT_BLOCKED_MAX, \
+					     CONFIG_BT_BUF_ACL_RX_COUNT_EXTRA)
+/* ACL Rx Buffers being processed by the Host */
+#define BT_BUF_ACL_RX_COUNT              (BT_BUF_ACL_RX_COUNT_RESERVED + BT_BUF_ACL_RX_COUNT_EXTRA)
+
+#else /* !CONFIG_BT_CONN || !CONFIG_BT_HCI_HOST */
+#define BT_BUF_ACL_RX_COUNT_EXTRA    0
+#define BT_BUF_ACL_RX_COUNT          0
+#endif /* !CONFIG_BT_CONN || !CONFIG_BT_HCI_HOST */
 
 BUILD_ASSERT(BT_BUF_ACL_RX_COUNT <= BT_BUF_ACL_RX_COUNT_MAX,
 	     "Maximum number of ACL RX buffer is 65535, reduce CONFIG_BT_BUF_ACL_RX_COUNT_EXTRA");
@@ -171,9 +184,21 @@ BUILD_ASSERT(BT_BUF_ACL_RX_COUNT <= BT_BUF_ACL_RX_COUNT_MAX,
 BUILD_ASSERT(CONFIG_BT_BUF_EVT_RX_COUNT > CONFIG_BT_BUF_ACL_TX_COUNT,
 	     "Increase Event RX buffer count to be greater than ACL TX buffer count");
 
+#if defined(CONFIG_BT_HCI_ACL_FLOW_CONTROL)
+/* TODO: Introduce Kconfig option to replace BT_BUF_HCI_ACL_RX_COUNT. For now, lets use minimum one
+ * Rx buffer for each active ACL connection in addition to one each blocked unreferencing in the
+ * Host per active ACL connection.
+ *
+ * We do not want the use of CONFIG_BT_BUF_EVT_RX_COUNT in the derivation of
+ * BT_BUF_HCI_ACL_RX_COUNT.
+ */
+#define BT_BUF_RX_COUNT ((CONFIG_BT_MAX_CONN + 1U) + BT_BUF_ACL_RX_COUNT)
+
+#else /* !CONFIG_BT_HCI_ACL_FLOW_CONTROL */
 /** Buffer count needed for HCI ACL or HCI ISO plus Event RX buffers */
 #define BT_BUF_RX_COUNT (CONFIG_BT_BUF_EVT_RX_COUNT + \
 			 MAX(BT_BUF_ACL_RX_COUNT, BT_BUF_ISO_RX_COUNT))
+#endif /* CONFIG_BT_HCI_ACL_FLOW_CONTROL */
 
 /** Data size needed for HCI Command buffers. */
 #define BT_BUF_CMD_TX_SIZE BT_BUF_CMD_SIZE(CONFIG_BT_BUF_CMD_TX_SIZE)
diff --git a/subsys/bluetooth/common/hci_common_internal.h b/subsys/bluetooth/common/hci_common_internal.h
index de137e1a79bb2..8091cce879534 100644
--- a/subsys/bluetooth/common/hci_common_internal.h
+++ b/subsys/bluetooth/common/hci_common_internal.h
@@ -41,15 +41,13 @@ BUILD_ASSERT((CONFIG_BT_BUF_CMD_TX_COUNT == CONFIG_BT_CTLR_HCI_NUM_CMD_PKT_MAX),
  *
  * Host keeps the first, and subsequent, Rx buffers (that comes from the driver) for each connection
  * to do re-assembly into, up to the L2CAP SDU length required number of Rx buffers.
- * BT_BUF_ACL_RX_COUNT_EXTRA holds the application configured number of buffers across active
- * connections for recombination of HCI data packets to L2CAP SDUs.
- *
- * BT_BUF_HCI_EVT_RX_COUNT defines the number of available buffers reserved for "synchronous"
- * processing of HCI events like Number of Completed Packets, disconnection complete etc.
+ * BT_BUF_ACL_RX_COUNT_BLOCKED_MAX represents the maximum number of buffers that can be blocked
+ * across active connections for recombination of HCI data packets to L2CAP SDUs.
  *
  * BT_BUF_HCI_ACL_RX_COUNT defines the number of available buffers for Controller to Host data
  * flow control; keeping the application configured BT_BUF_ACL_RX_COUNT_EXTRA number of buffers
- * available for L2CAP recombination, and a reserved number of buffers for processing HCI events.
+ * available for L2CAP recombination, and BT_BUF_ACL_RX_COUNT_RESERVED reserved number of buffers
+ * for processing incoming HCI data packets.
  */
 
 /* FIXME: Calculate the maximum number of HCI events of different types that a connection can
@@ -67,12 +65,23 @@ BUILD_ASSERT((CONFIG_BT_BUF_CMD_TX_COUNT == CONFIG_BT_CTLR_HCI_NUM_CMD_PKT_MAX),
  * control to restrict buffers required on resource constraint devices, i.e. if these events are not
  * processed "synchronous".
  */
-#define BT_BUF_HCI_EVT_RX_COUNT          1
-#define BT_BUF_HCI_ACL_RX_COUNT          (BT_BUF_RX_COUNT - BT_BUF_HCI_EVT_RX_COUNT - \
-					  BT_BUF_ACL_RX_COUNT_EXTRA)
+#define BT_BUF_HCI_ACL_RX_COUNT          (BT_BUF_RX_COUNT - BT_BUF_ACL_RX_COUNT_EXTRA)
+
+/* During L2CAP recombination, maximum one Rx buffer per each active ACL connection can be held or
+ * blocked unreferencing in the Host, i.e. BT_BUF_ACL_RX_COUNT_BLOCKED_MAX.
+ *
+ * But at the instant of generating Host Number of Completed packets events a minimum of one Rx
+ * buffer is still blocked unreferencing, i.e. BT_BUF_ACL_RX_COUNT_BLOCKED_MIN.
+ *
+ * BT_BUF_HCI_ACL_RX_COUNT_EXTRA defines the outstanding number of HCI ACL data packets that the
+ * Controller can generate.
+ */
+#define BT_BUF_HCI_ACL_RX_COUNT_EXTRA    (BT_BUF_HCI_ACL_RX_COUNT - BT_BUF_ACL_RX_COUNT_RESERVED - \
+					  BT_BUF_ACL_RX_COUNT_BLOCKED_MIN)
 #define BT_BUF_CMD_TX_HOST_NUM_CMPLT_PKT (BT_BUF_HCI_ACL_RX_COUNT)
 
 #else /* !CONFIG_BT_HCI_ACL_FLOW_CONTROL */
+#define BT_BUF_HCI_ACL_RX_COUNT_EXTRA    0
 #define BT_BUF_CMD_TX_HOST_NUM_CMPLT_PKT 0
 #endif /* !CONFIG_BT_HCI_ACL_FLOW_CONTROL */
 
@@ -97,6 +106,6 @@ BUILD_ASSERT(IS_ENABLED(CONFIG_BT_CTLR_HCI_NUM_CMD_PKT_MAX),
 #define BT_BUF_HCI_ACL_RX_COUNT (BT_BUF_RX_COUNT)
 
 /* Controller-only with Controller to Host data flow control */
-#define BT_BUF_CMD_TX_COUNT     (BT_BUF_RX_COUNT + CONFIG_BT_CTLR_HCI_NUM_CMD_PKT_MAX)
+#define BT_BUF_CMD_TX_COUNT     (BT_BUF_HCI_ACL_RX_COUNT + CONFIG_BT_CTLR_HCI_NUM_CMD_PKT_MAX)
 
 #endif /* CONFIG_BT_HCI_ACL_FLOW_CONTROL */
diff --git a/subsys/bluetooth/host/buf.c b/subsys/bluetooth/host/buf.c
index ade372504243d..7a90fa512865c 100644
--- a/subsys/bluetooth/host/buf.c
+++ b/subsys/bluetooth/host/buf.c
@@ -83,9 +83,13 @@ static void evt_pool_destroy(struct net_buf *buf)
 	buf_rx_freed_notify(BT_BUF_EVT);
 }
 
-NET_BUF_POOL_DEFINE(acl_in_pool, (BT_BUF_ACL_RX_COUNT_EXTRA + BT_BUF_HCI_ACL_RX_COUNT),
-		    BT_BUF_ACL_SIZE(CONFIG_BT_BUF_ACL_RX_SIZE), sizeof(struct bt_conn_rx),
-		    acl_in_pool_destroy);
+/* Allocate Rx buffer count sufficient to block unreferencing one Rx buffer per active ACL
+ * connection, and additional HCI ACL data packets that the Controller can generate for the
+ * Host Number of Completed data packets count that the Host has given back to the Controller.
+ */
+NET_BUF_POOL_DEFINE(acl_in_pool, (BT_BUF_ACL_RX_COUNT_EXTRA + BT_BUF_HCI_ACL_RX_COUNT_EXTRA),
+		    BT_BUF_ACL_SIZE(CONFIG_BT_BUF_ACL_RX_SIZE),
+		    sizeof(struct bt_conn_rx), acl_in_pool_destroy);
 
 NET_BUF_POOL_FIXED_DEFINE(evt_pool, CONFIG_BT_BUF_EVT_RX_COUNT, BT_BUF_EVT_RX_SIZE, 0,
 			  evt_pool_destroy);