diff --git a/src/search.c b/src/search.c
index faa8b900..7db7d5b9 100644
--- a/src/search.c
+++ b/src/search.c
@@ -505,7 +505,7 @@ static double calc_mode_bits(const encoder_state_t *state,
   }
 
   // MIP_TODO: calculation of MIP mode cost if this CU has MIP enabled.
-  double mode_bits = kvz_luma_mode_bits(state, cur_cu->intra.mode, candidate_modes, cur_cu->intra.multi_ref_idx, 0);
+  double mode_bits = kvz_luma_mode_bits(state, cur_cu->intra.mode, candidate_modes, cur_cu->intra.multi_ref_idx, 0, 0);
 
   if (((depth == 4 && x % 8 && y % 8) || (depth != 4)) && state->encoder_control->chroma_format != KVZ_CSP_400) {
     mode_bits += kvz_chroma_mode_bits(state, cur_cu->intra.mode_chroma, cur_cu->intra.mode);
diff --git a/src/search_intra.c b/src/search_intra.c
index dc0d8d6e..6800bfef 100644
--- a/src/search_intra.c
+++ b/src/search_intra.c
@@ -679,7 +679,7 @@ static int8_t search_intra_rough(encoder_state_t * const state,
   // affecting the halving search.
   int lambda_cost = (int)(state->lambda_sqrt + 0.5);
   for (int mode_i = 0; mode_i < modes_selected; ++mode_i) {
-    costs[mode_i] += lambda_cost * kvz_luma_mode_bits(state, modes[mode_i], intra_preds, 0, 0);
+    costs[mode_i] += lambda_cost * kvz_luma_mode_bits(state, modes[mode_i], intra_preds, 0, 0, 0);
   }
 
   #undef PARALLEL_BLKS
@@ -756,10 +756,40 @@ static int8_t search_intra_rdo(encoder_state_t * const state,
   }
 
   // MIP_TODO: implement this inside the standard intra for loop. Code duplication is bad.
+  // MIP_TODO: deriving mip flag context id could be done in it's own function since the exact same code is used in encode_coding_tree.c
   // MIP search
   const int transp_off = num_mip_modes >> 1;
   for (uint8_t mip_mode = 0; mip_mode < num_mip_modes; ++mip_mode) {
-    int rdo_bitcost = kvz_luma_mode_bits(state, mip_modes[mip_mode], intra_preds, 0, num_mip_modes);
+    // Derive mip flag context id
+    uint8_t ctx_id = 0;
+    const videoframe_t* const frame = state->tile->frame;
+    const vector2d_t lcu_px = { SUB_SCU(x_px), SUB_SCU(y_px) };
+    cu_info_t* cur_cu;
+    cur_cu = LCU_GET_CU_AT_PX(lcu, lcu_px.x, lcu_px.y);
+    const int cu_width = width;
+    const int cu_height = cu_width; // TODO: height for non-square blocks
+    const int pu_x = PU_GET_X(cur_cu->part_size, cu_width, x_px, 0);
+    const int pu_y = PU_GET_Y(cur_cu->part_size, cu_width, y_px, 0);
+    const cu_info_t* left_pu = NULL;
+    const cu_info_t* above_pu = NULL;
+
+    if (pu_x > 0) {
+      assert(pu_x >> 2 > 0);
+      left_pu = kvz_cu_array_at_const(frame->cu_array, pu_x - 1, pu_y + cu_width - 1);
+    }
+    if (left_pu != NULL) {
+      ctx_id = left_pu->intra.mip_flag ? 1 : 0;
+    }
+    // Don't take the above PU across the LCU boundary.
+    if (pu_y % LCU_WIDTH > 0 && pu_y > 0) {
+      assert(pu_y >> 2 > 0);
+      above_pu = kvz_cu_array_at_const(frame->cu_array, pu_x + cu_width - 1, pu_y - 1);
+    }
+    if (above_pu != NULL) {
+      ctx_id += above_pu->intra.mip_flag ? 1 : 0;
+    }
+    ctx_id = (cu_width > 2 * cu_height || cu_height > 2 * cu_width) ? 3 : ctx_id;
+    int rdo_bitcost = kvz_luma_mode_bits(state, mip_modes[mip_mode], intra_preds, 0, num_mip_modes, ctx_id);
 
     mip_costs[mip_mode] = rdo_bitcost * (int)(state->lambda + 0.5); // MIP_TODO: check if this is also correct in the case when MIP is used.
 
@@ -797,7 +827,7 @@ static int8_t search_intra_rdo(encoder_state_t * const state,
   }
 
   for(int rdo_mode = 0; rdo_mode < modes_to_check; rdo_mode ++) {
-    int rdo_bitcost = kvz_luma_mode_bits(state, modes[rdo_mode], intra_preds, multi_ref_idx, 0);
+    int rdo_bitcost = kvz_luma_mode_bits(state, modes[rdo_mode], intra_preds, multi_ref_idx, 0, 0);
 
     costs[rdo_mode] = rdo_bitcost * (int)(state->lambda + 0.5);
 
@@ -874,7 +904,7 @@ static int8_t search_intra_rdo(encoder_state_t * const state,
 }
 
 
-double kvz_luma_mode_bits(const encoder_state_t *state, int8_t luma_mode, const int8_t *intra_preds, const uint8_t multi_ref_idx, const uint8_t num_mip_modes)
+double kvz_luma_mode_bits(const encoder_state_t *state, int8_t luma_mode, const int8_t *intra_preds, const uint8_t multi_ref_idx, const uint8_t num_mip_modes, int mip_flag_ctx_id)
 {
   double mode_bits = 0.0;
 
@@ -897,8 +927,9 @@ double kvz_luma_mode_bits(const encoder_state_t *state, int8_t luma_mode, const
     bool mip_flag = enable_mip;
     const bool is_transposed = luma_mode >= transp_off ? true : false;
     int8_t mip_mode = is_transposed ? luma_mode - transp_off : luma_mode;
+
     // Write MIP flag
-    cabac->cur_ctx = &(cabac->ctx.mip_flag);
+    cabac->cur_ctx = &(cabac->ctx.mip_flag[mip_flag_ctx_id]);
     CABAC_BIN(cabac, mip_flag, "mip_flag");
     if (mip_flag) {
       // Write MIP transpose flag & mode
diff --git a/src/search_intra.h b/src/search_intra.h
index 06ef77ec..659695b3 100644
--- a/src/search_intra.h
+++ b/src/search_intra.h
@@ -44,7 +44,7 @@
 #include "intra.h"
 
 double kvz_luma_mode_bits(const encoder_state_t *state, 
-                          int8_t luma_mode, const int8_t *intra_preds, uint8_t multi_ref_idx, const uint8_t num_mip_modes);
+                          int8_t luma_mode, const int8_t *intra_preds, uint8_t multi_ref_idx, const uint8_t num_mip_modes, int mip_flag_ctx_id);
                        
 double kvz_chroma_mode_bits(const encoder_state_t *state,
                         int8_t chroma_mode, int8_t luma_mode);