Bug Weird behavior with few PNGs in unity. Transparency is disturbed.

Hi, this happens to me many times when I import images into unity with transparency. As you can see, In preview window, still there is transparency but when I drag the image into scene, its all disturbed. What could be the issue?

 

Here is the image

 

Look like in the scene the whole mesh is drawn might be worth checking the material that is used to render the image.

 

Apart from the material, I'd also check the import settings, but just below the part you are showing us. There's an advanced foldout. Make sure that Alpha Source is set to Input Texture Alpha and also check Alpha is Transparency(although at least for Sprite Renderer with the Sprite-Default material, this doesn't seem to matter).

 

I even tried with custom material but still the behavior was same.

Alpha is already marked as transparency. Please refer to original post of mine where I also showed the PREVIEW of the image where there you can see alpha channel in preview as well.

More clarification is that the same sprites are shown correctly at higher resolutions but when I reduce resolution of the image i.e. by reducing max size of the image, this issue occurs and transparency is disturbed.

 

You're right. Question, first Unity version is this?
Also for what it's worth, took an 8K png and set max res to 32x32 and 3px to unit. And applied a ridiculously small scale to it and it was fine on 2019.4.20.
On the other hand, I see ETC2, so I'm guessing you're building for Android. Perhaps it's an issue with ETC2?