diff --git a/compiler/luci/service/src/Nodes/CircleReshape.cpp b/compiler/luci/service/src/Nodes/CircleReshape.cpp
index a28ad648320..28eb6303735 100644
--- a/compiler/luci/service/src/Nodes/CircleReshape.cpp
+++ b/compiler/luci/service/src/Nodes/CircleReshape.cpp
@@ -71,6 +71,8 @@ loco::TensorShape Algorithm::visit(const luci::CircleReshape *node)
 
   const loco::DataType S32 = loco::DataType::S32;
 
+  bool is_static_shape = true;
+
   loco::TensorShape shape_by_input;
   {
     LUCI_ASSERT(node->shape(), "2nd input shape() should not be nullptr");
@@ -95,21 +97,12 @@ loco::TensorShape Algorithm::visit(const luci::CircleReshape *node)
     }
     else
     {
-      // We use shape from the node itself
-      loco::TensorShape shape;
-      shape.rank(node->rank());
-      for (uint32_t r = 0; r < node->rank(); ++r)
-      {
-        // TODO remove this copy from `use_own(node);`
-        // Shape inference rules in this file did not consider unknown dimension.
-        // If some node has unknown dimension, 0 is inserted and wrong shape
-        // inference was done as a result.
-        // To fix this, new shape inference algorithm is being implemented.
-        // Until new inference algorithm is fully implemented, unknown dimension
-        // would be represented as 1 along with TFLite expression.
-        shape.dim(r) = node->dim(r).known() ? node->dim(r).value() : 1;
-      }
-      shape_by_input = shape;
+      auto shape_node = loco::must_cast<luci::CircleNode *>(node->shape());
+      assert(shape_node->rank() == 1);
+      // shape_node tensor values will provide new shape, like [2, 3, 4]
+      auto num_elements = shape_node->dim(0).value(); // above example will give 3
+      shape_by_input.rank(num_elements);
+      is_static_shape = false;
     }
   }
 
@@ -138,7 +131,6 @@ loco::TensorShape Algorithm::visit(const luci::CircleReshape *node)
   uint32_t input_element_count = 1;
   uint32_t output_element_count = 1;
   uint32_t unknown_dim_index = UINT32_MAX;
-  bool is_static_shape = true;
   for (uint32_t i = 0; i < input_shape.rank(); ++i)
   {
     if (input_shape.dim(i).known())
@@ -146,23 +138,27 @@ loco::TensorShape Algorithm::visit(const luci::CircleReshape *node)
     else
       is_static_shape = false;
   }
-  for (uint32_t dim_index = 0; dim_index < output_shape.rank(); ++dim_index)
+
+  if (is_static_shape)
   {
-    const uint32_t dim_value = output_shape.dim(dim_index).value();
-    if (not output_shape.dim(dim_index).known())
+    for (uint32_t dim_index = 0; dim_index < output_shape.rank(); ++dim_index)
     {
-      LUCI_ASSERT(unknown_dim_index == UINT32_MAX, "More than one unknown dimension");
-      unknown_dim_index = dim_index;
+      const uint32_t dim_value = output_shape.dim(dim_index).value();
+      if (not output_shape.dim(dim_index).known())
+      {
+        LUCI_ASSERT(unknown_dim_index == UINT32_MAX, "More than one unknown dimension");
+        unknown_dim_index = dim_index;
+      }
+      else
+      {
+        output_element_count *= dim_value;
+      }
     }
-    else
+    if (unknown_dim_index != UINT32_MAX)
     {
-      output_element_count *= dim_value;
+      output_shape.dim(unknown_dim_index) = input_element_count / output_element_count;
     }
   }
-  if (unknown_dim_index != UINT32_MAX && is_static_shape)
-  {
-    output_shape.dim(unknown_dim_index) = input_element_count / output_element_count;
-  }
 
   return output_shape;
 }
diff --git a/compiler/luci/service/src/Nodes/CircleReshape.test.cpp b/compiler/luci/service/src/Nodes/CircleReshape.test.cpp
index 65382ce1f8e..4bb13edc2f9 100644
--- a/compiler/luci/service/src/Nodes/CircleReshape.test.cpp
+++ b/compiler/luci/service/src/Nodes/CircleReshape.test.cpp
@@ -134,3 +134,31 @@ TEST(ShapeRuleTest, reshape_should_infer)
   ASSERT_TRUE(output_shape.dim(1).known());
   ASSERT_EQ(4, output_shape.dim(1).value());
 }
+
+TEST(ShapeRuleTest, reshape_by_input_node)
+{
+  auto g = loco::make_graph();
+  auto node_reshape = g->nodes()->create<luci::CircleReshape>();
+  auto tensor_input = g->nodes()->create<luci::CircleInput>();
+  auto shape_by_input = g->nodes()->create<luci::CircleInput>();
+
+  tensor_input->dtype(loco::DataType::S32);
+  tensor_input->shape({2, 3, 4});
+  tensor_input->shape_status(luci::ShapeStatus::VALID);
+
+  shape_by_input->dtype(loco::DataType::S32);
+  shape_by_input->shape({2});
+  shape_by_input->shape_status(luci::ShapeStatus::VALID);
+
+  node_reshape->tensor(tensor_input);
+  node_reshape->shape(shape_by_input);
+
+  loco::TensorShape output_shape;
+  luci::sinf::Rule shape_inf_rule;
+
+  ASSERT_TRUE(shape_inf_rule.infer(node_reshape, output_shape));
+
+  ASSERT_EQ(2, output_shape.rank());
+  ASSERT_FALSE(output_shape.dim(0).known());
+  ASSERT_FALSE(output_shape.dim(1).known());
+}