diff --git a/examples/community/README.md b/examples/community/README.md
index 778e84325ded..b3063f109da1 100644
--- a/examples/community/README.md
+++ b/examples/community/README.md
@@ -21,6 +21,7 @@ If a community doesn't work as expected, please open an issue and ping the autho
 | Multilingual Stable Diffusion| Stable Diffusion Pipeline that supports prompts in 50 different languages.                                                                                                                                                                                                                                                                                                     | [Multilingual Stable Diffusion](#multilingual-stable-diffusion-pipeline)                                                                 | -                                                                                                                                                                                                                  |                        [Juan Carlos Piñeros](https://github.com/juancopi81) |
 | Image to Image Inpainting Stable Diffusion | Stable Diffusion Pipeline that enables the overlaying of two images and subsequent inpainting| [Image to Image Inpainting Stable Diffusion](#image-to-image-inpainting-stable-diffusion)                                                                 | -                                                                                                                                                                                                                  |                        [Alex McKinney](https://github.com/vvvm23) |
 | Text Based Inpainting Stable Diffusion | Stable Diffusion Inpainting Pipeline that enables passing a text prompt to generate the mask for inpainting| [Text Based Inpainting Stable Diffusion](#image-to-image-inpainting-stable-diffusion)                                                                 | -                                                                                                                                                                                                                  |                        [Dhruv Karan](https://github.com/unography) |
+| Bit Diffusion | Diffusion on discrete data | [Bit Diffusion](#bit-diffusion) | -  |[Stuti R.](https://github.com/kingstut) |
 
 
 
@@ -343,7 +344,6 @@ out = pipe(
 )
 ```
 
-
 ### Composable Stable diffusion 
 
 [Composable Stable Diffusion](https://energy-based-model.github.io/Compositional-Visual-Generation-with-Composable-Diffusion-Models/) proposes conjunction and negation (negative prompts) operators for compositional generation with conditional diffusion models.
@@ -655,3 +655,12 @@ prompt = "a cup"  # the masked out region will be replaced with this
 with autocast("cuda"):
     image = pipe(image=image, text=text, prompt=prompt).images[0]
 ```
+
+### Bit Diffusion 
+Based https://arxiv.org/abs/2208.04202, this is used for diffusion on discrete data - eg, discreate image data, DNA sequence data. An unconditional discreate image can be generated like this: 
+
+```python
+from diffusers import DiffusionPipeline
+pipe = DiffusionPipeline.from_pretrained("google/ddpm-cifar10-32", custom_pipeline="bit_diffusion")
+image = pipe().images[0]
+```
diff --git a/examples/community/bit_diffusion.py b/examples/community/bit_diffusion.py
new file mode 100644
index 000000000000..c0be3a13ad8d
--- /dev/null
+++ b/examples/community/bit_diffusion.py
@@ -0,0 +1,263 @@
+from typing import Optional, Tuple, Union
+
+import torch
+
+from diffusers import DDIMScheduler, DDPMScheduler, DiffusionPipeline, UNet2DConditionModel
+from diffusers.pipeline_utils import ImagePipelineOutput
+from diffusers.schedulers.scheduling_ddim import DDIMSchedulerOutput
+from diffusers.schedulers.scheduling_ddpm import DDPMSchedulerOutput
+from einops import rearrange, reduce
+
+
+BITS = 8
+
+
+# convert to bit representations and back taken from https://github.com/lucidrains/bit-diffusion/blob/main/bit_diffusion/bit_diffusion.py
+def decimal_to_bits(x, bits=BITS):
+    """expects image tensor ranging from 0 to 1, outputs bit tensor ranging from -1 to 1"""
+    device = x.device
+
+    x = (x * 255).int().clamp(0, 255)
+
+    mask = 2 ** torch.arange(bits - 1, -1, -1, device=device)
+    mask = rearrange(mask, "d -> d 1 1")
+    x = rearrange(x, "b c h w -> b c 1 h w")
+
+    bits = ((x & mask) != 0).float()
+    bits = rearrange(bits, "b c d h w -> b (c d) h w")
+    bits = bits * 2 - 1
+    return bits
+
+
+def bits_to_decimal(x, bits=BITS):
+    """expects bits from -1 to 1, outputs image tensor from 0 to 1"""
+    device = x.device
+
+    x = (x > 0).int()
+    mask = 2 ** torch.arange(bits - 1, -1, -1, device=device, dtype=torch.int32)
+
+    mask = rearrange(mask, "d -> d 1 1")
+    x = rearrange(x, "b (c d) h w -> b c d h w", d=8)
+    dec = reduce(x * mask, "b c d h w -> b c h w", "sum")
+    return (dec / 255).clamp(0.0, 1.0)
+
+
+# modified scheduler step functions for clamping the predicted x_0 between -bit_scale and +bit_scale
+def ddim_bit_scheduler_step(
+    self,
+    model_output: torch.FloatTensor,
+    timestep: int,
+    sample: torch.FloatTensor,
+    eta: float = 0.0,
+    use_clipped_model_output: bool = True,
+    generator=None,
+    return_dict: bool = True,
+) -> Union[DDIMSchedulerOutput, Tuple]:
+    """
+    Predict the sample at the previous timestep by reversing the SDE. Core function to propagate the diffusion
+    process from the learned model outputs (most often the predicted noise).
+    Args:
+        model_output (`torch.FloatTensor`): direct output from learned diffusion model.
+        timestep (`int`): current discrete timestep in the diffusion chain.
+        sample (`torch.FloatTensor`):
+            current instance of sample being created by diffusion process.
+        eta (`float`): weight of noise for added noise in diffusion step.
+        use_clipped_model_output (`bool`): TODO
+        generator: random number generator.
+        return_dict (`bool`): option for returning tuple rather than DDIMSchedulerOutput class
+    Returns:
+        [`~schedulers.scheduling_utils.DDIMSchedulerOutput`] or `tuple`:
+        [`~schedulers.scheduling_utils.DDIMSchedulerOutput`] if `return_dict` is True, otherwise a `tuple`. When
+        returning a tuple, the first element is the sample tensor.
+    """
+    if self.num_inference_steps is None:
+        raise ValueError(
+            "Number of inference steps is 'None', you need to run 'set_timesteps' after creating the scheduler"
+        )
+
+    # See formulas (12) and (16) of DDIM paper https://arxiv.org/pdf/2010.02502.pdf
+    # Ideally, read DDIM paper in-detail understanding
+
+    # Notation (<variable name> -> <name in paper>
+    # - pred_noise_t -> e_theta(x_t, t)
+    # - pred_original_sample -> f_theta(x_t, t) or x_0
+    # - std_dev_t -> sigma_t
+    # - eta -> η
+    # - pred_sample_direction -> "direction pointing to x_t"
+    # - pred_prev_sample -> "x_t-1"
+
+    # 1. get previous step value (=t-1)
+    prev_timestep = timestep - self.config.num_train_timesteps // self.num_inference_steps
+
+    # 2. compute alphas, betas
+    alpha_prod_t = self.alphas_cumprod[timestep]
+    alpha_prod_t_prev = self.alphas_cumprod[prev_timestep] if prev_timestep >= 0 else self.final_alpha_cumprod
+
+    beta_prod_t = 1 - alpha_prod_t
+
+    # 3. compute predicted original sample from predicted noise also called
+    # "predicted x_0" of formula (12) from https://arxiv.org/pdf/2010.02502.pdf
+    pred_original_sample = (sample - beta_prod_t ** (0.5) * model_output) / alpha_prod_t ** (0.5)
+
+    # 4. Clip "predicted x_0"
+    scale = self.bit_scale
+    if self.config.clip_sample:
+        pred_original_sample = torch.clamp(pred_original_sample, -scale, scale)
+
+    # 5. compute variance: "sigma_t(η)" -> see formula (16)
+    # σ_t = sqrt((1 − α_t−1)/(1 − α_t)) * sqrt(1 − α_t/α_t−1)
+    variance = self._get_variance(timestep, prev_timestep)
+    std_dev_t = eta * variance ** (0.5)
+
+    if use_clipped_model_output:
+        # the model_output is always re-derived from the clipped x_0 in Glide
+        model_output = (sample - alpha_prod_t ** (0.5) * pred_original_sample) / beta_prod_t ** (0.5)
+
+    # 6. compute "direction pointing to x_t" of formula (12) from https://arxiv.org/pdf/2010.02502.pdf
+    pred_sample_direction = (1 - alpha_prod_t_prev - std_dev_t**2) ** (0.5) * model_output
+
+    # 7. compute x_t without "random noise" of formula (12) from https://arxiv.org/pdf/2010.02502.pdf
+    prev_sample = alpha_prod_t_prev ** (0.5) * pred_original_sample + pred_sample_direction
+
+    if eta > 0:
+        # randn_like does not support generator https://github.com/pytorch/pytorch/issues/27072
+        device = model_output.device if torch.is_tensor(model_output) else "cpu"
+        noise = torch.randn(model_output.shape, dtype=model_output.dtype, generator=generator).to(device)
+        variance = self._get_variance(timestep, prev_timestep) ** (0.5) * eta * noise
+
+        prev_sample = prev_sample + variance
+
+    if not return_dict:
+        return (prev_sample,)
+
+    return DDIMSchedulerOutput(prev_sample=prev_sample, pred_original_sample=pred_original_sample)
+
+
+def ddpm_bit_scheduler_step(
+    self,
+    model_output: torch.FloatTensor,
+    timestep: int,
+    sample: torch.FloatTensor,
+    predict_epsilon=True,
+    generator=None,
+    return_dict: bool = True,
+) -> Union[DDPMSchedulerOutput, Tuple]:
+    """
+    Predict the sample at the previous timestep by reversing the SDE. Core function to propagate the diffusion
+    process from the learned model outputs (most often the predicted noise).
+    Args:
+        model_output (`torch.FloatTensor`): direct output from learned diffusion model.
+        timestep (`int`): current discrete timestep in the diffusion chain.
+        sample (`torch.FloatTensor`):
+            current instance of sample being created by diffusion process.
+        predict_epsilon (`bool`):
+            optional flag to use when model predicts the samples directly instead of the noise, epsilon.
+        generator: random number generator.
+        return_dict (`bool`): option for returning tuple rather than DDPMSchedulerOutput class
+    Returns:
+        [`~schedulers.scheduling_utils.DDPMSchedulerOutput`] or `tuple`:
+        [`~schedulers.scheduling_utils.DDPMSchedulerOutput`] if `return_dict` is True, otherwise a `tuple`. When
+        returning a tuple, the first element is the sample tensor.
+    """
+    t = timestep
+
+    if model_output.shape[1] == sample.shape[1] * 2 and self.variance_type in ["learned", "learned_range"]:
+        model_output, predicted_variance = torch.split(model_output, sample.shape[1], dim=1)
+    else:
+        predicted_variance = None
+
+    # 1. compute alphas, betas
+    alpha_prod_t = self.alphas_cumprod[t]
+    alpha_prod_t_prev = self.alphas_cumprod[t - 1] if t > 0 else self.one
+    beta_prod_t = 1 - alpha_prod_t
+    beta_prod_t_prev = 1 - alpha_prod_t_prev
+
+    # 2. compute predicted original sample from predicted noise also called
+    # "predicted x_0" of formula (15) from https://arxiv.org/pdf/2006.11239.pdf
+    if predict_epsilon:
+        pred_original_sample = (sample - beta_prod_t ** (0.5) * model_output) / alpha_prod_t ** (0.5)
+    else:
+        pred_original_sample = model_output
+
+    # 3. Clip "predicted x_0"
+    scale = self.bit_scale
+    if self.config.clip_sample:
+        pred_original_sample = torch.clamp(pred_original_sample, -scale, scale)
+
+    # 4. Compute coefficients for pred_original_sample x_0 and current sample x_t
+    # See formula (7) from https://arxiv.org/pdf/2006.11239.pdf
+    pred_original_sample_coeff = (alpha_prod_t_prev ** (0.5) * self.betas[t]) / beta_prod_t
+    current_sample_coeff = self.alphas[t] ** (0.5) * beta_prod_t_prev / beta_prod_t
+
+    # 5. Compute predicted previous sample µ_t
+    # See formula (7) from https://arxiv.org/pdf/2006.11239.pdf
+    pred_prev_sample = pred_original_sample_coeff * pred_original_sample + current_sample_coeff * sample
+
+    # 6. Add noise
+    variance = 0
+    if t > 0:
+        noise = torch.randn(
+            model_output.size(), dtype=model_output.dtype, layout=model_output.layout, generator=generator
+        ).to(model_output.device)
+        variance = (self._get_variance(t, predicted_variance=predicted_variance) ** 0.5) * noise
+
+    pred_prev_sample = pred_prev_sample + variance
+
+    if not return_dict:
+        return (pred_prev_sample,)
+
+    return DDPMSchedulerOutput(prev_sample=pred_prev_sample, pred_original_sample=pred_original_sample)
+
+
+class BitDiffusion(DiffusionPipeline):
+    def __init__(
+        self,
+        unet: UNet2DConditionModel,
+        scheduler: Union[DDIMScheduler, DDPMScheduler],
+        bit_scale: Optional[float] = 1.0,
+    ):
+        super().__init__()
+        self.bit_scale = bit_scale
+        self.scheduler.step = (
+            ddim_bit_scheduler_step if isinstance(scheduler, DDIMScheduler) else ddpm_bit_scheduler_step
+        )
+
+        self.register_modules(unet=unet, scheduler=scheduler)
+
+    @torch.no_grad()
+    def __call__(
+        self,
+        height: Optional[int] = 256,
+        width: Optional[int] = 256,
+        num_inference_steps: Optional[int] = 50,
+        generator: Optional[torch.Generator] = None,
+        batch_size: Optional[int] = 1,
+        output_type: Optional[str] = "pil",
+        return_dict: bool = True,
+        **kwargs,
+    ) -> Union[Tuple, ImagePipelineOutput]:
+        latents = torch.randn(
+            (batch_size, self.unet.in_channels, height, width),
+            generator=generator,
+        )
+        latents = decimal_to_bits(latents) * self.bit_scale
+        latents = latents.to(self.device)
+
+        self.scheduler.set_timesteps(num_inference_steps)
+
+        for t in self.progress_bar(self.scheduler.timesteps):
+            # predict the noise residual
+            noise_pred = self.unet(latents, t).sample
+
+            # compute the previous noisy sample x_t -> x_t-1
+            latents = self.scheduler.step(noise_pred, t, latents).prev_sample
+
+        image = bits_to_decimal(latents)
+
+        if output_type == "pil":
+            image = self.numpy_to_pil(image)
+
+        if not return_dict:
+            return (image,)
+
+        return ImagePipelineOutput(images=image)