diff --git a/doc/whats-new.rst b/doc/whats-new.rst
index d4a46c1e020..e1012283c94 100644
--- a/doc/whats-new.rst
+++ b/doc/whats-new.rst
@@ -36,6 +36,10 @@ Breaking changes
 
 New Features
 ~~~~~~~~~~~~
+
+- ``chunks='auto'`` is now supported in the ``chunks`` argument of
+  :py:meth:`Dataset.chunk`. (:issue:`4055`)
+  By `Andrew Williams <https://github.com/AndrewWilliams3142>`_ 
 - Added :py:func:`xarray.cov` and :py:func:`xarray.corr` (:issue:`3784`, :pull:`3550`, :pull:`4089`).
   By `Andrew Williams <https://github.com/AndrewWilliams3142>`_ and `Robin Beer <https://github.com/r-beer>`_.
 - Added :py:meth:`DataArray.polyfit` and :py:func:`xarray.polyval` for fitting polynomials. (:issue:`3349`)
diff --git a/xarray/core/dataset.py b/xarray/core/dataset.py
index d93f4044a6d..43f6ad9c90e 100644
--- a/xarray/core/dataset.py
+++ b/xarray/core/dataset.py
@@ -1707,7 +1707,10 @@ def chunks(self) -> Mapping[Hashable, Tuple[int, ...]]:
     def chunk(
         self,
         chunks: Union[
-            None, Number, Mapping[Hashable, Union[None, Number, Tuple[Number, ...]]]
+            None,
+            Number,
+            str,
+            Mapping[Hashable, Union[None, Number, str, Tuple[Number, ...]]],
         ] = None,
         name_prefix: str = "xarray-",
         token: str = None,
@@ -1725,7 +1728,7 @@ def chunk(
 
         Parameters
         ----------
-        chunks : int or mapping, optional
+        chunks : int, 'auto' or mapping, optional
             Chunk sizes along each dimension, e.g., ``5`` or
             ``{'x': 5, 'y': 5}``.
         name_prefix : str, optional
@@ -1742,7 +1745,7 @@ def chunk(
         """
         from dask.base import tokenize
 
-        if isinstance(chunks, Number):
+        if isinstance(chunks, (Number, str)):
             chunks = dict.fromkeys(self.dims, chunks)
 
         if chunks is not None:
diff --git a/xarray/tests/test_dask.py b/xarray/tests/test_dask.py
index 75beb3757ca..6f714fe1825 100644
--- a/xarray/tests/test_dask.py
+++ b/xarray/tests/test_dask.py
@@ -1035,6 +1035,14 @@ def test_unify_chunks_shallow_copy(obj, transform):
     assert_identical(obj, unified) and obj is not obj.unify_chunks()
 
 
+@pytest.mark.parametrize("obj", [make_da()])
+def test_auto_chunk_da(obj):
+    actual = obj.chunk("auto").data
+    expected = obj.data.rechunk("auto")
+    np.testing.assert_array_equal(actual, expected)
+    assert actual.chunks == expected.chunks
+
+
 def test_map_blocks_error(map_da, map_ds):
     def bad_func(darray):
         return (darray * darray.x + 5 * darray.y)[:1, :1]