This is intentional. Previews inside nodes do not show alpha/transparency, only the RGB data. It’s common for colours to “stretch out” in fully transparent areas to avoid artifacts. If it was instead black in these areas, the colour might darken along the transparent edge. (That may look even worse when dealing with mipmaps, though you typically wouldn’t have those with sprites in particular) Only the Main Preview will show transparency. (Robot Character from Kenney Toon Characters 1) Even with these stretched-out previews, the final result should look correct provided the alpha channel (A output from Sample Texture 2D) is connected to the Alpha port in the Master Stack. If you don’t see that port (or it is greyed out), your graph is currently set to be Opaque. Can change this to Transparent in the Graph Settings (tab of Graph Inspector window, toggled with button in top right of graph). Sprite graphs are always transparent by default. If you still don’t see the Alpha port, try adding the block manually (see Intro to Shader Graph post - Master Stack) If for some reason you do need the texture masked correctly to the alpha, can Multiply the RGBA and A outputs. Or if you need to control the background color, put the A output into the T input on a Lerp with A as the background and B as the RGBA output.