diff --git a/CODEOWNERS b/CODEOWNERS
index e63528fabc..85ac107975 100644
--- a/CODEOWNERS
+++ b/CODEOWNERS
@@ -77,6 +77,7 @@ esphome/components/esp32_improv/* @jesserockz
 esphome/components/esp8266/* @esphome/core
 esphome/components/exposure_notifications/* @OttoWinter
 esphome/components/ezo/* @ssieb
+esphome/components/factory_reset/* @anatoly-savchenkov
 esphome/components/fastled_base/* @OttoWinter
 esphome/components/feedback/* @ianchi
 esphome/components/fingerprint_grow/* @OnFreund @loongyh
diff --git a/esphome/components/esp32/preferences.cpp b/esphome/components/esp32/preferences.cpp
index d070a20d82..6a6305cf87 100644
--- a/esphome/components/esp32/preferences.cpp
+++ b/esphome/components/esp32/preferences.cpp
@@ -141,7 +141,7 @@ class ESP32Preferences : public ESPPreferences {
     ESP_LOGD(TAG, "Saving %d preferences to flash: %d cached, %d written, %d failed", cached + written + failed, cached,
              written, failed);
     if (failed > 0) {
-      ESP_LOGD(TAG, "Error saving %d preferences to flash. Last error=%s for key=%s", failed, esp_err_to_name(last_err),
+      ESP_LOGE(TAG, "Error saving %d preferences to flash. Last error=%s for key=%s", failed, esp_err_to_name(last_err),
                last_key.c_str());
     }
 
@@ -170,6 +170,17 @@ class ESP32Preferences : public ESPPreferences {
     }
     return to_save.data != stored_data.data;
   }
+
+  bool reset() override {
+    ESP_LOGD(TAG, "Cleaning up preferences in flash...");
+    s_pending_save.clear();
+
+    nvs_flash_deinit();
+    nvs_flash_erase();
+    // Make the handle invalid to prevent any saves until restart
+    nvs_handle = 0;
+    return true;
+  }
 };
 
 void setup_preferences() {
diff --git a/esphome/components/esp8266/preferences.cpp b/esphome/components/esp8266/preferences.cpp
index 0e42cea576..1bd20f16ae 100644
--- a/esphome/components/esp8266/preferences.cpp
+++ b/esphome/components/esp8266/preferences.cpp
@@ -243,17 +243,34 @@ class ESP8266Preferences : public ESPPreferences {
       }
     }
     if (erase_res != SPI_FLASH_RESULT_OK) {
-      ESP_LOGV(TAG, "Erase ESP8266 flash failed!");
+      ESP_LOGE(TAG, "Erase ESP8266 flash failed!");
       return false;
     }
     if (write_res != SPI_FLASH_RESULT_OK) {
-      ESP_LOGV(TAG, "Write ESP8266 flash failed!");
+      ESP_LOGE(TAG, "Write ESP8266 flash failed!");
       return false;
     }
 
     s_flash_dirty = false;
     return true;
   }
+
+  bool reset() override {
+    ESP_LOGD(TAG, "Cleaning up preferences in flash...");
+    SpiFlashOpResult erase_res;
+    {
+      InterruptLock lock;
+      erase_res = spi_flash_erase_sector(get_esp8266_flash_sector());
+    }
+    if (erase_res != SPI_FLASH_RESULT_OK) {
+      ESP_LOGE(TAG, "Erase ESP8266 flash failed!");
+      return false;
+    }
+
+    // Protect flash from writing till restart
+    s_prevent_write = true;
+    return true;
+  }
 };
 
 void setup_preferences() {
diff --git a/esphome/components/factory_reset/__init__.py b/esphome/components/factory_reset/__init__.py
new file mode 100644
index 0000000000..f1bcfd8c55
--- /dev/null
+++ b/esphome/components/factory_reset/__init__.py
@@ -0,0 +1,5 @@
+import esphome.codegen as cg
+
+CODEOWNERS = ["@anatoly-savchenkov"]
+
+factory_reset_ns = cg.esphome_ns.namespace("factory_reset")
diff --git a/esphome/components/factory_reset/button/__init__.py b/esphome/components/factory_reset/button/__init__.py
new file mode 100644
index 0000000000..d5beac34b5
--- /dev/null
+++ b/esphome/components/factory_reset/button/__init__.py
@@ -0,0 +1,30 @@
+import esphome.codegen as cg
+import esphome.config_validation as cv
+from esphome.components import button
+from esphome.const import (
+    CONF_ID,
+    DEVICE_CLASS_RESTART,
+    ENTITY_CATEGORY_CONFIG,
+    ICON_RESTART_ALERT,
+)
+from .. import factory_reset_ns
+
+FactoryResetButton = factory_reset_ns.class_(
+    "FactoryResetButton", button.Button, cg.Component
+)
+
+CONFIG_SCHEMA = (
+    button.button_schema(
+        device_class=DEVICE_CLASS_RESTART,
+        entity_category=ENTITY_CATEGORY_CONFIG,
+        icon=ICON_RESTART_ALERT,
+    )
+    .extend({cv.GenerateID(): cv.declare_id(FactoryResetButton)})
+    .extend(cv.COMPONENT_SCHEMA)
+)
+
+
+async def to_code(config):
+    var = cg.new_Pvariable(config[CONF_ID])
+    await cg.register_component(var, config)
+    await button.register_button(var, config)
diff --git a/esphome/components/factory_reset/button/factory_reset_button.cpp b/esphome/components/factory_reset/button/factory_reset_button.cpp
new file mode 100644
index 0000000000..9354a3363e
--- /dev/null
+++ b/esphome/components/factory_reset/button/factory_reset_button.cpp
@@ -0,0 +1,21 @@
+#include "factory_reset_button.h"
+#include "esphome/core/hal.h"
+#include "esphome/core/log.h"
+#include "esphome/core/application.h"
+
+namespace esphome {
+namespace factory_reset {
+
+static const char *const TAG = "factory_reset.button";
+
+void FactoryResetButton::dump_config() { LOG_BUTTON("", "Factory Reset Button", this); }
+void FactoryResetButton::press_action() {
+  ESP_LOGI(TAG, "Resetting to factory defaults...");
+  // Let MQTT settle a bit
+  delay(100);  // NOLINT
+  global_preferences->reset();
+  App.safe_reboot();
+}
+
+}  // namespace factory_reset
+}  // namespace esphome
diff --git a/esphome/components/factory_reset/button/factory_reset_button.h b/esphome/components/factory_reset/button/factory_reset_button.h
new file mode 100644
index 0000000000..9996a860d9
--- /dev/null
+++ b/esphome/components/factory_reset/button/factory_reset_button.h
@@ -0,0 +1,18 @@
+#pragma once
+
+#include "esphome/core/component.h"
+#include "esphome/components/button/button.h"
+
+namespace esphome {
+namespace factory_reset {
+
+class FactoryResetButton : public button::Button, public Component {
+ public:
+  void dump_config() override;
+
+ protected:
+  void press_action() override;
+};
+
+}  // namespace factory_reset
+}  // namespace esphome
diff --git a/esphome/components/factory_reset/switch/__init__.py b/esphome/components/factory_reset/switch/__init__.py
new file mode 100644
index 0000000000..3cc19a35a3
--- /dev/null
+++ b/esphome/components/factory_reset/switch/__init__.py
@@ -0,0 +1,35 @@
+import esphome.codegen as cg
+import esphome.config_validation as cv
+from esphome.components import switch
+from esphome.const import (
+    CONF_ENTITY_CATEGORY,
+    CONF_ID,
+    CONF_INVERTED,
+    CONF_ICON,
+    ENTITY_CATEGORY_CONFIG,
+    ICON_RESTART_ALERT,
+)
+from .. import factory_reset_ns
+
+FactoryResetSwitch = factory_reset_ns.class_(
+    "FactoryResetSwitch", switch.Switch, cg.Component
+)
+
+CONFIG_SCHEMA = switch.SWITCH_SCHEMA.extend(
+    {
+        cv.GenerateID(): cv.declare_id(FactoryResetSwitch),
+        cv.Optional(CONF_INVERTED): cv.invalid(
+            "Factory Reset switches do not support inverted mode!"
+        ),
+        cv.Optional(CONF_ICON, default=ICON_RESTART_ALERT): cv.icon,
+        cv.Optional(
+            CONF_ENTITY_CATEGORY, default=ENTITY_CATEGORY_CONFIG
+        ): cv.entity_category,
+    }
+).extend(cv.COMPONENT_SCHEMA)
+
+
+async def to_code(config):
+    var = cg.new_Pvariable(config[CONF_ID])
+    await cg.register_component(var, config)
+    await switch.register_switch(var, config)
diff --git a/esphome/components/factory_reset/switch/factory_reset_switch.cpp b/esphome/components/factory_reset/switch/factory_reset_switch.cpp
new file mode 100644
index 0000000000..7bc8676736
--- /dev/null
+++ b/esphome/components/factory_reset/switch/factory_reset_switch.cpp
@@ -0,0 +1,26 @@
+#include "factory_reset_switch.h"
+#include "esphome/core/hal.h"
+#include "esphome/core/log.h"
+#include "esphome/core/application.h"
+
+namespace esphome {
+namespace factory_reset {
+
+static const char *const TAG = "factory_reset.switch";
+
+void FactoryResetSwitch::dump_config() { LOG_SWITCH("", "Factory Reset Switch", this); }
+void FactoryResetSwitch::write_state(bool state) {
+  // Acknowledge
+  this->publish_state(false);
+
+  if (state) {
+    ESP_LOGI(TAG, "Resetting to factory defaults...");
+    // Let MQTT settle a bit
+    delay(100);  // NOLINT
+    global_preferences->reset();
+    App.safe_reboot();
+  }
+}
+
+}  // namespace factory_reset
+}  // namespace esphome
diff --git a/esphome/components/factory_reset/switch/factory_reset_switch.h b/esphome/components/factory_reset/switch/factory_reset_switch.h
new file mode 100644
index 0000000000..2c914ea76d
--- /dev/null
+++ b/esphome/components/factory_reset/switch/factory_reset_switch.h
@@ -0,0 +1,18 @@
+#pragma once
+
+#include "esphome/core/component.h"
+#include "esphome/components/switch/switch.h"
+
+namespace esphome {
+namespace factory_reset {
+
+class FactoryResetSwitch : public switch_::Switch, public Component {
+ public:
+  void dump_config() override;
+
+ protected:
+  void write_state(bool state) override;
+};
+
+}  // namespace factory_reset
+}  // namespace esphome
diff --git a/esphome/core/preferences.h b/esphome/core/preferences.h
index 2b13061a59..6d2dd967e9 100644
--- a/esphome/core/preferences.h
+++ b/esphome/core/preferences.h
@@ -46,6 +46,14 @@ class ESPPreferences {
    */
   virtual bool sync() = 0;
 
+  /**
+   * Forget all unsaved changes and re-initialize the permanent preferences storage.
+   * Usually followed by a restart which moves the system to "factory" conditions
+   *
+   * @return true if operation is successful.
+   */
+  virtual bool reset() = 0;
+
   template<typename T, enable_if_t<is_trivially_copyable<T>::value, bool> = true>
   ESPPreferenceObject make_preference(uint32_t type, bool in_flash) {
     return this->make_preference(sizeof(T), type, in_flash);
diff --git a/tests/test1.yaml b/tests/test1.yaml
index e5e9754d74..e213a8b041 100644
--- a/tests/test1.yaml
+++ b/tests/test1.yaml
@@ -2178,6 +2178,8 @@ switch:
     name: Living Room Restart
   - platform: safe_mode
     name: Living Room Restart (Safe Mode)
+  - platform: factory_reset
+    name: Living Room Restart (Factory Default Settings)
   - platform: shutdown
     name: Living Room Shutdown
   - platform: output
diff --git a/tests/test3.yaml b/tests/test3.yaml
index 1d4b4fb076..4eee0fd2c9 100644
--- a/tests/test3.yaml
+++ b/tests/test3.yaml
@@ -1529,6 +1529,9 @@ button:
     target_mac_address: 12:34:56:78:90:ab
     name: wol_test_1
     id: wol_1
+  - platform: factory_reset
+    name: Restart Button (Factory Default Settings)
+
 
 cd74hc4067:
   pin_s0: GPIO12