diff --git a/Cargo.lock b/Cargo.lock
index 7c0325c260e60..8d4edd807d2c5 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -10242,9 +10242,15 @@ checksum = "4ee93343901ab17bd981295f2cf0026d4ad018c7c31ba84549a4ddbb47a45104"
 
 [[package]]
 name = "litep2p"
+<<<<<<< HEAD
 version = "0.9.5"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "14fb10e63363204b89d91e1292df83322fd9de5d7fa76c3d5c78ddc2f8f3efa9"
+=======
+version = "0.12.3"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "d903b21d57fae0e8d184c6ea0107fb5303fcab7cd2acaf5d2d9beb2807194b4a"
+>>>>>>> a12ec9c (cargo: Update litep2p to v0.12.3 (#10665))
 dependencies = [
  "async-trait",
  "bs58",
diff --git a/Cargo.toml b/Cargo.toml
index 6e83407823c65..dbe8188ed3eaa 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -901,7 +901,11 @@ linked-hash-map = { version = "0.5.4" }
 linked_hash_set = { version = "0.1.4" }
 linregress = { version = "0.5.1" }
 lite-json = { version = "0.2.0", default-features = false }
+<<<<<<< HEAD
 litep2p = { version = "0.9.5", features = ["websocket"] }
+=======
+litep2p = { version = "0.12.3", features = ["rsa", "websocket"] }
+>>>>>>> a12ec9c (cargo: Update litep2p to v0.12.3 (#10665))
 log = { version = "0.4.22", default-features = false }
 macro_magic = { version = "0.5.1" }
 maplit = { version = "1.0.2" }
diff --git a/prdoc/pr_10665.prdoc b/prdoc/pr_10665.prdoc
new file mode 100644
index 0000000000000..227afe2e47b16
--- /dev/null
+++ b/prdoc/pr_10665.prdoc
@@ -0,0 +1,20 @@
+title: 'cargo: Update litep2p to v0.12.3'
+doc:
+- audience: Node Dev
+  description: |-
+    ## [0.12.3] - 2025-12-16
+
+    This release improves the robustness of the multistream-select negotiation over WebRTC transport and fixes inbound bandwidth metering on substreams. It also enhances the dialing success rate by improving the transport dialing logic. Additionally, it re-exports CID's multihash to facilitate the construction of CID V1.
+
+    ### Changed
+
+    - transports: Improves the robustness and success rate of connection dialing  ([#495](https://github.com/paritytech/litep2p/pull/495))
+    - types: Re-export cid's multihash to construct CID V1  ([#491](https://github.com/paritytech/litep2p/pull/491))
+
+    ### Fixed
+
+    - fix: multistream-select negotiation on outbound substream over webrtc  ([#465](https://github.com/paritytech/litep2p/pull/465))
+    - substream: Fix inbound bandwidth metering  ([#499](https://github.com/paritytech/litep2p/pull/499))
+
+    cc @paritytech/sdk-node
+crates: []