An image sensor may have an array of pixels and readout circuitry. The array may include image pixels that generate signals in response to image light and reference pixels that generate signals in response to electrical noise. The readout circuitry may obtain first pixel values from the image pixels and may obtain second pixel values from the reference pixels. The readout circuitry may generate an extended precision pixel value based on the second pixel values that have an extended bit width relative to the each of the second pixel values. The readout circuitry may generate multiple dithered correction values by adding randomized sequences of least significant bits to the extended precision pixel value. The readout circuitry may mitigate visible quantization error and noise such as row-correlated and column-correlated noise in the final image by subtracting the dithered correction values from corresponding first pixel values.