Various embodiments of methods and systems for dynamically adjusting a peak dynamic power threshold are disclosed. Advantageously, embodiments of the solution for peak dynamic power management optimize a peak dynamic power threshold based on estimations of real-time leakage current levels and/or actual power supply levels to a power domain of a system on a chip (“SoC”). In this way, embodiments of the solution ensure that a maximum amount of available power supply is allocated to dynamic power consumption for processing workloads at an optimum performance or quality of service (“QoS”) level without risking that the total power consumption (leakage power consumption+dynamic power consumption) for the power domain exceeds the power supply capacity.