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On both my iMac (M1) and my MacBook Pro (M3 Pro), I get this issue after updating to 26.3.
Some wallpapers are upside down!

The original picture both in Photos and when I go directly to show in finder and open with Preview, has it correct... but when I try and make it a wallpaper it's upside down. Or like Top Gun, "Inverted".

I've used this wallpaper for almost 10 years with no issue, so the source file didn't change.

Anyone else see this?

PS. It's with like 1/4 of my photos that it does this... all of which appear to be objects or landscapes. People photos seem to be fine.
Also, when in settings > wallpaper the image shows upright... it's only on the actual wallpaper that it's inverted.

View attachment 2605775
I just updated to 26.3.1 this afternoon and my wallpaper inverted. Tried restarting and some of the other suggestions here. I got it to work by opening in preview and exporting, but I also got it to work by turning OFF Live on the photo. Could this be a glitch with live photos?
 
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