diff --git a/gossipd/gossip.c b/gossipd/gossip.c
index 439ce8253..76a647003 100644
--- a/gossipd/gossip.c
+++ b/gossipd/gossip.c
@@ -1890,17 +1890,21 @@ static struct io_plan *handle_routing_failure(struct io_conn *conn,
 	struct pubkey erring_node;
 	struct short_channel_id erring_channel;
 	u16 failcode;
+	u8 *channel_update;
 
-	if (!fromwire_gossip_routing_failure(msg, NULL,
+	if (!fromwire_gossip_routing_failure(msg,
+					     msg, NULL,
 					     &erring_node,
 					     &erring_channel,
-					     &failcode))
+					     &failcode,
+					     &channel_update))
 		master_badmsg(WIRE_GOSSIP_ROUTING_FAILURE, msg);
 
 	routing_failure(daemon->rstate,
 			&erring_node,
 			&erring_channel,
-			(enum onion_type) failcode);
+			(enum onion_type) failcode,
+			channel_update);
 
 	return daemon_conn_read_next(conn, &daemon->master);
 }
diff --git a/gossipd/gossip_wire.csv b/gossipd/gossip_wire.csv
index e6c35ee22..756953e9a 100644
--- a/gossipd/gossip_wire.csv
+++ b/gossipd/gossip_wire.csv
@@ -202,3 +202,5 @@ gossip_routing_failure,3021
 gossip_routing_failure,,erring_node,struct pubkey
 gossip_routing_failure,,erring_channel,struct short_channel_id
 gossip_routing_failure,,failcode,u16
+gossip_routing_failure,,len,u16
+gossip_routing_failure,,channel_update,len*u8
diff --git a/gossipd/routing.c b/gossipd/routing.c
index 08e6bd615..f9d45ea15 100644
--- a/gossipd/routing.c
+++ b/gossipd/routing.c
@@ -1054,12 +1054,14 @@ static void routing_failure_on_nc(struct routing_state *rstate,
 void routing_failure(struct routing_state *rstate,
 		     const struct pubkey *erring_node_pubkey,
 		     const struct short_channel_id *scid,
-		     enum onion_type failcode)
+		     enum onion_type failcode,
+		     const u8 *channel_update)
 {
 	const tal_t *tmpctx = tal_tmpctx(rstate);
 	struct node *node;
 	struct node_connection *nc;
 	int i;
+	enum wire_type t;
 
 	status_trace("Received routing failure 0x%04x (%s), "
 		     "erring node %s, "
@@ -1106,7 +1108,35 @@ void routing_failure(struct routing_state *rstate,
 						    erring_node_pubkey));
 	}
 
-	/* FIXME: if UPDATE is set, apply the channel update. */
+	/* Update the channel if UPDATE failcode. Do
+	 * this after deactivating, so that if the
+	 * channel_update is newer it will be
+	 * reactivated. */
+	if (failcode & UPDATE) {
+		if (tal_len(channel_update) == 0) {
+			status_trace("UNUSUAL routing_failure: "
+				     "UPDATE bit set, no channel_update. "
+				     "failcode: 0x%04x",
+				     (int) failcode);
+			goto out;
+		}
+		t = fromwire_peektype(channel_update);
+		if (t != WIRE_CHANNEL_UPDATE) {
+			status_trace("UNUSUAL routing_failure: "
+				     "not a channel_update. "
+				     "type: %d",
+				     (int) t);
+			goto out;
+		}
+		handle_channel_update(rstate, channel_update);
+	} else {
+		if (tal_len(channel_update) != 0)
+			status_trace("UNUSUAL routing_failure: "
+				     "UPDATE bit clear, channel_update given. "
+				     "failcode: 0x%04x",
+				     (int) failcode);
+	}
+
 out:
 	tal_free(tmpctx);
 }
diff --git a/gossipd/routing.h b/gossipd/routing.h
index aa5a74ce4..68d590bfa 100644
--- a/gossipd/routing.h
+++ b/gossipd/routing.h
@@ -153,7 +153,8 @@ struct route_hop *get_route(tal_t *ctx, struct routing_state *rstate,
 void routing_failure(struct routing_state *rstate,
 		     const struct pubkey *erring_node,
 		     const struct short_channel_id *erring_channel,
-		     enum onion_type failcode);
+		     enum onion_type failcode,
+		     const u8 *channel_update);
 
 /* Utility function that, given a source and a destination, gives us
  * the direction bit the matching channel should get */
diff --git a/gossipd/test/run-bench-find_route.c b/gossipd/test/run-bench-find_route.c
index 05b70001f..9be41701e 100644
--- a/gossipd/test/run-bench-find_route.c
+++ b/gossipd/test/run-bench-find_route.c
@@ -57,6 +57,9 @@ bool fromwire_channel_update(const void *p UNNEEDED, size_t *plen UNNEEDED, secp
 /* Generated stub for fromwire_node_announcement */
 bool fromwire_node_announcement(const tal_t *ctx UNNEEDED, const void *p UNNEEDED, size_t *plen UNNEEDED, secp256k1_ecdsa_signature *signature UNNEEDED, u8 **features UNNEEDED, u32 *timestamp UNNEEDED, struct pubkey *node_id UNNEEDED, u8 rgb_color[3] UNNEEDED, u8 alias[32] UNNEEDED, u8 **addresses UNNEEDED)
 { fprintf(stderr, "fromwire_node_announcement called!\n"); abort(); }
+/* Generated stub for fromwire_peektype */
+int fromwire_peektype(const u8 *cursor UNNEEDED)
+{ fprintf(stderr, "fromwire_peektype called!\n"); abort(); }
 /* Generated stub for fromwire_u8 */
 u8 fromwire_u8(const u8 **cursor UNNEEDED, size_t *max UNNEEDED)
 { fprintf(stderr, "fromwire_u8 called!\n"); abort(); }
diff --git a/gossipd/test/run-find_route-specific.c b/gossipd/test/run-find_route-specific.c
index 837c843ff..29c89485f 100644
--- a/gossipd/test/run-find_route-specific.c
+++ b/gossipd/test/run-find_route-specific.c
@@ -28,6 +28,9 @@ bool fromwire_channel_update(const void *p UNNEEDED, size_t *plen UNNEEDED, secp
 /* Generated stub for fromwire_node_announcement */
 bool fromwire_node_announcement(const tal_t *ctx UNNEEDED, const void *p UNNEEDED, size_t *plen UNNEEDED, secp256k1_ecdsa_signature *signature UNNEEDED, u8 **features UNNEEDED, u32 *timestamp UNNEEDED, struct pubkey *node_id UNNEEDED, u8 rgb_color[3] UNNEEDED, u8 alias[32] UNNEEDED, u8 **addresses UNNEEDED)
 { fprintf(stderr, "fromwire_node_announcement called!\n"); abort(); }
+/* Generated stub for fromwire_peektype */
+int fromwire_peektype(const u8 *cursor UNNEEDED)
+{ fprintf(stderr, "fromwire_peektype called!\n"); abort(); }
 /* Generated stub for fromwire_u8 */
 u8 fromwire_u8(const u8 **cursor UNNEEDED, size_t *max UNNEEDED)
 { fprintf(stderr, "fromwire_u8 called!\n"); abort(); }
diff --git a/gossipd/test/run-find_route.c b/gossipd/test/run-find_route.c
index 095cb89a6..0883e4806 100644
--- a/gossipd/test/run-find_route.c
+++ b/gossipd/test/run-find_route.c
@@ -21,6 +21,9 @@ bool fromwire_channel_update(const void *p UNNEEDED, size_t *plen UNNEEDED, secp
 /* Generated stub for fromwire_node_announcement */
 bool fromwire_node_announcement(const tal_t *ctx UNNEEDED, const void *p UNNEEDED, size_t *plen UNNEEDED, secp256k1_ecdsa_signature *signature UNNEEDED, u8 **features UNNEEDED, u32 *timestamp UNNEEDED, struct pubkey *node_id UNNEEDED, u8 rgb_color[3] UNNEEDED, u8 alias[32] UNNEEDED, u8 **addresses UNNEEDED)
 { fprintf(stderr, "fromwire_node_announcement called!\n"); abort(); }
+/* Generated stub for fromwire_peektype */
+int fromwire_peektype(const u8 *cursor UNNEEDED)
+{ fprintf(stderr, "fromwire_peektype called!\n"); abort(); }
 /* Generated stub for fromwire_u8 */
 u8 fromwire_u8(const u8 **cursor UNNEEDED, size_t *max UNNEEDED)
 { fprintf(stderr, "fromwire_u8 called!\n"); abort(); }