diff --git a/qa/rpc-tests/p2p-compactblocks.py b/qa/rpc-tests/p2p-compactblocks.py
index 6b5d47713..6d1fb3fd9 100755
--- a/qa/rpc-tests/p2p-compactblocks.py
+++ b/qa/rpc-tests/p2p-compactblocks.py
@@ -708,6 +708,33 @@ class CompactBlocksTest(BitcoinTestFramework):
                 l.last_cmpctblock.header_and_shortids.header.calc_sha256()
                 assert_equal(l.last_cmpctblock.header_and_shortids.header.sha256, block.sha256)
 
+    # Test that we don't get disconnected if we relay a compact block with valid header,
+    # but invalid transactions.
+    def test_invalid_tx_in_compactblock(self, node, test_node, use_segwit):
+        assert(len(self.utxos))
+        utxo = self.utxos[0]
+
+        block = self.build_block_with_transactions(node, utxo, 5)
+        del block.vtx[3]
+        block.hashMerkleRoot = block.calc_merkle_root()
+        if use_segwit:
+            # If we're testing with segwit, also drop the coinbase witness,
+            # but include the witness commitment.
+            add_witness_commitment(block)
+            block.vtx[0].wit.vtxinwit = []
+        block.solve()
+
+        # Now send the compact block with all transactions prefilled, and
+        # verify that we don't get disconnected.
+        comp_block = HeaderAndShortIDs()
+        comp_block.initialize_from_block(block, prefill_list=[0, 1, 2, 3, 4], use_witness=use_segwit)
+        msg = msg_cmpctblock(comp_block.to_p2p())
+        test_node.send_and_ping(msg)
+
+        # Check that the tip didn't advance
+        assert(int(node.getbestblockhash(), 16) is not block.sha256)
+        test_node.sync_with_ping()
+
     # Helper for enabling cb announcements
     # Send the sendcmpct request and sync headers
     def request_cb_announcements(self, peer, node, version):
@@ -798,6 +825,11 @@ class CompactBlocksTest(BitcoinTestFramework):
         self.test_end_to_end_block_relay(self.nodes[0], [self.segwit_node, self.test_node, self.old_node])
         self.test_end_to_end_block_relay(self.nodes[1], [self.segwit_node, self.test_node, self.old_node])
 
+        print("\tTesting handling of invalid compact blocks...")
+        self.test_invalid_tx_in_compactblock(self.nodes[0], self.test_node, False)
+        self.test_invalid_tx_in_compactblock(self.nodes[1], self.segwit_node, False)
+        self.test_invalid_tx_in_compactblock(self.nodes[1], self.old_node, False)
+
         # Advance to segwit activation
         print ("\nAdvancing to segwit activation\n")
         self.activate_segwit(self.nodes[1])
@@ -844,6 +876,11 @@ class CompactBlocksTest(BitcoinTestFramework):
         self.request_cb_announcements(self.segwit_node, self.nodes[1], 2)
         self.test_end_to_end_block_relay(self.nodes[1], [self.segwit_node, self.test_node, self.old_node])
 
+        print("\tTesting handling of invalid compact blocks...")
+        self.test_invalid_tx_in_compactblock(self.nodes[0], self.test_node, False)
+        self.test_invalid_tx_in_compactblock(self.nodes[1], self.segwit_node, True)
+        self.test_invalid_tx_in_compactblock(self.nodes[1], self.old_node, True)
+
         print("\tTesting invalid index in cmpctblock message...")
         self.test_invalid_cmpctblock_message()
 
diff --git a/src/blockencodings.cpp b/src/blockencodings.cpp
index 93d3fa372..737102f16 100644
--- a/src/blockencodings.cpp
+++ b/src/blockencodings.cpp
@@ -167,7 +167,7 @@ ReadStatus PartiallyDownloadedBlock::FillBlock(CBlock& block, const std::vector<
         // check its own merkle root and cache that check.
         if (state.CorruptionPossible())
             return READ_STATUS_FAILED; // Possible Short ID collision
-        return READ_STATUS_INVALID;
+        return READ_STATUS_CHECKBLOCK_FAILED;
     }
 
     LogPrint("cmpctblock", "Successfully reconstructed block %s with %lu txn prefilled, %lu txn from mempool and %lu txn requested\n", header.GetHash().ToString(), prefilled_count, mempool_count, vtx_missing.size());
diff --git a/src/blockencodings.h b/src/blockencodings.h
index 99b1cb140..705eaf28a 100644
--- a/src/blockencodings.h
+++ b/src/blockencodings.h
@@ -124,6 +124,8 @@ typedef enum ReadStatus_t
     READ_STATUS_OK,
     READ_STATUS_INVALID, // Invalid object, peer is sending bogus crap
     READ_STATUS_FAILED, // Failed to process object
+    READ_STATUS_CHECKBLOCK_FAILED, // Used only by FillBlock to indicate a
+                                   // failure in CheckBlock.
 } ReadStatus;
 
 class CBlockHeaderAndShortTxIDs {
diff --git a/src/main.cpp b/src/main.cpp
index 2fb143e6a..7e5b9528b 100644
--- a/src/main.cpp
+++ b/src/main.cpp
@@ -180,8 +180,10 @@ namespace {
      * Sources of received blocks, saved to be able to send them reject
      * messages or ban them when processing happens afterwards. Protected by
      * cs_main.
+     * Set mapBlockSource[hash].second to false if the node should not be
+     * punished if the block is invalid.
      */
-    map<uint256, NodeId> mapBlockSource;
+    map<uint256, std::pair<NodeId, bool>> mapBlockSource;
 
     /**
      * Filter for transactions that were recently rejected by
@@ -3785,7 +3787,7 @@ static bool AcceptBlock(const CBlock& block, CValidationState& state, const CCha
     return true;
 }
 
-bool ProcessNewBlock(CValidationState& state, const CChainParams& chainparams, CNode* pfrom, const CBlock* pblock, bool fForceProcessing, const CDiskBlockPos* dbp)
+bool ProcessNewBlock(CValidationState& state, const CChainParams& chainparams, CNode* pfrom, const CBlock* pblock, bool fForceProcessing, const CDiskBlockPos* dbp, bool fMayBanPeerIfInvalid)
 {
     {
         LOCK(cs_main);
@@ -3795,7 +3797,7 @@ bool ProcessNewBlock(CValidationState& state, const CChainParams& chainparams, C
         bool fNewBlock = false;
         bool ret = AcceptBlock(*pblock, state, chainparams, &pindex, fForceProcessing, dbp, &fNewBlock);
         if (pindex && pfrom) {
-            mapBlockSource[pindex->GetBlockHash()] = pfrom->GetId();
+            mapBlockSource[pindex->GetBlockHash()] = std::make_pair(pfrom->GetId(), fMayBanPeerIfInvalid);
             if (fNewBlock) pfrom->nLastBlockTime = GetTime();
         }
         CheckBlockIndex(chainparams.GetConsensus());
@@ -4775,16 +4777,16 @@ void PeerLogicValidation::BlockChecked(const CBlock& block, const CValidationSta
     LOCK(cs_main);
 
     const uint256 hash(block.GetHash());
-    std::map<uint256, NodeId>::iterator it = mapBlockSource.find(hash);
+    std::map<uint256, std::pair<NodeId, bool>>::iterator it = mapBlockSource.find(hash);
 
     int nDoS = 0;
     if (state.IsInvalid(nDoS)) {
-        if (it != mapBlockSource.end() && State(it->second)) {
+        if (it != mapBlockSource.end() && State(it->second.first)) {
             assert (state.GetRejectCode() < REJECT_INTERNAL); // Blocks are never rejected with internal reject codes
             CBlockReject reject = {(unsigned char)state.GetRejectCode(), state.GetRejectReason().substr(0, MAX_REJECT_MESSAGE_LENGTH), hash};
-            State(it->second)->rejects.push_back(reject);
-            if (nDoS > 0)
-                Misbehaving(it->second, nDoS);
+            State(it->second.first)->rejects.push_back(reject);
+            if (nDoS > 0 && it->second.second)
+                Misbehaving(it->second.first, nDoS);
         }
     }
     if (it != mapBlockSource.end())
@@ -5893,6 +5895,23 @@ bool static ProcessMessage(CNode* pfrom, string strCommand, CDataStream& vRecv,
                 invs.push_back(CInv(MSG_BLOCK | GetFetchFlags(pfrom, chainActive.Tip(), chainparams.GetConsensus()), resp.blockhash));
                 connman.PushMessage(pfrom, NetMsgType::GETDATA, invs);
             } else {
+                // Block is either okay, or possibly we received
+                // READ_STATUS_CHECKBLOCK_FAILED.
+                // Note that CheckBlock can only fail for one of a few reasons:
+                // 1. bad-proof-of-work (impossible here, because we've already
+                //    accepted the header)
+                // 2. merkleroot doesn't match the transactions given (already
+                //    caught in FillBlock with READ_STATUS_FAILED, so
+                //    impossible here)
+                // 3. the block is otherwise invalid (eg invalid coinbase,
+                //    block is too big, too many legacy sigops, etc).
+                // So if CheckBlock failed, #3 is the only possibility.
+                // Under BIP 152, we don't DoS-ban unless proof of work is
+                // invalid (we don't require all the stateless checks to have
+                // been run).  This is handled below, so just treat this as
+                // though the block was successfully read, and rely on the
+                // handling in ProcessNewBlock to ensure the block index is
+                // updated, reject messages go out, etc.
                 MarkBlockAsReceived(resp.blockhash); // it is now an empty pointer
                 fBlockRead = true;
             }
@@ -5901,16 +5920,15 @@ bool static ProcessMessage(CNode* pfrom, string strCommand, CDataStream& vRecv,
             CValidationState state;
             // Since we requested this block (it was in mapBlocksInFlight), force it to be processed,
             // even if it would not be a candidate for new tip (missing previous block, chain not long enough, etc)
-            ProcessNewBlock(state, chainparams, pfrom, &block, true, NULL);
+            // BIP 152 permits peers to relay compact blocks after validating
+            // the header only; we should not punish peers if the block turns
+            // out to be invalid.
+            ProcessNewBlock(state, chainparams, pfrom, &block, true, NULL, false);
             int nDoS;
             if (state.IsInvalid(nDoS)) {
                 assert (state.GetRejectCode() < REJECT_INTERNAL); // Blocks are never rejected with internal reject codes
                 connman.PushMessage(pfrom, NetMsgType::REJECT, strCommand, (unsigned char)state.GetRejectCode(),
                                    state.GetRejectReason().substr(0, MAX_REJECT_MESSAGE_LENGTH), block.GetHash());
-                if (nDoS > 0) {
-                    LOCK(cs_main);
-                    Misbehaving(pfrom->GetId(), nDoS);
-                }
             }
         }
     }
@@ -6081,7 +6099,7 @@ bool static ProcessMessage(CNode* pfrom, string strCommand, CDataStream& vRecv,
             // need it even though it is not a candidate for a new best tip.
             forceProcessing |= MarkBlockAsReceived(block.GetHash());
         }
-        ProcessNewBlock(state, chainparams, pfrom, &block, forceProcessing, NULL);
+        ProcessNewBlock(state, chainparams, pfrom, &block, forceProcessing, NULL, true);
         int nDoS;
         if (state.IsInvalid(nDoS)) {
             assert (state.GetRejectCode() < REJECT_INTERNAL); // Blocks are never rejected with internal reject codes
diff --git a/src/main.h b/src/main.h
index e80314a64..934333058 100644
--- a/src/main.h
+++ b/src/main.h
@@ -223,7 +223,7 @@ static const uint64_t MIN_DISK_SPACE_FOR_BLOCK_FILES = 550 * 1024 * 1024;
  * @param[out]  dbp     The already known disk position of pblock, or NULL if not yet stored.
  * @return True if state.IsValid()
  */
-bool ProcessNewBlock(CValidationState& state, const CChainParams& chainparams, CNode* pfrom, const CBlock* pblock, bool fForceProcessing, const CDiskBlockPos* dbp);
+bool ProcessNewBlock(CValidationState& state, const CChainParams& chainparams, CNode* pfrom, const CBlock* pblock, bool fForceProcessing, const CDiskBlockPos* dbp, bool fMayBanPeerIfInvalid);
 /** Check whether enough disk space is available for an incoming block */
 bool CheckDiskSpace(uint64_t nAdditionalBytes = 0);
 /** Open a block file (blk?????.dat) */
diff --git a/src/rpc/mining.cpp b/src/rpc/mining.cpp
index f418262f0..3e91a79a6 100644
--- a/src/rpc/mining.cpp
+++ b/src/rpc/mining.cpp
@@ -132,7 +132,7 @@ UniValue generateBlocks(boost::shared_ptr<CReserveScript> coinbaseScript, int nG
             continue;
         }
         CValidationState state;
-        if (!ProcessNewBlock(state, Params(), NULL, pblock, true, NULL))
+        if (!ProcessNewBlock(state, Params(), NULL, pblock, true, NULL, false))
             throw JSONRPCError(RPC_INTERNAL_ERROR, "ProcessNewBlock, block not accepted");
         ++nHeight;
         blockHashes.push_back(pblock->GetHash().GetHex());
@@ -757,7 +757,7 @@ UniValue submitblock(const JSONRPCRequest& request)
     CValidationState state;
     submitblock_StateCatcher sc(block.GetHash());
     RegisterValidationInterface(&sc);
-    bool fAccepted = ProcessNewBlock(state, Params(), NULL, &block, true, NULL);
+    bool fAccepted = ProcessNewBlock(state, Params(), NULL, &block, true, NULL, false);
     UnregisterValidationInterface(&sc);
     if (fBlockPresent)
     {
diff --git a/src/test/miner_tests.cpp b/src/test/miner_tests.cpp
index a94979fd7..2762cafa3 100644
--- a/src/test/miner_tests.cpp
+++ b/src/test/miner_tests.cpp
@@ -223,7 +223,7 @@ BOOST_AUTO_TEST_CASE(CreateNewBlock_validity)
         pblock->hashMerkleRoot = BlockMerkleRoot(*pblock);
         pblock->nNonce = blockinfo[i].nonce;
         CValidationState state;
-        BOOST_CHECK(ProcessNewBlock(state, chainparams, NULL, pblock, true, NULL));
+        BOOST_CHECK(ProcessNewBlock(state, chainparams, NULL, pblock, true, NULL, false));
         BOOST_CHECK(state.IsValid());
         pblock->hashPrevBlock = pblock->GetHash();
     }
diff --git a/src/test/test_bitcoin.cpp b/src/test/test_bitcoin.cpp
index 98f4ed939..3da0be8ca 100644
--- a/src/test/test_bitcoin.cpp
+++ b/src/test/test_bitcoin.cpp
@@ -127,7 +127,7 @@ TestChain100Setup::CreateAndProcessBlock(const std::vector<CMutableTransaction>&
     while (!CheckProofOfWork(block.GetHash(), block.nBits, chainparams.GetConsensus())) ++block.nNonce;
 
     CValidationState state;
-    ProcessNewBlock(state, chainparams, NULL, &block, true, NULL);
+    ProcessNewBlock(state, chainparams, NULL, &block, true, NULL, false);
 
     CBlock result = block;
     return result;
diff --git a/src/version.h b/src/version.h
index 87bd65506..87fb1a3a7 100644
--- a/src/version.h
+++ b/src/version.h
@@ -9,7 +9,7 @@
  * network protocol versioning
  */
 
-static const int PROTOCOL_VERSION = 70014;
+static const int PROTOCOL_VERSION = 70015;
 
 //! initial proto version, to be increased after version/verack negotiation
 static const int INIT_PROTO_VERSION = 209;
@@ -42,4 +42,7 @@ static const int FEEFILTER_VERSION = 70013;
 //! short-id-based block download starts with this version
 static const int SHORT_IDS_BLOCKS_VERSION = 70014;
 
+//! not banning for invalid compact blocks starts with this version
+static const int INVALID_CB_NO_BAN_VERSION = 70015;
+
 #endif // BITCOIN_VERSION_H