diff --git a/test/functional/wallet_fallbackfee.py b/test/functional/wallet_fallbackfee.py
index e6930627c44..23fa5b681c3 100755
--- a/test/functional/wallet_fallbackfee.py
+++ b/test/functional/wallet_fallbackfee.py
@@ -2,13 +2,18 @@
 # Copyright (c) 2017-present The Bitcoin Core developers
 # Distributed under the MIT software license, see the accompanying
 # file COPYING or http://www.opensource.org/licenses/mit-license.php.
-"""Test wallet replace-by-fee capabilities in conjunction with the fallbackfee."""
+"""Test wallet fallbackfee."""
+
+from decimal import Decimal
 
 from test_framework.blocktools import COINBASE_MATURITY
 from test_framework.test_framework import BitcoinTestFramework
-from test_framework.util import assert_raises_rpc_error
+from test_framework.util import assert_equal, assert_raises_rpc_error
 
-class WalletRBFTest(BitcoinTestFramework):
+HIGH_TX_FEE_PER_KB = Decimal('0.01')
+
+
+class WalletFallbackFeeTest(BitcoinTestFramework):
     def set_test_params(self):
         self.num_nodes = 1
         self.setup_clean_chain = True
@@ -16,17 +21,55 @@ class WalletRBFTest(BitcoinTestFramework):
     def skip_test_if_missing_module(self):
         self.skip_if_no_wallet()
 
+    def sending_succeeds(self, node):
+        # Check that fallback fee is being used as a test-of-the-test.
+        assert_equal(
+            node.sendtoaddress(node.getnewaddress(), 1, verbose=True)['fee_reason'],
+            "Fallback fee"
+        )
+        node.fundrawtransaction(node.createrawtransaction([], {node.getnewaddress(): 1}))
+        assert_equal(
+            node.sendmany("", {node.getnewaddress(): 1}, verbose=True)["fee_reason"],
+            "Fallback fee"
+        )
+
+    def sending_fails(self, node):
+        assert_raises_rpc_error(-6, "Fee estimation failed", lambda: node.sendtoaddress(node.getnewaddress(), 1))
+        assert_raises_rpc_error(-4, "Fee estimation failed", lambda: node.fundrawtransaction(node.createrawtransaction([], {node.getnewaddress(): 1})))
+        assert_raises_rpc_error(-6, "Fee estimation failed", lambda: node.sendmany("", {node.getnewaddress(): 1}))
+
     def run_test(self):
-        self.generate(self.nodes[0], COINBASE_MATURITY + 1)
+        node = self.nodes[0]
+        self.generate(node, COINBASE_MATURITY + 1)
 
-        # sending a transaction without fee estimations must be possible by default on regtest
-        self.nodes[0].sendtoaddress(self.nodes[0].getnewaddress(), 1)
+        # By default, the test framework sets a fallback fee for nodes,
+        # in order to test default behavior, comment this line out.
+        node.replace_in_config([("fallbackfee=", "#fallbackfee=")])
+        self.restart_node(0)
 
-        # test sending a tx with disabled fallback fee (must fail)
+        # Sending a transaction with no -fallbackfee setting fails, since the
+        # default value is 0.
+        self.sending_fails(node)
+
+        # Sending a tx with explicitly disabled fallback fee fails.
         self.restart_node(0, extra_args=["-fallbackfee=0"])
-        assert_raises_rpc_error(-6, "Fee estimation failed", lambda: self.nodes[0].sendtoaddress(self.nodes[0].getnewaddress(), 1))
-        assert_raises_rpc_error(-4, "Fee estimation failed", lambda: self.nodes[0].fundrawtransaction(self.nodes[0].createrawtransaction([], {self.nodes[0].getnewaddress(): 1})))
-        assert_raises_rpc_error(-6, "Fee estimation failed", lambda: self.nodes[0].sendmany("", {self.nodes[0].getnewaddress(): 1}))
+        self.sending_fails(node)
+
+        # Sending a transaction with a fallback fee set succeeds. Use the
+        # largest fallbackfee value that doesn't trigger a warning.
+        self.restart_node(0, extra_args=[f"-fallbackfee={HIGH_TX_FEE_PER_KB}"])
+        self.sending_succeeds(node)
+        self.stop_node(0, expected_stderr='')
+
+        # Starting a node with a large fallback fee set...
+        excessive_fallback = HIGH_TX_FEE_PER_KB + Decimal('0.00000001')
+        self.start_node(0, extra_args=[f"-fallbackfee={excessive_fallback}"])
+        # ...works...
+        self.sending_succeeds(node)
+        # ...but results in a warning message.
+        expected_error = "Warning: -fallbackfee is set very high! This is the transaction fee you may pay when fee estimates are not available."
+        self.stop_node(0, expected_stderr=expected_error)
+
 
 if __name__ == '__main__':
-    WalletRBFTest(__file__).main()
+    WalletFallbackFeeTest(__file__).main()