diff --git a/htlcswitch/mock.go b/htlcswitch/mock.go
index f2ab707c0..1429b139e 100644
--- a/htlcswitch/mock.go
+++ b/htlcswitch/mock.go
@@ -51,13 +51,17 @@ func newMockServer(t *testing.T, name string) *mockServer {
 	copy(id[:], h[:])
 
 	return &mockServer{
-		t:           t,
-		id:          id,
-		name:        name,
-		messages:    make(chan lnwire.Message, 3000),
-		quit:        make(chan bool),
-		registry:    newMockRegistry(),
-		htlcSwitch:  New(Config{}),
+		t:        t,
+		id:       id,
+		name:     name,
+		messages: make(chan lnwire.Message, 3000),
+		quit:     make(chan bool),
+		registry: newMockRegistry(),
+		htlcSwitch: New(Config{
+			UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+				return nil
+			},
+		}),
 		recordFuncs: make([]func(lnwire.Message), 0),
 	}
 }
diff --git a/htlcswitch/switch.go b/htlcswitch/switch.go
index ffbdaf464..dacf73539 100644
--- a/htlcswitch/switch.go
+++ b/htlcswitch/switch.go
@@ -88,6 +88,10 @@ type Config struct {
 	// or forced unilateral closure of the channel initiated by a local
 	// subsystem.
 	LocalChannelClose func(pubKey []byte, request *ChanClose)
+
+	// UpdateTopology sends the onion error failure topology update to router
+	// subsystem.
+	UpdateTopology func(msg *lnwire.ChannelUpdate) error
 }
 
 // Switch is the central messaging bus for all incoming/outgoing HTLCs.
@@ -313,6 +317,31 @@ func (s *Switch) handleLocalDispatch(payment *pendingPayment, packet *htlcPacket
 				err)
 			log.Error(userErr)
 		} else {
+			// Process payment failure by updating the lightning network
+			// topology by using router subsystem handler.
+			var update *lnwire.ChannelUpdate
+
+			switch failure := failure.(type) {
+			case *lnwire.FailTemporaryChannelFailure:
+				update = failure.Update
+			case *lnwire.FailAmountBelowMinimum:
+				update = &failure.Update
+			case *lnwire.FailFeeInsufficient:
+				update = &failure.Update
+			case *lnwire.FailIncorrectCltvExpiry:
+				update = &failure.Update
+			case *lnwire.FailExpiryTooSoon:
+				update = &failure.Update
+			case *lnwire.FailChannelDisabled:
+				update = &failure.Update
+			}
+
+			if update != nil {
+				log.Info("Received payment failure(%v), applying lightning "+
+					"network topology update", failure.Code())
+				s.cfg.UpdateTopology(update)
+			}
+
 			userErr = errors.New(failure.Code())
 		}
 
diff --git a/htlcswitch/switch_test.go b/htlcswitch/switch_test.go
index cbcf1351a..2279d8baa 100644
--- a/htlcswitch/switch_test.go
+++ b/htlcswitch/switch_test.go
@@ -40,7 +40,11 @@ func TestSwitchForward(t *testing.T) {
 	aliceChannelLink := newMockChannelLink(chanID1, aliceChanID, alicePeer)
 	bobChannelLink := newMockChannelLink(chanID2, bobChanID, bobPeer)
 
-	s := New(Config{})
+	s := New(Config{
+		UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+			return nil
+		},
+	})
 	s.Start()
 	if err := s.AddLink(aliceChannelLink); err != nil {
 		t.Fatalf("unable to add alice link: %v", err)
@@ -118,7 +122,11 @@ func TestSwitchCancel(t *testing.T) {
 	aliceChannelLink := newMockChannelLink(chanID1, aliceChanID, alicePeer)
 	bobChannelLink := newMockChannelLink(chanID2, bobChanID, bobPeer)
 
-	s := New(Config{})
+	s := New(Config{
+		UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+			return nil
+		},
+	})
 	s.Start()
 	if err := s.AddLink(aliceChannelLink); err != nil {
 		t.Fatalf("unable to add alice link: %v", err)
@@ -194,7 +202,11 @@ func TestSwitchAddSamePayment(t *testing.T) {
 	aliceChannelLink := newMockChannelLink(chanID1, aliceChanID, alicePeer)
 	bobChannelLink := newMockChannelLink(chanID2, bobChanID, bobPeer)
 
-	s := New(Config{})
+	s := New(Config{
+		UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+			return nil
+		},
+	})
 	s.Start()
 	if err := s.AddLink(aliceChannelLink); err != nil {
 		t.Fatalf("unable to add alice link: %v", err)
@@ -290,7 +302,11 @@ func TestSwitchSendPayment(t *testing.T) {
 	alicePeer := newMockServer(t, "alice")
 	aliceChannelLink := newMockChannelLink(chanID1, aliceChanID, alicePeer)
 
-	s := New(Config{})
+	s := New(Config{
+		UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+			return nil
+		},
+	})
 	s.Start()
 	if err := s.AddLink(aliceChannelLink); err != nil {
 		t.Fatalf("unable to add link: %v", err)
diff --git a/server.go b/server.go
index 81b5fa496..e8ab4ac82 100644
--- a/server.go
+++ b/server.go
@@ -176,6 +176,10 @@ func newServer(listenAddrs []string, chanDB *channeldb.DB, cc *chainControl,
 
 			peer.localCloseChanReqs <- request
 		},
+		UpdateTopology: func(msg *lnwire.ChannelUpdate) error {
+			s.discoverSrv.ProcessRemoteAnnouncement(msg, nil)
+			return nil
+		},
 	})
 
 	// If external IP addresses have been specified, add those to the list