diff --git a/.golangci.yml b/.golangci.yml
index a68dd81ee..3ac45f3c7 100644
--- a/.golangci.yml
+++ b/.golangci.yml
@@ -214,10 +214,17 @@ issues:
         - gosec
         - funlen
         - revive
+        # Allow duplications in tests so it's easier to follow a single unit
+        # test.
+        - dupl
 
     - path: mock*
       linters:
         - revive
+        # forcetypeassert is skipped for the mock because the test would fail
+        # if the returned value doesn't match the type, so there's no need to
+        # check the convert.
+        - forcetypeassert
 
     - path: test*
       linters:
diff --git a/config.go b/config.go
index 706fb7892..e2ee0ca68 100644
--- a/config.go
+++ b/config.go
@@ -490,6 +490,10 @@ type Config struct {
 
 	// Estimator is used to estimate routing probabilities.
 	Estimator routing.Estimator
+
+	// Dev specifies configs used for integration tests, which is always
+	// empty if not built with `integration` flag.
+	Dev *lncfg.DevConfig `group:"dev" namespace:"dev"`
 }
 
 // GRPCConfig holds the configuration options for the gRPC server.
diff --git a/discovery/mock_test.go b/discovery/mock_test.go
index 0040ab8b6..446999233 100644
--- a/discovery/mock_test.go
+++ b/discovery/mock_test.go
@@ -63,6 +63,16 @@ func (p *mockPeer) RemoteFeatures() *lnwire.FeatureVector {
 	return nil
 }
 
+func (p *mockPeer) AddPendingChannel(_ lnwire.ChannelID,
+	_ <-chan struct{}) error {
+
+	return nil
+}
+
+func (p *mockPeer) RemovePendingChannel(_ lnwire.ChannelID) error {
+	return nil
+}
+
 // mockMessageStore is an in-memory implementation of the MessageStore interface
 // used for the gossiper's unit tests.
 type mockMessageStore struct {
diff --git a/docs/release-notes/release-notes-0.17.0.md b/docs/release-notes/release-notes-0.17.0.md
index 6cd76fb79..883c46376 100644
--- a/docs/release-notes/release-notes-0.17.0.md
+++ b/docs/release-notes/release-notes-0.17.0.md
@@ -216,6 +216,9 @@ compare the default values between lnd and sample-lnd.conf.
   creation](https://github.com/lightningnetwork/lnd/pull/7856) that can arise
   under rare scenarios.
 
+- A race condition found between `channel_ready` and link updates is [now
+  fixed](https://github.com/lightningnetwork/lnd/pull/7518).
+
 ### Tooling and documentation
 
 * Add support for [custom `RPCHOST` and
diff --git a/funding/manager.go b/funding/manager.go
index f243a8037..ddd92491d 100644
--- a/funding/manager.go
+++ b/funding/manager.go
@@ -337,10 +337,22 @@ func newSerializedKey(pubKey *btcec.PublicKey) serializedPubKey {
 	return s
 }
 
+// DevConfig specifies configs used for integration test only.
+type DevConfig struct {
+	// ProcessChannelReadyWait is the duration to sleep before processing
+	// remote node's channel ready message once the channel as been marked
+	// as `channelReadySent`.
+	ProcessChannelReadyWait time.Duration
+}
+
 // Config defines the configuration for the FundingManager. All elements
 // within the configuration MUST be non-nil for the FundingManager to carry out
 // its duties.
 type Config struct {
+	// Dev specifies config values used in integration test. For
+	// production, this config will always be an empty struct.
+	Dev *DevConfig
+
 	// NoWumboChans indicates if we're to reject all incoming wumbo channel
 	// requests, and also reject all outgoing wumbo channel requests.
 	NoWumboChans bool
@@ -842,6 +854,48 @@ func (f *Manager) CancelPeerReservations(nodePub [33]byte) {
 	delete(f.activeReservations, nodePub)
 }
 
+// chanIdentifier wraps pending channel ID and channel ID into one struct so
+// it's easier to identify a specific channel.
+//
+// TODO(yy): move to a different package to hide the private fields so direct
+// access is disabled.
+type chanIdentifier struct {
+	// tempChanID is the pending channel ID created by the funder when
+	// initializing the funding flow. For fundee, it's received from the
+	// `open_channel` message.
+	tempChanID lnwire.ChannelID
+
+	// chanID is the channel ID created by the funder once the
+	// `accept_channel` message is received. For fundee, it's received from
+	// the `funding_created` message.
+	chanID lnwire.ChannelID
+
+	// chanIDSet is a boolean indicates whether the active channel ID is
+	// set for this identifier. For zero conf channels, the `chanID` can be
+	// all-zero, which is the same as the empty value of `ChannelID`. To
+	// avoid the confusion, we use this boolean to explicitly signal
+	// whether the `chanID` is set or not.
+	chanIDSet bool
+}
+
+// newChanIdentifier creates a new chanIdentifier.
+func newChanIdentifier(tempChanID lnwire.ChannelID) *chanIdentifier {
+	return &chanIdentifier{
+		tempChanID: tempChanID,
+	}
+}
+
+// setChanID updates the `chanIdentifier` with the active channel ID.
+func (c *chanIdentifier) setChanID(chanID lnwire.ChannelID) {
+	c.chanID = chanID
+	c.chanIDSet = true
+}
+
+// hasChanID returns true if the active channel ID has been set.
+func (c *chanIdentifier) hasChanID() bool {
+	return c.chanIDSet
+}
+
 // failFundingFlow will fail the active funding flow with the target peer,
 // identified by its unique temporary channel ID. This method will send an
 // error to the remote peer, and also remove the reservation from our set of
@@ -849,14 +903,26 @@ func (f *Manager) CancelPeerReservations(nodePub [33]byte) {
 //
 // TODO(roasbeef): if peer disconnects, and haven't yet broadcast funding
 // transaction, then all reservations should be cleared.
-func (f *Manager) failFundingFlow(peer lnpeer.Peer, tempChanID [32]byte,
+func (f *Manager) failFundingFlow(peer lnpeer.Peer, cid *chanIdentifier,
 	fundingErr error) {
 
-	log.Debugf("Failing funding flow for pending_id=%x: %v",
-		tempChanID, fundingErr)
+	log.Debugf("Failing funding flow for pending_id=%v: %v",
+		cid.tempChanID, fundingErr)
+
+	// First, notify Brontide to remove the pending channel.
+	//
+	// NOTE: depending on where we fail the flow, we may not have the
+	// active channel ID yet.
+	if cid.hasChanID() {
+		err := peer.RemovePendingChannel(cid.chanID)
+		if err != nil {
+			log.Errorf("Unable to remove channel %v with peer %x: "+
+				"%v", cid, peer.IdentityKey(), err)
+		}
+	}
 
 	ctx, err := f.cancelReservationCtx(
-		peer.IdentityKey(), tempChanID, false,
+		peer.IdentityKey(), cid.tempChanID, false,
 	)
 	if err != nil {
 		log.Errorf("unable to cancel reservation: %v", err)
@@ -887,7 +953,7 @@ func (f *Manager) failFundingFlow(peer lnpeer.Peer, tempChanID [32]byte,
 	}
 
 	errMsg := &lnwire.Error{
-		ChanID: tempChanID,
+		ChanID: cid.tempChanID,
 		Data:   msg,
 	}
 
@@ -1325,13 +1391,14 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	}
 	f.resMtx.RUnlock()
 
+	// Create the channel identifier.
+	cid := newChanIdentifier(msg.PendingChannelID)
+
 	// Also count the channels that are already pending. There we don't know
 	// the underlying intent anymore, unfortunately.
 	channels, err := f.cfg.Wallet.Cfg.Database.FetchOpenChannels(peerPubKey)
 	if err != nil {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID, err,
-		)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1350,29 +1417,20 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	// TODO(roasbeef): modify to only accept a _single_ pending channel per
 	// block unless white listed
 	if numPending >= f.cfg.MaxPendingChannels {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID,
-			lnwire.ErrMaxPendingChannels,
-		)
+		f.failFundingFlow(peer, cid, lnwire.ErrMaxPendingChannels)
+
 		return
 	}
 
 	// Ensure that the pendingChansLimit is respected.
 	pendingChans, err := f.cfg.Wallet.Cfg.Database.FetchPendingChannels()
 	if err != nil {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID, err,
-		)
-
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
 	if len(pendingChans) > pendingChansLimit {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID,
-			lnwire.ErrMaxPendingChannels,
-		)
-
+		f.failFundingFlow(peer, cid, lnwire.ErrMaxPendingChannels)
 		return
 	}
 
@@ -1385,17 +1443,14 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 			log.Errorf("unable to query wallet: %v", err)
 		}
 		err := errors.New("Synchronizing blockchain")
-		f.failFundingFlow(
-			peer, msg.PendingChannelID,
-			err,
-		)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
 	// Ensure that the remote party respects our maximum channel size.
 	if amt > f.cfg.MaxChanSize {
 		f.failFundingFlow(
-			peer, msg.PendingChannelID,
+			peer, cid,
 			lnwallet.ErrChanTooLarge(amt, f.cfg.MaxChanSize),
 		)
 		return
@@ -1405,7 +1460,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	// a channel that's below our current min channel size.
 	if amt < f.cfg.MinChanSize {
 		f.failFundingFlow(
-			peer, msg.PendingChannelID,
+			peer, cid,
 			lnwallet.ErrChanTooSmall(amt, f.cfg.MinChanSize),
 		)
 		return
@@ -1414,10 +1469,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	// If request specifies non-zero push amount and 'rejectpush' is set,
 	// signal an error.
 	if f.cfg.RejectPush && msg.PushAmount > 0 {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID,
-			lnwallet.ErrNonZeroPushAmount(),
-		)
+		f.failFundingFlow(peer, cid, lnwallet.ErrNonZeroPushAmount())
 		return
 	}
 
@@ -1432,10 +1484,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	// the channel.
 	acceptorResp := f.cfg.OpenChannelPredicate.Accept(chanReq)
 	if acceptorResp.RejectChannel() {
-		f.failFundingFlow(
-			peer, msg.PendingChannelID,
-			acceptorResp.ChanAcceptError,
-		)
+		f.failFundingFlow(peer, cid, acceptorResp.ChanAcceptError)
 		return
 	}
 
@@ -1462,7 +1511,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	if err != nil {
 		// TODO(roasbeef): should be using soft errors
 		log.Errorf("channel type negotiation failed: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1498,9 +1547,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 			// Fail the funding flow.
 			flowErr := fmt.Errorf("channel acceptor blocked " +
 				"zero-conf channel negotiation")
-			f.failFundingFlow(
-				peer, msg.PendingChannelID, flowErr,
-			)
+			f.failFundingFlow(peer, cid, flowErr)
 			return
 		}
 
@@ -1514,9 +1561,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 				// Fail the funding flow.
 				flowErr := fmt.Errorf("scid-alias feature " +
 					"must be negotiated for zero-conf")
-				f.failFundingFlow(
-					peer, msg.PendingChannelID, flowErr,
-				)
+				f.failFundingFlow(peer, cid, flowErr)
 				return
 			}
 
@@ -1532,7 +1577,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 		err = fmt.Errorf("option-scid-alias chantype for public " +
 			"channel")
 		log.Error(err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1557,7 +1602,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	reservation, err := f.cfg.Wallet.InitChannelReservation(req)
 	if err != nil {
 		log.Errorf("Unable to initialize reservation: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1571,7 +1616,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 		aliasScid, err := f.cfg.AliasManager.RequestAlias()
 		if err != nil {
 			log.Errorf("Unable to request alias: %v", err)
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 
@@ -1612,7 +1657,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	)
 	if err != nil {
 		log.Errorf("Unacceptable channel constraints: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1626,7 +1671,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	)
 	if err != nil {
 		f.failFundingFlow(
-			peer, msg.PendingChannelID,
+			peer, cid,
 			fmt.Errorf("getUpfrontShutdownScript error: %v", err),
 		)
 		return
@@ -1638,7 +1683,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	if commitType == lnwallet.CommitmentTypeScriptEnforcedLease {
 		if msg.LeaseExpiry == nil {
 			err := errors.New("missing lease expiry")
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 
@@ -1651,9 +1696,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 				reservation.LeaseExpiry() {
 
 				err := errors.New("lease expiry mismatch")
-				f.failFundingFlow(
-					peer, msg.PendingChannelID, err,
-				)
+				f.failFundingFlow(peer, cid, err)
 				return
 			}
 		}
@@ -1775,7 +1818,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 	err = reservation.ProcessSingleContribution(remoteContribution)
 	if err != nil {
 		log.Errorf("unable to add contribution reservation: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1809,7 +1852,7 @@ func (f *Manager) handleFundingOpen(peer lnpeer.Peer,
 
 	if err := peer.SendMessage(true, &fundingAccept); err != nil {
 		log.Errorf("unable to send funding response to peer: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 }
@@ -1840,6 +1883,9 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 	log.Infof("Recv'd fundingResponse for pending_id(%x)",
 		pendingChanID[:])
 
+	// Create the channel identifier.
+	cid := newChanIdentifier(msg.PendingChannelID)
+
 	// Perform some basic validation of any custom TLV records included.
 	//
 	// TODO: Return errors as funding.Error to give context to remote peer?
@@ -1849,14 +1895,14 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 		if msg.ChannelType == nil {
 			err := errors.New("explicit channel type not echoed " +
 				"back")
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 		proposedFeatures := lnwire.RawFeatureVector(*resCtx.channelType)
 		ackedFeatures := lnwire.RawFeatureVector(*msg.ChannelType)
 		if !proposedFeatures.Equals(&ackedFeatures) {
 			err := errors.New("channel type mismatch")
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 
@@ -1866,18 +1912,14 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 			if msg.LeaseExpiry == nil {
 				err := errors.New("lease expiry not echoed " +
 					"back")
-				f.failFundingFlow(
-					peer, msg.PendingChannelID, err,
-				)
+				f.failFundingFlow(peer, cid, err)
 				return
 			}
 			if uint32(*msg.LeaseExpiry) !=
 				resCtx.reservation.LeaseExpiry() {
 
 				err := errors.New("lease expiry mismatch")
-				f.failFundingFlow(
-					peer, msg.PendingChannelID, err,
-				)
+				f.failFundingFlow(peer, cid, err)
 				return
 			}
 		}
@@ -1899,7 +1941,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 		)
 		if err != nil {
 			err := errors.New("received unexpected channel type")
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 
@@ -1909,7 +1951,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 		// it's another type, we fail the flow.
 		if implicitChannelType != negotiatedChannelType {
 			err := errors.New("negotiated unexpected channel type")
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 	}
@@ -1922,7 +1964,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 			msg.MinAcceptDepth, chainntnfs.MaxNumConfs,
 		)
 		log.Warnf("Unacceptable channel constraints: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1930,7 +1972,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 	if resCtx.reservation.IsZeroConf() && msg.MinAcceptDepth != 0 {
 		err = fmt.Errorf("zero-conf channel has min_depth non-zero")
 		log.Warn(err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1939,7 +1981,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 	if !resCtx.reservation.IsZeroConf() && msg.MinAcceptDepth == 0 {
 		err = fmt.Errorf("non-zero-conf channel has min depth zero")
 		log.Warn(err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -1960,7 +2002,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 	)
 	if err != nil {
 		log.Warnf("Unacceptable channel constraints: %v", err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2012,7 +2054,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 			log.Errorf("Unable to process PSBT funding params "+
 				"for contribution from %x: %v", peerKeyBytes,
 				err)
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 		var buf bytes.Buffer
@@ -2020,7 +2062,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 		if err != nil {
 			log.Errorf("Unable to serialize PSBT for "+
 				"contribution from %x: %v", peerKeyBytes, err)
-			f.failFundingFlow(peer, msg.PendingChannelID, err)
+			f.failFundingFlow(peer, cid, err)
 			return
 		}
 		resCtx.updates <- &lnrpc.OpenStatusUpdate{
@@ -2037,7 +2079,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 	} else if err != nil {
 		log.Errorf("Unable to process contribution from %x: %v",
 			peerKeyBytes, err)
-		f.failFundingFlow(peer, msg.PendingChannelID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2056,7 +2098,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 		go func() {
 			defer f.wg.Done()
 
-			f.waitForPsbt(psbtIntent, resCtx, pendingChanID)
+			f.waitForPsbt(psbtIntent, resCtx, cid)
 		}()
 
 		// With the new goroutine spawned, we can now exit to unblock
@@ -2066,7 +2108,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 
 	// In a normal, non-PSBT funding flow, we can jump directly to the next
 	// step where we expect our contribution to be finalized.
-	f.continueFundingAccept(resCtx, pendingChanID)
+	f.continueFundingAccept(resCtx, cid)
 }
 
 // waitForPsbt blocks until either a signed PSBT arrives, an error occurs or
@@ -2075,7 +2117,7 @@ func (f *Manager) handleFundingAccept(peer lnpeer.Peer,
 //
 // NOTE: This method must be called as a goroutine.
 func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
-	resCtx *reservationWithCtx, pendingChanID [32]byte) {
+	resCtx *reservationWithCtx, cid *chanIdentifier) {
 
 	// failFlow is a helper that logs an error message with the current
 	// context and then fails the funding flow.
@@ -2083,9 +2125,9 @@ func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
 	failFlow := func(errMsg string, cause error) {
 		log.Errorf("Unable to handle funding accept message "+
 			"for peer_key=%x, pending_chan_id=%x: %s: %v",
-			peerKey.SerializeCompressed(), pendingChanID, errMsg,
+			peerKey.SerializeCompressed(), cid.tempChanID, errMsg,
 			cause)
-		f.failFundingFlow(resCtx.peer, pendingChanID, cause)
+		f.failFundingFlow(resCtx.peer, cid, cause)
 	}
 
 	// We'll now wait until the intent has received the final and complete
@@ -2106,7 +2148,7 @@ func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
 		case chanfunding.ErrRemoteCanceled:
 			log.Infof("Remote canceled, aborting PSBT flow "+
 				"for peer_key=%x, pending_chan_id=%x",
-				peerKey.SerializeCompressed(), pendingChanID)
+				peerKey.SerializeCompressed(), cid.tempChanID)
 			return
 
 		// Nil error means the flow continues normally now.
@@ -2128,7 +2170,7 @@ func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
 		}
 
 		// We are now ready to continue the funding flow.
-		f.continueFundingAccept(resCtx, pendingChanID)
+		f.continueFundingAccept(resCtx, cid)
 
 	// Handle a server shutdown as well because the reservation won't
 	// survive a restart as it's in memory only.
@@ -2136,7 +2178,7 @@ func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
 		log.Errorf("Unable to handle funding accept message "+
 			"for peer_key=%x, pending_chan_id=%x: funding manager "+
 			"shutting down", peerKey.SerializeCompressed(),
-			pendingChanID)
+			cid.tempChanID)
 		return
 	}
 }
@@ -2145,7 +2187,7 @@ func (f *Manager) waitForPsbt(intent *chanfunding.PsbtIntent,
 // contribution is finalized, the channel output is known and the funding
 // transaction is signed.
 func (f *Manager) continueFundingAccept(resCtx *reservationWithCtx,
-	pendingChanID [32]byte) {
+	cid *chanIdentifier) {
 
 	// Now that we have their contribution, we can extract, then send over
 	// both the funding out point and our signature for their version of
@@ -2166,26 +2208,40 @@ func (f *Manager) continueFundingAccept(resCtx *reservationWithCtx,
 	// so we can retrieve the reservation context once we get the
 	// FundingSigned message.
 	f.resMtx.Lock()
-	f.signedReservations[channelID] = pendingChanID
+	f.signedReservations[channelID] = cid.tempChanID
 	f.resMtx.Unlock()
 
 	log.Infof("Generated ChannelPoint(%v) for pending_id(%x)", outPoint,
-		pendingChanID[:])
+		cid.tempChanID[:])
 
-	var err error
+	// Before sending FundingCreated sent, we notify Brontide to keep track
+	// of this pending open channel.
+	err := resCtx.peer.AddPendingChannel(channelID, f.quit)
+	if err != nil {
+		pubKey := resCtx.peer.IdentityKey().SerializeCompressed()
+		log.Errorf("Unable to add pending channel %v with peer %x: %v",
+			channelID, pubKey, err)
+	}
+
+	// Once Brontide is aware of this channel, we need to set it in
+	// chanIdentifier so this channel will be removed from Brontide if the
+	// funding flow fails.
+	cid.setChanID(channelID)
+
+	// Send the FundingCreated msg.
 	fundingCreated := &lnwire.FundingCreated{
-		PendingChannelID: pendingChanID,
+		PendingChannelID: cid.tempChanID,
 		FundingPoint:     *outPoint,
 	}
 	fundingCreated.CommitSig, err = lnwire.NewSigFromSignature(sig)
 	if err != nil {
 		log.Errorf("Unable to parse signature: %v", err)
-		f.failFundingFlow(resCtx.peer, pendingChanID, err)
+		f.failFundingFlow(resCtx.peer, cid, err)
 		return
 	}
 	if err := resCtx.peer.SendMessage(true, fundingCreated); err != nil {
 		log.Errorf("Unable to send funding complete message: %v", err)
-		f.failFundingFlow(resCtx.peer, pendingChanID, err)
+		f.failFundingFlow(resCtx.peer, cid, err)
 		return
 	}
 }
@@ -2216,10 +2272,13 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 	log.Infof("completing pending_id(%x) with ChannelPoint(%v)",
 		pendingChanID[:], fundingOut)
 
+	// Create the channel identifier without setting the active channel ID.
+	cid := newChanIdentifier(pendingChanID)
+
 	commitSig, err := msg.CommitSig.ToSignature()
 	if err != nil {
 		log.Errorf("unable to parse signature: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2234,7 +2293,7 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 	if err != nil {
 		// TODO(roasbeef): better error logging: peerID, channelID, etc.
 		log.Errorf("unable to complete single reservation: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2243,7 +2302,7 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 
 	// The channel is marked IsPending in the database, and can be removed
 	// from the set of active reservations.
-	f.deleteReservationCtx(peerKey, msg.PendingChannelID)
+	f.deleteReservationCtx(peerKey, cid.tempChanID)
 
 	// If something goes wrong before the funding transaction is confirmed,
 	// we use this convenience method to delete the pending OpenChannel
@@ -2289,18 +2348,31 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 	ourCommitSig, err := lnwire.NewSigFromSignature(sig)
 	if err != nil {
 		log.Errorf("unable to parse signature: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		deleteFromDatabase()
 		return
 	}
 
+	// Before sending FundingSigned, we notify Brontide first to keep track
+	// of this pending open channel.
+	if err := peer.AddPendingChannel(channelID, f.quit); err != nil {
+		pubKey := peer.IdentityKey().SerializeCompressed()
+		log.Errorf("Unable to add pending channel %v with peer %x: %v",
+			cid.chanID, pubKey, err)
+	}
+
+	// Once Brontide is aware of this channel, we need to set it in
+	// chanIdentifier so this channel will be removed from Brontide if the
+	// funding flow fails.
+	cid.setChanID(channelID)
+
 	fundingSigned := &lnwire.FundingSigned{
-		ChanID:    channelID,
+		ChanID:    cid.chanID,
 		CommitSig: ourCommitSig,
 	}
 	if err := peer.SendMessage(true, fundingSigned); err != nil {
 		log.Errorf("unable to send FundingSigned message: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		deleteFromDatabase()
 		return
 	}
@@ -2308,7 +2380,7 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 	// With a permanent channel id established we can save the respective
 	// forwarding policy in the database. In the channel announcement phase
 	// this forwarding policy is retrieved and applied.
-	err = f.saveInitialFwdingPolicy(channelID, &forwardingPolicy)
+	err = f.saveInitialFwdingPolicy(cid.chanID, &forwardingPolicy)
 	if err != nil {
 		log.Errorf("Unable to store the forwarding policy: %v", err)
 	}
@@ -2324,7 +2396,7 @@ func (f *Manager) handleFundingCreated(peer lnpeer.Peer,
 	// Create an entry in the local discovery map so we can ensure that we
 	// process the channel confirmation fully before we receive a
 	// channel_ready message.
-	f.localDiscoverySignals.Store(channelID, make(chan struct{}))
+	f.localDiscoverySignals.Store(cid.chanID, make(chan struct{}))
 
 	// Inform the ChannelNotifier that the channel has entered
 	// pending open state.
@@ -2365,11 +2437,29 @@ func (f *Manager) handleFundingSigned(peer lnpeer.Peer,
 	pendingChanID, ok := f.signedReservations[msg.ChanID]
 	delete(f.signedReservations, msg.ChanID)
 	f.resMtx.Unlock()
+
+	// Create the channel identifier and set the channel ID.
+	//
+	// NOTE: we may get an empty pending channel ID here if the key cannot
+	// be found, which means when we cancel the reservation context in
+	// `failFundingFlow`, we will get an error. In this case, we will send
+	// an error msg to our peer using the active channel ID.
+	//
+	// TODO(yy): refactor the funding flow to fix this case.
+	cid := newChanIdentifier(pendingChanID)
+	cid.setChanID(msg.ChanID)
+
+	// If the pending channel ID is not found, fail the funding flow.
 	if !ok {
+		// NOTE: we directly overwrite the pending channel ID here for
+		// this rare case since we don't have a valid pending channel
+		// ID.
+		cid.tempChanID = msg.ChanID
+
 		err := fmt.Errorf("unable to find signed reservation for "+
 			"chan_id=%x", msg.ChanID)
 		log.Warnf(err.Error())
-		f.failFundingFlow(peer, msg.ChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2379,7 +2469,7 @@ func (f *Manager) handleFundingSigned(peer lnpeer.Peer,
 		log.Warnf("Unable to find reservation (peer_id:%v, "+
 			"chan_id:%x)", peerKey, pendingChanID[:])
 		// TODO: add ErrChanNotFound?
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2404,7 +2494,7 @@ func (f *Manager) handleFundingSigned(peer lnpeer.Peer,
 	commitSig, err := msg.CommitSig.ToSignature()
 	if err != nil {
 		log.Errorf("Unable to parse signature: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2414,7 +2504,7 @@ func (f *Manager) handleFundingSigned(peer lnpeer.Peer,
 	if err != nil {
 		log.Errorf("Unable to complete reservation sign "+
 			"complete: %v", err)
-		f.failFundingFlow(peer, pendingChanID, err)
+		f.failFundingFlow(peer, cid, err)
 		return
 	}
 
@@ -2575,12 +2665,16 @@ func (f *Manager) fundingTimeout(c *channeldb.OpenChannel,
 				"to come online: %v", err)
 		}
 
+		// Create channel identifier and set the channel ID.
+		cid := newChanIdentifier(pendingID)
+		cid.setChanID(lnwire.NewChanIDFromOutPoint(&c.FundingOutpoint))
+
 		// TODO(halseth): should this send be made
 		// reliable?
 
 		// The reservation won't exist at this point, but we'll send an
 		// Error message over anyways with ChanID set to pendingID.
-		f.failFundingFlow(peer, pendingID, timeoutErr)
+		f.failFundingFlow(peer, cid, timeoutErr)
 	}()
 
 	return timeoutErr
@@ -3441,6 +3535,24 @@ func (f *Manager) handleChannelReady(peer lnpeer.Peer,
 	msg *lnwire.ChannelReady) {
 
 	defer f.wg.Done()
+
+	// If we are in development mode, we'll wait for specified duration
+	// before processing the channel ready message.
+	if f.cfg.Dev != nil {
+		duration := f.cfg.Dev.ProcessChannelReadyWait
+		log.Warnf("Channel(%v): sleeping %v before processing "+
+			"channel_ready", msg.ChanID, duration)
+
+		select {
+		case <-time.After(duration):
+			log.Warnf("Channel(%v): slept %v before processing "+
+				"channel_ready", msg.ChanID, duration)
+		case <-f.quit:
+			log.Warnf("Channel(%v): quit sleeping", msg.ChanID)
+			return
+		}
+	}
+
 	log.Debugf("Received ChannelReady for ChannelID(%v) from "+
 		"peer %x", msg.ChanID,
 		peer.IdentityKey().SerializeCompressed())
@@ -4386,7 +4498,16 @@ func (f *Manager) pruneZombieReservations() {
 			resCtx.peer.IdentityKey().SerializeCompressed(),
 			pendingChanID[:])
 		log.Warnf(err.Error())
-		f.failFundingFlow(resCtx.peer, pendingChanID, err)
+
+		chanID := lnwire.NewChanIDFromOutPoint(
+			resCtx.reservation.FundingOutpoint(),
+		)
+
+		// Create channel identifier and set the channel ID.
+		cid := newChanIdentifier(pendingChanID)
+		cid.setChanID(chanID)
+
+		f.failFundingFlow(resCtx.peer, cid, err)
 	}
 }
 
diff --git a/funding/manager_test.go b/funding/manager_test.go
index 1ca66904b..73b6fd1d3 100644
--- a/funding/manager_test.go
+++ b/funding/manager_test.go
@@ -321,6 +321,16 @@ func (n *testNode) AddNewChannel(channel *channeldb.OpenChannel,
 	}
 }
 
+func (n *testNode) AddPendingChannel(_ lnwire.ChannelID,
+	quit <-chan struct{}) error {
+
+	return nil
+}
+
+func (n *testNode) RemovePendingChannel(_ lnwire.ChannelID) error {
+	return nil
+}
+
 func createTestWallet(cdb *channeldb.ChannelStateDB, netParams *chaincfg.Params,
 	notifier chainntnfs.ChainNotifier, wc lnwallet.WalletController,
 	signer input.Signer, keyRing keychain.SecretKeyRing,
diff --git a/htlcswitch/link_test.go b/htlcswitch/link_test.go
index 6817ff930..35eb6a9ea 100644
--- a/htlcswitch/link_test.go
+++ b/htlcswitch/link_test.go
@@ -1888,6 +1888,16 @@ func (m *mockPeer) RemoteFeatures() *lnwire.FeatureVector {
 	return nil
 }
 
+func (m *mockPeer) AddPendingChannel(_ lnwire.ChannelID,
+	_ <-chan struct{}) error {
+
+	return nil
+}
+
+func (m *mockPeer) RemovePendingChannel(_ lnwire.ChannelID) error {
+	return nil
+}
+
 func newSingleLinkTestHarness(t *testing.T, chanAmt, chanReserve btcutil.Amount) (
 	ChannelLink, *lnwallet.LightningChannel, chan time.Time, func() error,
 	func() (*lnwallet.LightningChannel, error), error) {
diff --git a/htlcswitch/mock.go b/htlcswitch/mock.go
index bb36eda20..a17045b1e 100644
--- a/htlcswitch/mock.go
+++ b/htlcswitch/mock.go
@@ -672,6 +672,16 @@ func (s *mockServer) AddNewChannel(channel *channeldb.OpenChannel,
 	return nil
 }
 
+func (s *mockServer) AddPendingChannel(_ lnwire.ChannelID,
+	cancel <-chan struct{}) error {
+
+	return nil
+}
+
+func (s *mockServer) RemovePendingChannel(_ lnwire.ChannelID) error {
+	return nil
+}
+
 func (s *mockServer) WipeChannel(*wire.OutPoint) {}
 
 func (s *mockServer) LocalFeatures() *lnwire.FeatureVector {
diff --git a/itest/list_on_test.go b/itest/list_on_test.go
index 970dc32e3..613e572fe 100644
--- a/itest/list_on_test.go
+++ b/itest/list_on_test.go
@@ -546,4 +546,8 @@ var allTestCases = []*lntest.TestCase{
 		Name:     "utxo selection funding",
 		TestFunc: testChannelUtxoSelection,
 	},
+	{
+		Name:     "update pending open channels",
+		TestFunc: testUpdateOnPendingOpenChannels,
+	},
 }
diff --git a/itest/lnd_open_channel_test.go b/itest/lnd_open_channel_test.go
index 12b13a14f..674d9a62b 100644
--- a/itest/lnd_open_channel_test.go
+++ b/itest/lnd_open_channel_test.go
@@ -10,6 +10,7 @@ import (
 	"github.com/lightningnetwork/lnd/chainreg"
 	"github.com/lightningnetwork/lnd/funding"
 	"github.com/lightningnetwork/lnd/lnrpc"
+	"github.com/lightningnetwork/lnd/lnrpc/routerrpc"
 	"github.com/lightningnetwork/lnd/lntest"
 	"github.com/lightningnetwork/lnd/lntest/node"
 	"github.com/lightningnetwork/lnd/lntest/rpc"
@@ -488,6 +489,194 @@ func runBasicChannelCreationAndUpdates(ht *lntest.HarnessTest,
 	)
 }
 
+// testUpdateOnPendingOpenChannels checks that `update_add_htlc` followed by
+// `channel_ready` is properly handled. In specific, when a node is in a state
+// that it's still processing a remote `channel_ready` message, meanwhile an
+// `update_add_htlc` is received, this HTLC message is cached and settled once
+// processing `channel_ready` is complete.
+func testUpdateOnPendingOpenChannels(ht *lntest.HarnessTest) {
+	// Test funder's behavior. Funder sees the channel pending, but fundee
+	// sees it active and sends an HTLC.
+	ht.Run("pending on funder side", func(t *testing.T) {
+		st := ht.Subtest(t)
+		testUpdateOnFunderPendingOpenChannels(st)
+	})
+
+	// Test fundee's behavior. Fundee sees the channel pending, but funder
+	// sees it active and sends an HTLC.
+	ht.Run("pending on fundee side", func(t *testing.T) {
+		st := ht.Subtest(t)
+		testUpdateOnFundeePendingOpenChannels(st)
+	})
+}
+
+// testUpdateOnFunderPendingOpenChannels checks that when the fundee sends an
+// `update_add_htlc` followed by `channel_ready` while the funder is still
+// processing the fundee's `channel_ready`, the HTLC will be cached and
+// eventually settled.
+func testUpdateOnFunderPendingOpenChannels(ht *lntest.HarnessTest) {
+	// Grab the channel participants.
+	alice, bob := ht.Alice, ht.Bob
+
+	// Restart Alice with the config so she won't process Bob's
+	// channel_ready msg immediately.
+	ht.RestartNodeWithExtraArgs(alice, []string{
+		"--dev.processchannelreadywait=10s",
+	})
+
+	// Make sure Alice and Bob are connected.
+	ht.EnsureConnected(alice, bob)
+
+	// Create a new channel that requires 1 confs before it's considered
+	// open.
+	params := lntest.OpenChannelParams{
+		Amt:     funding.MaxBtcFundingAmount,
+		PushAmt: funding.MaxBtcFundingAmount / 2,
+	}
+	pendingChan := ht.OpenChannelAssertPending(alice, bob, params)
+	chanPoint := &lnrpc.ChannelPoint{
+		FundingTxid: &lnrpc.ChannelPoint_FundingTxidBytes{
+			FundingTxidBytes: pendingChan.Txid,
+		},
+		OutputIndex: pendingChan.OutputIndex,
+	}
+
+	// Alice and Bob should both consider the channel pending open.
+	ht.AssertNumPendingOpenChannels(alice, 1)
+	ht.AssertNumPendingOpenChannels(bob, 1)
+
+	// Mine one block to confirm the funding transaction.
+	ht.MineBlocksAndAssertNumTxes(1, 1)
+
+	// TODO(yy): we've prematurely marked the channel as open before
+	// processing channel ready messages. We need to mark it as open after
+	// we've processed channel ready messages and change the check to,
+	// ht.AssertNumPendingOpenChannels(alice, 1)
+	ht.AssertNumPendingOpenChannels(alice, 0)
+
+	// Bob will consider the channel open as there's no wait time to send
+	// and receive Alice's channel_ready message.
+	ht.AssertNumPendingOpenChannels(bob, 0)
+
+	// Alice and Bob now have different view of the channel. For Bob,
+	// since the channel_ready messages are processed, he will have a
+	// working link to route HTLCs. For Alice, because she hasn't handled
+	// Bob's channel_ready, there's no active link yet.
+	//
+	// Alice now adds an invoice.
+	req := &lnrpc.Invoice{
+		RPreimage: ht.Random32Bytes(),
+		Value:     10_000,
+	}
+	invoice := alice.RPC.AddInvoice(req)
+
+	// Bob sends an `update_add_htlc`, which would result in this message
+	// being cached in Alice's `peer.Brontide` and the payment will stay
+	// in-flight instead of being failed by Alice.
+	bobReq := &routerrpc.SendPaymentRequest{
+		PaymentRequest: invoice.PaymentRequest,
+		TimeoutSeconds: 60,
+		FeeLimitMsat:   noFeeLimitMsat,
+	}
+	bobStream := bob.RPC.SendPayment(bobReq)
+	ht.AssertPaymentStatusFromStream(bobStream, lnrpc.Payment_IN_FLIGHT)
+
+	// Wait until Alice finishes processing Bob's channel_ready.
+	//
+	// NOTE: no effect before fixing the above TODO.
+	ht.AssertNumPendingOpenChannels(alice, 0)
+
+	// Once Alice sees the channel as active, she will process the cached
+	// premature `update_add_htlc` and settles the payment.
+	ht.AssertPaymentStatusFromStream(bobStream, lnrpc.Payment_SUCCEEDED)
+
+	// Close the channel.
+	ht.CloseChannel(alice, chanPoint)
+}
+
+// testUpdateOnFundeePendingOpenChannels checks that when the funder sends an
+// `update_add_htlc` followed by `channel_ready` while the fundee is still
+// processing the funder's `channel_ready`, the HTLC will be cached and
+// eventually settled.
+func testUpdateOnFundeePendingOpenChannels(ht *lntest.HarnessTest) {
+	// Grab the channel participants.
+	alice, bob := ht.Alice, ht.Bob
+
+	// Restart Bob with the config so he won't process Alice's
+	// channel_ready msg immediately.
+	ht.RestartNodeWithExtraArgs(bob, []string{
+		"--dev.processchannelreadywait=10s",
+	})
+
+	// Make sure Alice and Bob are connected.
+	ht.EnsureConnected(alice, bob)
+
+	// Create a new channel that requires 1 confs before it's considered
+	// open.
+	params := lntest.OpenChannelParams{
+		Amt: funding.MaxBtcFundingAmount,
+	}
+	pendingChan := ht.OpenChannelAssertPending(alice, bob, params)
+	chanPoint := &lnrpc.ChannelPoint{
+		FundingTxid: &lnrpc.ChannelPoint_FundingTxidBytes{
+			FundingTxidBytes: pendingChan.Txid,
+		},
+		OutputIndex: pendingChan.OutputIndex,
+	}
+
+	// Alice and Bob should both consider the channel pending open.
+	ht.AssertNumPendingOpenChannels(alice, 1)
+	ht.AssertNumPendingOpenChannels(bob, 1)
+
+	// Mine one block to confirm the funding transaction.
+	ht.MineBlocksAndAssertNumTxes(1, 1)
+
+	// Alice will consider the channel open as there's no wait time to send
+	// and receive Bob's channel_ready message.
+	ht.AssertNumPendingOpenChannels(alice, 0)
+
+	// TODO(yy): we've prematurely marked the channel as open before
+	// processing channel ready messages. We need to mark it as open after
+	// we've processed channel ready messages and change the check to,
+	// ht.AssertNumPendingOpenChannels(bob, 1)
+	ht.AssertNumPendingOpenChannels(bob, 0)
+
+	// Alice and Bob now have different view of the channel. For Alice,
+	// since the channel_ready messages are processed, she will have a
+	// working link to route HTLCs. For Bob, because he hasn't handled
+	// Alice's channel_ready, there's no active link yet.
+	//
+	// Bob now adds an invoice.
+	req := &lnrpc.Invoice{
+		RPreimage: ht.Random32Bytes(),
+		Value:     10_000,
+	}
+	bobInvoice := bob.RPC.AddInvoice(req)
+
+	// Alice sends an `update_add_htlc`, which would result in this message
+	// being cached in Bob's `peer.Brontide` and the payment will stay
+	// in-flight instead of being failed by Bob.
+	aliceReq := &routerrpc.SendPaymentRequest{
+		PaymentRequest: bobInvoice.PaymentRequest,
+		TimeoutSeconds: 60,
+		FeeLimitMsat:   noFeeLimitMsat,
+	}
+	aliceStream := alice.RPC.SendPayment(aliceReq)
+	ht.AssertPaymentStatusFromStream(aliceStream, lnrpc.Payment_IN_FLIGHT)
+
+	// Wait until Bob finishes processing Alice's channel_ready.
+	//
+	// NOTE: no effect before fixing the above TODO.
+	ht.AssertNumPendingOpenChannels(bob, 0)
+
+	// Once Bob sees the channel as active, he will process the cached
+	// premature `update_add_htlc` and settles the payment.
+	ht.AssertPaymentStatusFromStream(aliceStream, lnrpc.Payment_SUCCEEDED)
+
+	// Close the channel.
+	ht.CloseChannel(alice, chanPoint)
+}
+
 // verifyCloseUpdate is used to verify that a closed channel update is of the
 // expected type.
 func verifyCloseUpdate(chanUpdate *lnrpc.ChannelEventUpdate,
diff --git a/lncfg/dev.go b/lncfg/dev.go
new file mode 100644
index 000000000..ac47b0f5e
--- /dev/null
+++ b/lncfg/dev.go
@@ -0,0 +1,23 @@
+//go:build !integration
+
+package lncfg
+
+import "time"
+
+// IsDevBuild returns a bool to indicate whether we are in a development
+// environment.
+//
+// NOTE: always return false here.
+func IsDevBuild() bool {
+	return false
+}
+
+// DevConfig specifies development configs used for production. This struct
+// should always remain empty.
+type DevConfig struct{}
+
+// ChannelReadyWait returns the config value, which is always 0 for production
+// build.
+func (d *DevConfig) ChannelReadyWait() time.Duration {
+	return 0
+}
diff --git a/lncfg/dev_integration.go b/lncfg/dev_integration.go
new file mode 100644
index 000000000..c55b2efa7
--- /dev/null
+++ b/lncfg/dev_integration.go
@@ -0,0 +1,26 @@
+//go:build integration
+
+package lncfg
+
+import "time"
+
+// IsDevBuild returns a bool to indicate whether we are in a development
+// environment.
+//
+// NOTE: always return true here.
+func IsDevBuild() bool {
+	return true
+}
+
+// DevConfig specifies configs used for integration tests. These configs can
+// only be used in tests and must NOT be exported for production usage.
+//
+//nolint:lll
+type DevConfig struct {
+	ProcessChannelReadyWait time.Duration `long:"processchannelreadywait" description:"Time to sleep before processing remote node's channel_ready message."`
+}
+
+// ChannelReadyWait returns the config value `ProcessChannelReadyWait`.
+func (d *DevConfig) ChannelReadyWait() time.Duration {
+	return d.ProcessChannelReadyWait
+}
diff --git a/lnpeer/mock_peer.go b/lnpeer/mock_peer.go
new file mode 100644
index 000000000..a8953092c
--- /dev/null
+++ b/lnpeer/mock_peer.go
@@ -0,0 +1,82 @@
+package lnpeer
+
+import (
+	"net"
+
+	"github.com/btcsuite/btcd/btcec/v2"
+	"github.com/btcsuite/btcd/wire"
+	"github.com/lightningnetwork/lnd/channeldb"
+	"github.com/lightningnetwork/lnd/lnwire"
+	"github.com/stretchr/testify/mock"
+)
+
+// MockPeer implements the `lnpeer.Peer` interface.
+type MockPeer struct {
+	mock.Mock
+}
+
+// Compile time assertion that MockPeer implements lnpeer.Peer.
+var _ Peer = (*MockPeer)(nil)
+
+func (m *MockPeer) SendMessage(sync bool, msgs ...lnwire.Message) error {
+	args := m.Called(sync, msgs)
+	return args.Error(0)
+}
+
+func (m *MockPeer) SendMessageLazy(sync bool, msgs ...lnwire.Message) error {
+	args := m.Called(sync, msgs)
+	return args.Error(0)
+}
+
+func (m *MockPeer) AddNewChannel(channel *channeldb.OpenChannel,
+	cancel <-chan struct{}) error {
+
+	args := m.Called(channel, cancel)
+	return args.Error(0)
+}
+
+func (m *MockPeer) AddPendingChannel(cid lnwire.ChannelID,
+	cancel <-chan struct{}) error {
+
+	args := m.Called(cid, cancel)
+	return args.Error(0)
+}
+
+func (m *MockPeer) RemovePendingChannel(cid lnwire.ChannelID) error {
+	args := m.Called(cid)
+	return args.Error(0)
+}
+
+func (m *MockPeer) WipeChannel(op *wire.OutPoint) {
+	m.Called(op)
+}
+
+func (m *MockPeer) PubKey() [33]byte {
+	args := m.Called()
+	return args.Get(0).([33]byte)
+}
+
+func (m *MockPeer) IdentityKey() *btcec.PublicKey {
+	args := m.Called()
+	return args.Get(0).(*btcec.PublicKey)
+}
+
+func (m *MockPeer) Address() net.Addr {
+	args := m.Called()
+	return args.Get(0).(net.Addr)
+}
+
+func (m *MockPeer) QuitSignal() <-chan struct{} {
+	args := m.Called()
+	return args.Get(0).(<-chan struct{})
+}
+
+func (m *MockPeer) LocalFeatures() *lnwire.FeatureVector {
+	args := m.Called()
+	return args.Get(0).(*lnwire.FeatureVector)
+}
+
+func (m *MockPeer) RemoteFeatures() *lnwire.FeatureVector {
+	args := m.Called()
+	return args.Get(0).(*lnwire.FeatureVector)
+}
diff --git a/lnpeer/peer.go b/lnpeer/peer.go
index 465a41cb9..f66991e42 100644
--- a/lnpeer/peer.go
+++ b/lnpeer/peer.go
@@ -27,6 +27,13 @@ type Peer interface {
 	// to be added if the cancel channel is closed.
 	AddNewChannel(channel *channeldb.OpenChannel, cancel <-chan struct{}) error
 
+	// AddPendingChannel adds a pending open channel ID to the peer. The
+	// channel should fail to be added if the cancel chan is closed.
+	AddPendingChannel(cid lnwire.ChannelID, cancel <-chan struct{}) error
+
+	// RemovePendingChannel removes a pending open channel ID to the peer.
+	RemovePendingChannel(cid lnwire.ChannelID) error
+
 	// WipeChannel removes the channel uniquely identified by its channel
 	// point from all indexes associated with the peer.
 	WipeChannel(*wire.OutPoint)
diff --git a/peer/brontide.go b/peer/brontide.go
index 591f6601a..43d4e57f3 100644
--- a/peer/brontide.go
+++ b/peer/brontide.go
@@ -88,8 +88,13 @@ type outgoingMsg struct {
 // the receiver of the request to report when the channel creation process has
 // completed.
 type newChannelMsg struct {
+	// channel is used when the pending channel becomes active.
 	channel *channeldb.OpenChannel
-	err     chan error
+
+	// channelID is used when there's a new pending channel.
+	channelID lnwire.ChannelID
+
+	err chan error
 }
 
 type customMsg struct {
@@ -427,6 +432,14 @@ type Brontide struct {
 	// channels to the source peer which handled the funding workflow.
 	newActiveChannel chan *newChannelMsg
 
+	// newPendingChannel is used by the fundingManager to send pending open
+	// channels to the source peer which handled the funding workflow.
+	newPendingChannel chan *newChannelMsg
+
+	// removePendingChannel is used by the fundingManager to cancel pending
+	// open channels to the source peer when the funding flow is failed.
+	removePendingChannel chan *newChannelMsg
+
 	// activeMsgStreams is a map from channel id to the channel streams that
 	// proxy messages to individual, active links.
 	activeMsgStreams map[lnwire.ChannelID]*msgStream
@@ -493,7 +506,8 @@ func NewBrontide(cfg Config) *Brontide {
 		activeChannels: &lnutils.SyncMap[
 			lnwire.ChannelID, *lnwallet.LightningChannel,
 		]{},
-		newActiveChannel: make(chan *newChannelMsg, 1),
+		newActiveChannel:  make(chan *newChannelMsg, 1),
+		newPendingChannel: make(chan *newChannelMsg, 1),
 
 		activeMsgStreams:   make(map[lnwire.ChannelID]*msgStream),
 		activeChanCloses:   make(map[lnwire.ChannelID]*chancloser.ChanCloser),
@@ -1593,8 +1607,7 @@ out:
 
 		case *lnwire.ChannelReestablish:
 			targetChan = msg.ChanID
-			isLinkUpdate = p.isActiveChannel(targetChan) ||
-				p.isPendingChannel(targetChan)
+			isLinkUpdate = p.hasChannel(targetChan)
 
 			// If we failed to find the link in question, and the
 			// message received was a channel sync message, then
@@ -1611,9 +1624,22 @@ out:
 				}
 			}
 
+		// For messages that implement the LinkUpdater interface, we
+		// will consider them as link updates and send them to
+		// chanStream. These messages will be queued inside chanStream
+		// if the channel is not active yet.
 		case LinkUpdater:
 			targetChan = msg.TargetChanID()
-			isLinkUpdate = p.isActiveChannel(targetChan)
+			isLinkUpdate = p.hasChannel(targetChan)
+
+			// Log an error if we don't have this channel. This
+			// means the peer has sent us a message with unknown
+			// channel ID.
+			if !isLinkUpdate {
+				p.log.Errorf("Unknown channel ID: %v found "+
+					"in received msg=%s", targetChan,
+					nextMsg.MsgType())
+			}
 
 		case *lnwire.ChannelUpdate,
 			*lnwire.ChannelAnnouncement,
@@ -1647,20 +1673,7 @@ out:
 		if isLinkUpdate {
 			// If this is a channel update, then we need to feed it
 			// into the channel's in-order message stream.
-			chanStream, ok := p.activeMsgStreams[targetChan]
-			if !ok {
-				// If a stream hasn't yet been created, then
-				// we'll do so, add it to the map, and finally
-				// start it.
-				chanStream = newChanMsgStream(p, targetChan)
-				p.activeMsgStreams[targetChan] = chanStream
-				chanStream.Start()
-				defer chanStream.Stop()
-			}
-
-			// With the stream obtained, add the message to the
-			// stream so we can continue processing message.
-			chanStream.AddMsg(nextMsg)
+			p.sendLinkUpdateMsg(targetChan, nextMsg)
 		}
 
 		idleTimer.Reset(idleTimeout)
@@ -1728,6 +1741,13 @@ func (p *Brontide) isPendingChannel(chanID lnwire.ChannelID) bool {
 	return channel == nil
 }
 
+// hasChannel returns true if the peer has a pending/active channel specified
+// by the channel ID.
+func (p *Brontide) hasChannel(chanID lnwire.ChannelID) bool {
+	_, ok := p.activeChannels.Load(chanID)
+	return ok
+}
+
 // storeError stores an error in our peer's buffer of recent errors with the
 // current timestamp. Errors are only stored if we have at least one active
 // channel with the peer to mitigate a dos vector where a peer costlessly
@@ -2382,12 +2402,25 @@ func (p *Brontide) channelManager() {
 out:
 	for {
 		select {
+		// A new pending channel has arrived which means we are about
+		// to complete a funding workflow and is waiting for the final
+		// `ChannelReady` messages to be exchanged. We will add this
+		// channel to the `activeChannels` with a nil value to indicate
+		// this is a pending channel.
+		case req := <-p.newPendingChannel:
+			p.handleNewPendingChannel(req)
+
 		// A new channel has arrived which means we've just completed a
 		// funding workflow. We'll initialize the necessary local
 		// state, and notify the htlc switch of a new link.
 		case req := <-p.newActiveChannel:
 			p.handleNewActiveChannel(req)
 
+		// The funding flow for a pending channel is failed, we will
+		// remove it from Brontide.
+		case req := <-p.removePendingChannel:
+			p.handleRemovePendingChannel(req)
+
 		// We've just received a local request to close an active
 		// channel. It will either kick of a cooperative channel
 		// closure negotiation, or be a notification of a breached
@@ -3484,6 +3517,72 @@ func (p *Brontide) AddNewChannel(channel *channeldb.OpenChannel,
 	}
 }
 
+// AddPendingChannel adds a pending open channel to the peer. The channel
+// should fail to be added if the cancel channel is closed.
+//
+// NOTE: Part of the lnpeer.Peer interface.
+func (p *Brontide) AddPendingChannel(cid lnwire.ChannelID,
+	cancel <-chan struct{}) error {
+
+	errChan := make(chan error, 1)
+	newChanMsg := &newChannelMsg{
+		channelID: cid,
+		err:       errChan,
+	}
+
+	select {
+	case p.newPendingChannel <- newChanMsg:
+
+	case <-cancel:
+		return errors.New("canceled adding pending channel")
+
+	case <-p.quit:
+		return lnpeer.ErrPeerExiting
+	}
+
+	// We pause here to wait for the peer to recognize the new pending
+	// channel before we close the channel barrier corresponding to the
+	// channel.
+	select {
+	case err := <-errChan:
+		return err
+
+	case <-cancel:
+		return errors.New("canceled adding pending channel")
+
+	case <-p.quit:
+		return lnpeer.ErrPeerExiting
+	}
+}
+
+// RemovePendingChannel removes a pending open channel from the peer.
+//
+// NOTE: Part of the lnpeer.Peer interface.
+func (p *Brontide) RemovePendingChannel(cid lnwire.ChannelID) error {
+	errChan := make(chan error, 1)
+	newChanMsg := &newChannelMsg{
+		channelID: cid,
+		err:       errChan,
+	}
+
+	select {
+	case p.removePendingChannel <- newChanMsg:
+	case <-p.quit:
+		return lnpeer.ErrPeerExiting
+	}
+
+	// We pause here to wait for the peer to respond to the cancellation of
+	// the pending channel before we close the channel barrier
+	// corresponding to the channel.
+	select {
+	case err := <-errChan:
+		return err
+
+	case <-p.quit:
+		return lnpeer.ErrPeerExiting
+	}
+}
+
 // StartTime returns the time at which the connection was established if the
 // peer started successfully, and zero otherwise.
 func (p *Brontide) StartTime() time.Time {
@@ -3654,7 +3753,7 @@ func (p *Brontide) attachChannelEventSubscription() error {
 
 // updateNextRevocation updates the existing channel's next revocation if it's
 // nil.
-func (p *Brontide) updateNextRevocation(c *channeldb.OpenChannel) {
+func (p *Brontide) updateNextRevocation(c *channeldb.OpenChannel) error {
 	chanPoint := &c.FundingOutpoint
 	chanID := lnwire.NewChanIDFromOutPoint(chanPoint)
 
@@ -3664,32 +3763,35 @@ func (p *Brontide) updateNextRevocation(c *channeldb.OpenChannel) {
 	// currentChan should exist, but we perform a check anyway to avoid nil
 	// pointer dereference.
 	if !loaded {
-		p.log.Errorf("missing active channel with chanID=%v", chanID)
-		return
+		return fmt.Errorf("missing active channel with chanID=%v",
+			chanID)
 	}
 
 	// currentChan should not be nil, but we perform a check anyway to
 	// avoid nil pointer dereference.
 	if currentChan == nil {
-		p.log.Errorf("found nil active channel with chanID=%v", chanID)
-		return
+		return fmt.Errorf("found nil active channel with chanID=%v",
+			chanID)
 	}
 
 	// If we're being sent a new channel, and our existing channel doesn't
 	// have the next revocation, then we need to update the current
 	// existing channel.
 	if currentChan.RemoteNextRevocation() != nil {
-		return
+		return nil
 	}
 
 	p.log.Infof("Processing retransmitted ChannelReady for "+
 		"ChannelPoint(%v)", chanPoint)
 
 	nextRevoke := c.RemoteNextRevocation
+
 	err := currentChan.InitNextRevocation(nextRevoke)
 	if err != nil {
-		p.log.Errorf("unable to init chan revocation: %v", err)
+		return fmt.Errorf("unable to init next revocation: %w", err)
 	}
+
+	return nil
 }
 
 // addActiveChannel adds a new active channel to the `activeChannels` map. It
@@ -3718,7 +3820,6 @@ func (p *Brontide) addActiveChannel(c *channeldb.OpenChannel) error {
 
 	// Store the channel in the activeChannels map.
 	p.activeChannels.Store(chanID, lnChan)
-	p.addedChannels.Store(chanID, struct{}{})
 
 	p.log.Infof("New channel active ChannelPoint(%v) with peer", chanPoint)
 
@@ -3776,7 +3877,11 @@ func (p *Brontide) handleNewActiveChannel(req *newChannelMsg) {
 
 		// Handle it and close the err chan on the request.
 		close(req.err)
-		p.updateNextRevocation(newChan)
+
+		// Update the next revocation point.
+		if err := p.updateNextRevocation(newChan); err != nil {
+			p.log.Errorf(err.Error())
+		}
 
 		return
 	}
@@ -3793,3 +3898,91 @@ func (p *Brontide) handleNewActiveChannel(req *newChannelMsg) {
 	// Close the err chan if everything went fine.
 	close(req.err)
 }
+
+// handleNewPendingChannel takes a `newChannelMsg` request and add it to
+// `activeChannels` map with nil value. This pending channel will be saved as
+// it may become active in the future. Once active, the funding manager will
+// send it again via `AddNewChannel`, and we'd handle the link creation there.
+func (p *Brontide) handleNewPendingChannel(req *newChannelMsg) {
+	defer close(req.err)
+
+	chanID := req.channelID
+
+	// If we already have this channel, something is wrong with the funding
+	// flow as it will only be marked as active after `ChannelReady` is
+	// handled. In this case, we will do nothing but log an error, just in
+	// case this is a legit channel.
+	if p.isActiveChannel(chanID) {
+		p.log.Errorf("Channel(%v) is already active, ignoring "+
+			"pending channel request", chanID)
+
+		return
+	}
+
+	// The channel has already been added, we will do nothing and return.
+	if p.isPendingChannel(chanID) {
+		p.log.Infof("Channel(%v) is already added, ignoring "+
+			"pending channel request", chanID)
+
+		return
+	}
+
+	// This is a new channel, we now add it to the map `activeChannels`
+	// with nil value and mark it as a newly added channel in
+	// `addedChannels`.
+	p.activeChannels.Store(chanID, nil)
+	p.addedChannels.Store(chanID, struct{}{})
+}
+
+// handleRemovePendingChannel takes a `newChannelMsg` request and removes it
+// from `activeChannels` map. The request will be ignored if the channel is
+// considered active by Brontide. Noop if the channel ID cannot be found.
+func (p *Brontide) handleRemovePendingChannel(req *newChannelMsg) {
+	defer close(req.err)
+
+	chanID := req.channelID
+
+	// If we already have this channel, something is wrong with the funding
+	// flow as it will only be marked as active after `ChannelReady` is
+	// handled. In this case, we will log an error and exit.
+	if p.isActiveChannel(chanID) {
+		p.log.Errorf("Channel(%v) is active, ignoring remove request",
+			chanID)
+		return
+	}
+
+	// The channel has not been added yet, we will log a warning as there
+	// is an unexpected call from funding manager.
+	if !p.isPendingChannel(chanID) {
+		p.log.Warnf("Channel(%v) not found, removing it anyway", chanID)
+	}
+
+	// Remove the record of this pending channel.
+	p.activeChannels.Delete(chanID)
+	p.addedChannels.Delete(chanID)
+}
+
+// sendLinkUpdateMsg sends a message that updates the channel to the
+// channel's message stream.
+func (p *Brontide) sendLinkUpdateMsg(cid lnwire.ChannelID, msg lnwire.Message) {
+	p.log.Tracef("Sending link update msg=%v", msg.MsgType())
+
+	chanStream, ok := p.activeMsgStreams[cid]
+	if !ok {
+		// If a stream hasn't yet been created, then we'll do so, add
+		// it to the map, and finally start it.
+		chanStream = newChanMsgStream(p, cid)
+		p.activeMsgStreams[cid] = chanStream
+		chanStream.Start()
+
+		// Stop the stream when quit.
+		go func() {
+			<-p.quit
+			chanStream.Stop()
+		}()
+	}
+
+	// With the stream obtained, add the message to the stream so we can
+	// continue processing message.
+	chanStream.AddMsg(msg)
+}
diff --git a/peer/brontide_test.go b/peer/brontide_test.go
index cf71e0b92..428ea934e 100644
--- a/peer/brontide_test.go
+++ b/peer/brontide_test.go
@@ -16,6 +16,7 @@ import (
 	"github.com/lightningnetwork/lnd/contractcourt"
 	"github.com/lightningnetwork/lnd/htlcswitch"
 	"github.com/lightningnetwork/lnd/lntest/mock"
+	"github.com/lightningnetwork/lnd/lnwallet"
 	"github.com/lightningnetwork/lnd/lnwallet/chancloser"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/pool"
@@ -1118,3 +1119,224 @@ func TestPeerCustomMessage(t *testing.T) {
 	require.Equal(t, remoteKey, receivedCustom.peer)
 	require.Equal(t, receivedCustomMsg, &receivedCustom.msg)
 }
+
+// TestUpdateNextRevocation checks that the method `updateNextRevocation` is
+// behave as expected.
+func TestUpdateNextRevocation(t *testing.T) {
+	t.Parallel()
+
+	require := require.New(t)
+
+	// TODO(yy): create interface for lnwallet.LightningChannel so we can
+	// easily mock it without the following setups.
+	notifier := &mock.ChainNotifier{
+		SpendChan: make(chan *chainntnfs.SpendDetail),
+		EpochChan: make(chan *chainntnfs.BlockEpoch),
+		ConfChan:  make(chan *chainntnfs.TxConfirmation),
+	}
+	broadcastTxChan := make(chan *wire.MsgTx)
+	mockSwitch := &mockMessageSwitch{}
+
+	alicePeer, bobChan, err := createTestPeer(
+		t, notifier, broadcastTxChan, noUpdate, mockSwitch,
+	)
+	require.NoError(err, "unable to create test channels")
+
+	// testChannel is used to test the updateNextRevocation function.
+	testChannel := bobChan.State()
+
+	// Update the next revocation for a known channel should give us no
+	// error.
+	err = alicePeer.updateNextRevocation(testChannel)
+	require.NoError(err, "expected no error")
+
+	// Test an error is returned when the chanID cannot be found in
+	// `activeChannels` map.
+	testChannel.FundingOutpoint = wire.OutPoint{Index: 0}
+	err = alicePeer.updateNextRevocation(testChannel)
+	require.Error(err, "expected an error")
+
+	// Test an error is returned when the chanID's corresponding channel is
+	// nil.
+	testChannel.FundingOutpoint = wire.OutPoint{Index: 1}
+	chanID := lnwire.NewChanIDFromOutPoint(&testChannel.FundingOutpoint)
+	alicePeer.activeChannels.Store(chanID, nil)
+
+	err = alicePeer.updateNextRevocation(testChannel)
+	require.Error(err, "expected an error")
+
+	// TODO(yy): should also test `InitNextRevocation` is called on
+	// `lnwallet.LightningWallet` once it's interfaced.
+}
+
+// TODO(yy): add test for `addActiveChannel` and `handleNewActiveChannel` once
+// we have interfaced `lnwallet.LightningChannel` and
+// `*contractcourt.ChainArbitrator`.
+
+// TestHandleNewPendingChannel checks the method `handleNewPendingChannel`
+// behaves as expected.
+func TestHandleNewPendingChannel(t *testing.T) {
+	t.Parallel()
+
+	// Create three channel IDs for testing.
+	chanIDActive := lnwire.ChannelID{0}
+	chanIDNotExist := lnwire.ChannelID{1}
+	chanIDPending := lnwire.ChannelID{2}
+
+	// Create a test brontide.
+	dummyConfig := Config{}
+	peer := NewBrontide(dummyConfig)
+
+	// Create the test state.
+	peer.activeChannels.Store(chanIDActive, &lnwallet.LightningChannel{})
+	peer.activeChannels.Store(chanIDPending, nil)
+
+	// Assert test state, we should have two channels store, one active and
+	// one pending.
+	require.Equal(t, 2, peer.activeChannels.Len())
+
+	testCases := []struct {
+		name   string
+		chanID lnwire.ChannelID
+
+		// expectChanAdded specifies whether this chanID will be added
+		// to the peer's state.
+		expectChanAdded bool
+	}{
+		{
+			name:            "noop on active channel",
+			chanID:          chanIDActive,
+			expectChanAdded: false,
+		},
+		{
+			name:            "noop on pending channel",
+			chanID:          chanIDPending,
+			expectChanAdded: false,
+		},
+		{
+			name:            "new channel should be added",
+			chanID:          chanIDNotExist,
+			expectChanAdded: true,
+		},
+	}
+
+	for _, tc := range testCases {
+		tc := tc
+
+		// Create a request for testing.
+		errChan := make(chan error, 1)
+		req := &newChannelMsg{
+			channelID: tc.chanID,
+			err:       errChan,
+		}
+
+		t.Run(tc.name, func(t *testing.T) {
+			t.Parallel()
+			require := require.New(t)
+
+			// Get the number of channels before mutating the
+			// state.
+			numChans := peer.activeChannels.Len()
+
+			// Call the method.
+			peer.handleNewPendingChannel(req)
+
+			// Add one if we expect this channel to be added.
+			if tc.expectChanAdded {
+				numChans++
+			}
+
+			// Assert the number of channels is correct.
+			require.Equal(numChans, peer.activeChannels.Len())
+
+			// Assert the request's error chan is closed.
+			err, ok := <-req.err
+			require.False(ok, "expect err chan to be closed")
+			require.NoError(err, "expect no error")
+		})
+	}
+}
+
+// TestHandleRemovePendingChannel checks the method
+// `handleRemovePendingChannel` behaves as expected.
+func TestHandleRemovePendingChannel(t *testing.T) {
+	t.Parallel()
+
+	// Create three channel IDs for testing.
+	chanIDActive := lnwire.ChannelID{0}
+	chanIDNotExist := lnwire.ChannelID{1}
+	chanIDPending := lnwire.ChannelID{2}
+
+	// Create a test brontide.
+	dummyConfig := Config{}
+	peer := NewBrontide(dummyConfig)
+
+	// Create the test state.
+	peer.activeChannels.Store(chanIDActive, &lnwallet.LightningChannel{})
+	peer.activeChannels.Store(chanIDPending, nil)
+
+	// Assert test state, we should have two channels store, one active and
+	// one pending.
+	require.Equal(t, 2, peer.activeChannels.Len())
+
+	testCases := []struct {
+		name   string
+		chanID lnwire.ChannelID
+
+		// expectDeleted specifies whether this chanID will be removed
+		// from the peer's state.
+		expectDeleted bool
+	}{
+		{
+			name:          "noop on active channel",
+			chanID:        chanIDActive,
+			expectDeleted: false,
+		},
+		{
+			name:          "pending channel should be removed",
+			chanID:        chanIDPending,
+			expectDeleted: true,
+		},
+		{
+			name:          "noop on non-exist channel",
+			chanID:        chanIDNotExist,
+			expectDeleted: false,
+		},
+	}
+
+	for _, tc := range testCases {
+		tc := tc
+
+		// Create a request for testing.
+		errChan := make(chan error, 1)
+		req := &newChannelMsg{
+			channelID: tc.chanID,
+			err:       errChan,
+		}
+
+		t.Run(tc.name, func(t *testing.T) {
+			t.Parallel()
+			require := require.New(t)
+
+			// Get the number of channels before mutating the
+			// state.
+			numChans := peer.activeChannels.Len()
+
+			// Call the method.
+			peer.handleRemovePendingChannel(req)
+
+			// Minus one if we expect this channel to be removed.
+			if tc.expectDeleted {
+				numChans--
+			}
+
+			// Assert the number of channels is correct.
+			require.Equal(numChans, peer.activeChannels.Len())
+
+			// Assert the request's error chan is closed.
+			err, ok := <-req.err
+			require.False(ok, "expect err chan to be closed")
+			require.NoError(err, "expect no error")
+		})
+	}
+}
diff --git a/server.go b/server.go
index 5b421ae2f..e3fc80113 100644
--- a/server.go
+++ b/server.go
@@ -1276,8 +1276,18 @@ func newServer(cfg *Config, listenAddrs []net.Addr,
 		return ourPolicy, err
 	}
 
+	// Get the development config for funding manager. If we are not in
+	// development mode, this would be nil.
+	var devCfg *funding.DevConfig
+	if lncfg.IsDevBuild() {
+		devCfg = &funding.DevConfig{
+			ProcessChannelReadyWait: cfg.Dev.ChannelReadyWait(),
+		}
+	}
+
 	//nolint:lll
 	s.fundingMgr, err = funding.NewFundingManager(funding.Config{
+		Dev:                devCfg,
 		NoWumboChans:       !cfg.ProtocolOptions.Wumbo(),
 		IDKey:              nodeKeyDesc.PubKey,
 		IDKeyLoc:           nodeKeyDesc.KeyLocator,