diff --git a/itest/list_on_test.go b/itest/list_on_test.go
index 60f31e3e0..9e735dcff 100644
--- a/itest/list_on_test.go
+++ b/itest/list_on_test.go
@@ -566,4 +566,8 @@ var allTestCases = []*lntest.TestCase{
 		Name:     "fail funding flow psbt",
 		TestFunc: testPsbtChanFundingFailFlow,
 	},
+	{
+		Name:     "coop close with htlcs",
+		TestFunc: testCoopCloseWithHtlcs,
+	},
 }
diff --git a/itest/lnd_coop_close_with_htlcs_test.go b/itest/lnd_coop_close_with_htlcs_test.go
new file mode 100644
index 000000000..3978e1192
--- /dev/null
+++ b/itest/lnd_coop_close_with_htlcs_test.go
@@ -0,0 +1,103 @@
+package itest
+
+import (
+	"github.com/btcsuite/btcd/btcutil"
+	"github.com/btcsuite/btcd/chaincfg/chainhash"
+	"github.com/lightningnetwork/lnd/lnrpc"
+	"github.com/lightningnetwork/lnd/lnrpc/invoicesrpc"
+	"github.com/lightningnetwork/lnd/lnrpc/routerrpc"
+	"github.com/lightningnetwork/lnd/lntest"
+	"github.com/lightningnetwork/lnd/lntypes"
+	"github.com/stretchr/testify/require"
+)
+
+// testCoopCloseWithHtlcs tests whether or not we can successfully issue a coop
+// close request whilt there are still active htlcs on the link. Here we will
+// set up an HODL invoice to suspend settlement. Then we will attempt to close
+// the channel which should appear as a noop for the time being. Then we will
+// have the receiver settle the invoice and observe that the channel gets torn
+// down after settlement.
+func testCoopCloseWithHtlcs(ht *lntest.HarnessTest) {
+	alice, bob := ht.Alice, ht.Bob
+
+	// Here we set up a channel between Alice and Bob, beginning with a
+	// balance on Bob's side.
+	chanPoint := ht.OpenChannel(bob, alice, lntest.OpenChannelParams{
+		Amt: btcutil.Amount(1000000),
+	})
+
+	// Wait for Bob to understand that the channel is ready to use.
+	ht.AssertTopologyChannelOpen(bob, chanPoint)
+
+	// Here we set things up so that Alice generates a HODL invoice so we
+	// can test whether the shutdown is deferred until the settlement of
+	// that invoice.
+	payAmt := btcutil.Amount(4)
+	var preimage lntypes.Preimage
+	copy(preimage[:], ht.Random32Bytes())
+	payHash := preimage.Hash()
+
+	invoiceReq := &invoicesrpc.AddHoldInvoiceRequest{
+		Memo:  "testing close",
+		Value: int64(payAmt),
+		Hash:  payHash[:],
+	}
+	resp := alice.RPC.AddHoldInvoice(invoiceReq)
+	invoiceStream := alice.RPC.SubscribeSingleInvoice(payHash[:])
+
+	// Here we wait for the invoice to be open and payable.
+	ht.AssertInvoiceState(invoiceStream, lnrpc.Invoice_OPEN)
+
+	// Now that the invoice is ready to be paid, let's have Bob open an
+	// HTLC for it.
+	req := &routerrpc.SendPaymentRequest{
+		PaymentRequest: resp.PaymentRequest,
+		TimeoutSeconds: 60,
+		FeeLimitSat:    1000000,
+	}
+	ht.SendPaymentAndAssertStatus(bob, req, lnrpc.Payment_IN_FLIGHT)
+	ht.AssertNumActiveHtlcs(bob, 1)
+
+	// Assert at this point that the HTLC is open but not yet settled.
+	ht.AssertInvoiceState(invoiceStream, lnrpc.Invoice_ACCEPTED)
+
+	// Have alice attempt to close the channel.
+	closeClient := alice.RPC.CloseChannel(&lnrpc.CloseChannelRequest{
+		ChannelPoint: chanPoint,
+		NoWait:       true,
+	})
+	ht.AssertChannelInactive(bob, chanPoint)
+
+	// Now that the channel is inactive we can be certain that the deferred
+	// closure is set up. Let's settle the invoice.
+	alice.RPC.SettleInvoice(preimage[:])
+
+	// Pull the instant update off the wire to clear the path for the
+	// close pending update.
+	_, err := closeClient.Recv()
+	require.NoError(ht, err)
+
+	// Wait for the next channel closure update. Now that we have settled
+	// the only HTLC this should be imminent.
+	update, err := closeClient.Recv()
+	require.NoError(ht, err)
+
+	// This next update should be a GetClosePending as it should be the
+	// negotiation of the coop close tx.
+	closePending := update.GetClosePending()
+	require.NotNil(ht, closePending)
+
+	// Convert the txid we get from the PendingUpdate to a Hash so we can
+	// wait for it to be mined.
+	var closeTxid chainhash.Hash
+	require.NoError(
+		ht, closeTxid.SetBytes(closePending.Txid),
+		"invalid closing txid",
+	)
+
+	// Wait for the close tx to be in the Mempool.
+	ht.Miner.AssertTxInMempool(&closeTxid)
+
+	// Wait for it to get mined and finish tearing down.
+	ht.AssertStreamChannelCoopClosed(alice, chanPoint, false, closeClient)
+}