diff --git a/payments/db/sql_store.go b/payments/db/sql_store.go
index 7f2e1c8a3..469f0bea7 100644
--- a/payments/db/sql_store.go
+++ b/payments/db/sql_store.go
@@ -77,6 +77,8 @@ type SQLQueries interface {
 
 	SettleAttempt(ctx context.Context, arg sqlc.SettleAttemptParams) error
 
+	FailPayment(ctx context.Context, arg sqlc.FailPaymentParams) (sql.Result, error)
+
 	DeletePayment(ctx context.Context, paymentID int64) error
 
 	// DeleteFailedAttempts removes all failed HTLCs from the db for a
@@ -1360,3 +1362,67 @@ func (s *SQLStore) SettleAttempt(paymentHash lntypes.Hash,
 
 	return mpPayment, nil
 }
+
+// Fail records the ultimate reason why a payment failed. This method stores
+// the failure reason for record keeping but does not enforce that all HTLC
+// attempts are resolved - HTLCs may still be in flight when this is called.
+//
+// The payment's actual status transition to StatusFailed is determined by the
+// payment state calculation, which considers both the recorded failure reason
+// and the current state of all HTLC attempts. The status will transition to
+// StatusFailed once all HTLCs are resolved and/or a failure reason is recorded.
+//
+// NOTE: According to the interface contract, this should only be called when
+// all active attempts are already failed. However, the implementation allows
+// concurrent calls and does not validate this precondition, enabling the last
+// failing attempt to record the failure reason without synchronization.
+//
+// This method is part of the PaymentControl interface, which is embedded in
+// the PaymentWriter interface and ultimately the DB interface. It represents
+// step 4 in the payment lifecycle control flow.
+func (s *SQLStore) Fail(paymentHash lntypes.Hash,
+	reason FailureReason) (*MPPayment, error) {
+
+	ctx := context.TODO()
+
+	var mpPayment *MPPayment
+
+	err := s.db.ExecTx(ctx, sqldb.WriteTxOpt(), func(db SQLQueries) error {
+		result, err := db.FailPayment(ctx, sqlc.FailPaymentParams{
+			PaymentIdentifier: paymentHash[:],
+			FailReason:        sqldb.SQLInt32(reason),
+		})
+		if err != nil {
+			return err
+		}
+
+		rowsAffected, err := result.RowsAffected()
+		if err != nil {
+			return err
+		}
+		if rowsAffected == 0 {
+			return ErrPaymentNotInitiated
+		}
+
+		payment, err := db.FetchPayment(ctx, paymentHash[:])
+		if err != nil {
+			return fmt.Errorf("failed to fetch payment: %w", err)
+		}
+		mpPayment, err = fetchPaymentWithCompleteData(
+			ctx, s.cfg.QueryCfg, db, payment,
+		)
+		if err != nil {
+			return fmt.Errorf("failed to fetch payment with "+
+				"complete data: %w", err)
+		}
+
+		return nil
+	}, func() {
+		mpPayment = nil
+	})
+	if err != nil {
+		return nil, fmt.Errorf("failed to fail payment: %w", err)
+	}
+
+	return mpPayment, nil
+}
diff --git a/sqldb/sqlc/payments.sql.go b/sqldb/sqlc/payments.sql.go
index fb117bcaa..fd150592d 100644
--- a/sqldb/sqlc/payments.sql.go
+++ b/sqldb/sqlc/payments.sql.go
@@ -85,6 +85,19 @@ func (q *Queries) FailAttempt(ctx context.Context, arg FailAttemptParams) error
 	return err
 }
 
+const failPayment = `-- name: FailPayment :execresult
+UPDATE payments SET fail_reason = $1 WHERE payment_identifier = $2
+`
+
+type FailPaymentParams struct {
+	FailReason        sql.NullInt32
+	PaymentIdentifier []byte
+}
+
+func (q *Queries) FailPayment(ctx context.Context, arg FailPaymentParams) (sql.Result, error) {
+	return q.db.ExecContext(ctx, failPayment, arg.FailReason, arg.PaymentIdentifier)
+}
+
 const fetchAllInflightAttempts = `-- name: FetchAllInflightAttempts :many
 SELECT
     ha.id,
diff --git a/sqldb/sqlc/querier.go b/sqldb/sqlc/querier.go
index cc52f06f1..da022c1de 100644
--- a/sqldb/sqlc/querier.go
+++ b/sqldb/sqlc/querier.go
@@ -35,6 +35,7 @@ type Querier interface {
 	DeleteUnconnectedNodes(ctx context.Context) ([][]byte, error)
 	DeleteZombieChannel(ctx context.Context, arg DeleteZombieChannelParams) (sql.Result, error)
 	FailAttempt(ctx context.Context, arg FailAttemptParams) error
+	FailPayment(ctx context.Context, arg FailPaymentParams) (sql.Result, error)
 	FetchAMPSubInvoiceHTLCs(ctx context.Context, arg FetchAMPSubInvoiceHTLCsParams) ([]FetchAMPSubInvoiceHTLCsRow, error)
 	FetchAMPSubInvoices(ctx context.Context, arg FetchAMPSubInvoicesParams) ([]AmpSubInvoice, error)
 	// Fetch all inflight attempts across all payments
diff --git a/sqldb/sqlc/queries/payments.sql b/sqldb/sqlc/queries/payments.sql
index b0183ccd2..1cc8e2330 100644
--- a/sqldb/sqlc/queries/payments.sql
+++ b/sqldb/sqlc/queries/payments.sql
@@ -352,3 +352,6 @@ VALUES (
     @htlc_fail_reason,
     @failure_msg
 );
+
+-- name: FailPayment :execresult
+UPDATE payments SET fail_reason = $1 WHERE payment_identifier = $2;