diff --git a/compact_history.py b/compact_history.py
new file mode 100755
index 0000000..32e0cbb
--- /dev/null
+++ b/compact_history.py
@@ -0,0 +1,76 @@
+#!/usr/bin/env python3
+#
+# Copyright (c) 2017, Neil Booth
+#
+# All rights reserved.
+#
+# See the file "LICENCE" for information about the copyright
+# and warranty status of this software.
+
+'''Script to compact the history database.  This should save space and
+will reset the flush counter to a low number, avoiding overflow when
+the flush count reaches 65,536.
+
+This needs to lock the database so ElectrumX must not be running -
+shut it down cleanly first.
+
+It is recommended you run this script with the same environment as
+ElectrumX.  However it is intended to be runnable with just
+DB_DIRECTORY and COIN set (COIN defaults as for ElectrumX).
+
+If you use daemon tools, you might run this script like so:
+
+   envdir /path/to/the/environment/directory ./compact_history.py
+
+Depending on your hardware this script may take up to 6 hours to
+complete; it logs progress regularly.
+
+Compaction can be interrupted and restarted harmlessly and will pick
+up where it left off.  However, if you restart ElectrumX without
+running the compaction to completion, it will not benefit and
+subsequent compactions will restart from the beginning.
+'''
+
+import logging
+import sys
+import traceback
+from os import environ
+
+from server.env import Env
+from server.db import DB
+
+
+def compact_history():
+    if sys.version_info < (3, 5, 3):
+        raise RuntimeError('Python >= 3.5.3 is required to run ElectrumX')
+
+    environ['DAEMON_URL'] = ''   # Avoid Env erroring out
+    env = Env()
+    db = DB(env)
+
+    assert not db.first_sync
+    # Continue where we left off, if interrupted
+    if db.comp_cursor == -1:
+        db.comp_cursor = 0
+
+    db.comp_flush_count = max(db.comp_flush_count, 1)
+    limit = 8 * 1000 * 1000
+
+    while db.comp_cursor != -1:
+        db._compact_history(limit)
+
+
+def main():
+    logging.basicConfig(level=logging.INFO)
+    logging.info('Starting history compaction...')
+    try:
+        compact_history()
+    except Exception:
+        traceback.print_exc()
+        logging.critical('History compaction terminated abnormally')
+    else:
+        logging.info('History compaction complete')
+
+
+if __name__ == '__main__':
+    main()
diff --git a/server/block_processor.py b/server/block_processor.py
index fe26f63..63e2b1a 100644
--- a/server/block_processor.py
+++ b/server/block_processor.py
@@ -142,6 +142,11 @@ class BlockProcessor(server.db.DB):
 
     def __init__(self, env, controller, daemon):
         super().__init__(env)
+
+        # An incomplete compaction needs to be cancelled otherwise
+        # restarting it will corrupt the history
+        self.cancel_history_compaction()
+
         self.daemon = daemon
         self.controller = controller
 
@@ -332,7 +337,7 @@ class BlockProcessor(server.db.DB):
         self.wall_time += now - self.last_flush
         self.last_flush = now
         self.last_flush_tx_count = self.tx_count
-        self.write_state(batch)
+        self.utxo_write_state(batch)
 
     def assert_flushed(self):
         '''Asserts state is fully flushed.'''
diff --git a/server/db.py b/server/db.py
index 4958c2b..b802fcf 100644
--- a/server/db.py
+++ b/server/db.py
@@ -60,6 +60,9 @@ class DB(util.LoggedClass):
         self.db_class = db_class(self.env.db_engine)
         self.logger.info('using {} for DB backend'.format(self.env.db_engine))
 
+        # For history compaction
+        self.max_hist_row_entries = 12500
+
         self.utxo_db = None
         self.open_dbs()
         self.clean_db()
@@ -134,6 +137,7 @@ class DB(util.LoggedClass):
         self.logger.info('height: {:,d}'.format(self.db_height))
         self.logger.info('tip: {}'.format(hash_to_str(self.db_tip)))
         self.logger.info('tx count: {:,d}'.format(self.db_tx_count))
+        self.logger.info('flush count: {:,d}'.format(self.flush_count))
         if self.first_sync:
             self.logger.info('sync time so far: {}'
                              .format(util.formatted_time(self.wall_time)))
@@ -172,7 +176,7 @@ class DB(util.LoggedClass):
             self.wall_time = state['wall_time']
             self.first_sync = state['first_sync']
 
-    def write_state(self, batch):
+    def utxo_write_state(self, batch):
         '''Write (UTXO) state to the batch.'''
         state = {
             'genesis': self.coin.GENESIS_HASH,
@@ -194,7 +198,9 @@ class DB(util.LoggedClass):
         undo information.
         '''
         if self.flush_count < self.utxo_flush_count:
-            raise self.DBError('DB corrupt: flush_count < utxo_flush_count')
+            # Might happen at end of compaction as both DBs cannot be
+            # updated atomically
+            self.utxo_flush_count = self.flush_count
         if self.flush_count > self.utxo_flush_count:
             self.clear_excess_history(self.utxo_flush_count)
         self.clear_excess_undo_info()
@@ -417,7 +423,12 @@ class DB(util.LoggedClass):
         self.logger.info('deleted excess history entries')
 
     def write_history_state(self, batch):
-        state = {'flush_count': self.flush_count}
+        '''Write state to hist_db.'''
+        state = {
+            'flush_count': self.flush_count,
+            'comp_flush_count': self.comp_flush_count,
+            'comp_cursor': self.comp_cursor,
+        }
         # History entries are not prefixed; the suffix \0\0 ensures we
         # look similar to other entries and aren't interfered with
         batch.put(b'state\0\0', repr(state).encode())
@@ -429,8 +440,12 @@ class DB(util.LoggedClass):
             if not isinstance(state, dict):
                 raise self.DBError('failed reading state from history DB')
             self.flush_count = state['flush_count']
+            self.comp_flush_count = state.get('comp_flush_count', -1)
+            self.comp_cursor = state.get('comp_cursor', -1)
         else:
             self.flush_count = 0
+            self.comp_flush_count = -1
+            self.comp_cursor = -1
 
     def flush_history(self, history):
         self.flush_count += 1
@@ -495,3 +510,162 @@ class DB(util.LoggedClass):
         '''
         for tx_num in self.get_history_txnums(hashX, limit):
             yield self.fs_tx_hash(tx_num)
+
+    #
+    # History compaction
+    #
+
+    # comp_cursor is a cursor into compaction progress.
+    # -1: no compaction in progress
+    # 0-65535: Compaction in progress; all prefixes < comp_cursor have
+    #     been compacted, and later ones have not.
+    # 65536: compaction complete in-memory but not flushed
+    #
+    # comp_flush_count applies during compaction, and is a flush count
+    #     for history with prefix < comp_cursor.  flush_count applies
+    #     to still uncompacted history.  It is -1 when no compaction is
+    #     taking place.  Key suffixes up to and including comp_flush_count
+    #     are used, so a parallel history flush must first increment this
+    #
+    # When compaction is complete and the final flush takes place,
+    # flush_count is reset to comp_flush_count, and comp_flush_count to -1
+
+    def _flush_compaction(self, cursor, write_items, keys_to_delete):
+        '''Flush a single compaction pass as a batch.'''
+        # Update compaction state
+        if cursor == 65536:
+            self.flush_count = self.comp_flush_count
+            self.comp_cursor = -1
+            self.comp_flush_count = -1
+        else:
+            self.comp_cursor = cursor
+
+        # History DB.  Flush compacted history and updated state
+        with self.hist_db.write_batch() as batch:
+            # Important: delete first!  The keyspace may overlap.
+            for key in keys_to_delete:
+                batch.delete(key)
+            for key, value in write_items:
+                batch.put(key, value)
+            self.write_history_state(batch)
+
+        # If compaction was completed also update the UTXO flush count
+        if cursor == 65536:
+            self.utxo_flush_count = self.flush_count
+            with self.utxo_db.write_batch() as batch:
+                self.utxo_write_state(batch)
+
+    def _compact_hashX(self, hashX, hist_map, hist_list,
+                       write_items, keys_to_delete):
+        '''Compres history for a hashX.  hist_list is an ordered list of
+        the histories to be compressed.'''
+        # History entries (tx numbers) are 4 bytes each.  Distribute
+        # over rows of up to 50KB in size.  A fixed row size means
+        # future compactions will not need to update the first N - 1
+        # rows.
+        max_row_size = self.max_hist_row_entries * 4
+        full_hist = b''.join(hist_list)
+        nrows = (len(full_hist) + max_row_size - 1) // max_row_size
+        if nrows > 4:
+            self.log_info('hashX {} is large: {:,d} entries across {:,d} rows'
+                          .format(hash_to_str(hashX), len(full_hist) // 4,
+                                  nrows));
+
+        # Find what history needs to be written, and what keys need to
+        # be deleted.  Start by assuming all keys are to be deleted,
+        # and then remove those that are the same on-disk as when
+        # compacted.
+        write_size = 0
+        keys_to_delete.update(hist_map)
+        for n, chunk in enumerate(util.chunks(full_hist, max_row_size)):
+            key = hashX + pack('>H', n)
+            if hist_map.get(key) == chunk:
+                keys_to_delete.remove(key)
+            else:
+                write_items.append((key, chunk))
+                write_size += len(chunk)
+
+        assert n + 1 == nrows
+        self.comp_flush_count = max(self.comp_flush_count, n)
+
+        return write_size
+
+    def _compact_prefix(self, prefix, write_items, keys_to_delete):
+        '''Compact all history entries for hashXs beginning with the
+        given prefix.  Update keys_to_delete and write.'''
+        prior_hashX = None
+        hist_map = {}
+        hist_list = []
+
+        key_len = self.coin.HASHX_LEN + 2
+        write_size = 0
+        for key, hist in self.hist_db.iterator(prefix=prefix):
+            # Ignore non-history entries
+            if len(key) != key_len:
+                continue
+            hashX = key[:-2]
+            if hashX != prior_hashX and prior_hashX:
+                write_size += self._compact_hashX(prior_hashX, hist_map,
+                                                  hist_list, write_items,
+                                                  keys_to_delete)
+                hist_map.clear()
+                hist_list.clear()
+            prior_hashX = hashX
+            hist_map[key] = hist
+            hist_list.append(hist)
+
+        if prior_hashX:
+            write_size += self._compact_hashX(prior_hashX, hist_map, hist_list,
+                                              write_items, keys_to_delete)
+        return write_size
+
+    def _compact_history(self, limit):
+        '''Inner loop of history compaction.  Loops until limit bytes have
+        been processed.
+        '''
+        keys_to_delete = set()
+        write_items = []   # A list of (key, value) pairs
+        write_size = 0
+
+        # Loop over 2-byte prefixes
+        cursor = self.comp_cursor
+        while write_size < limit and cursor < 65536:
+            prefix = pack('>H', cursor)
+            write_size += self._compact_prefix(prefix, write_items,
+                                               keys_to_delete)
+            cursor += 1
+
+        max_rows = self.comp_flush_count + 1
+        self._flush_compaction(cursor, write_items, keys_to_delete)
+
+        self.log_info('history compaction: wrote {:,d} rows ({:.1f} MB), '
+                      'removed {:,d} rows, largest: {:,d}, {:.1f}% complete'
+                      .format(len(write_items), write_size / 1000000,
+                              len(keys_to_delete), max_rows,
+                              100 * cursor / 65536))
+        return write_size
+
+    async def compact_history(self, loop):
+        '''Start a background history compaction and reset the flush count if
+        its getting high.
+        '''
+        # Do nothing if during initial sync or if a compaction hasn't
+        # been initiated
+        if self.first_sync or self.comp_cursor == -1:
+            return
+
+        self.comp_flush_count = max(self.comp_flush_count, 1)
+        limit = 50 * 1000 * 1000
+
+        while self.comp_cursor != -1:
+            locked = self.semaphore.locked
+            if self.semaphore.locked:
+                self.log_info('compact_history: waiting on semaphore...')
+            with await self.semaphore:
+                await loop.run_in_executor(None, self._compact_history, limit)
+
+    def cancel_history_compaction(self):
+        if self.comp_cursor != -1:
+            self.logger.warning('cancelling in-progress history compaction')
+            self.comp_flush_count = -1
+            self.comp_cursor = -1
diff --git a/tests/server/test_compaction.py b/tests/server/test_compaction.py
new file mode 100644
index 0000000..d1974b5
--- /dev/null
+++ b/tests/server/test_compaction.py
@@ -0,0 +1,131 @@
+# Test of compaction code in server/db.py
+
+import array
+from collections import defaultdict
+from os import environ, urandom
+from struct import pack
+import random
+
+from lib.hash import hash_to_str
+from server.env import Env
+from server.db import DB
+
+
+def create_histories(db, hashX_count=100):
+    '''Creates a bunch of random transaction histories, and write them
+    to disk in a series of small flushes.'''
+    hashXs = [urandom(db.coin.HASHX_LEN) for n in range(hashX_count)]
+    mk_array = lambda : array.array('I')
+    histories = {hashX : mk_array() for hashX in hashXs}
+    this_history = defaultdict(mk_array)
+    tx_num = 0
+    while hashXs:
+        hash_indexes = set(random.randrange(len(hashXs))
+                           for n in range(1 + random.randrange(4)))
+        for index in hash_indexes:
+            histories[hashXs[index]].append(tx_num)
+            this_history[hashXs[index]].append(tx_num)
+
+        tx_num += 1
+        # Occasionally flush and drop a random hashX if non-empty
+        if random.random() < 0.1:
+            db.flush_history(this_history)
+            this_history.clear()
+            index = random.randrange(0, len(hashXs))
+            if histories[hashXs[index]]:
+                del hashXs[index]
+
+    return histories
+
+
+def check_hashX_compaction(db):
+    db.max_hist_row_entries = 40
+    row_size = db.max_hist_row_entries * 4
+    full_hist = array.array('I', range(100)).tobytes()
+    hashX = urandom(db.coin.HASHX_LEN)
+    pairs = ((1, 20), (26, 50), (56, 30))
+
+    cum = 0
+    hist_list = []
+    hist_map = {}
+    for flush_count, count in pairs:
+        key = hashX + pack('>H', flush_count)
+        hist = full_hist[cum * 4: (cum+count) * 4]
+        hist_map[key] = hist
+        hist_list.append(hist)
+        cum += count
+
+    write_items = []
+    keys_to_delete = set()
+    write_size = db._compact_hashX(hashX, hist_map, hist_list,
+                                   write_items, keys_to_delete)
+    # Check results for sanity
+    assert write_size == len(full_hist)
+    assert len(write_items) == 3
+    assert len(keys_to_delete) == 3
+    assert len(hist_map) == len(pairs)
+    for n, item in enumerate(write_items):
+        assert item == (hashX + pack('>H', n),
+                        full_hist[n * row_size: (n + 1) * row_size])
+    for flush_count, count in pairs:
+        assert hashX + pack('>H', flush_count) in keys_to_delete
+
+    # Check re-compaction is null
+    hist_map = {key: value for key, value in write_items}
+    hist_list = [value for key, value in write_items]
+    write_items.clear()
+    keys_to_delete.clear()
+    write_size = db._compact_hashX(hashX, hist_map, hist_list,
+                                   write_items, keys_to_delete)
+    assert write_size == 0
+    assert len(write_items) == 0
+    assert len(keys_to_delete) == 0
+    assert len(hist_map) == len(pairs)
+
+    # Check re-compaction adding a single tx writes the one row
+    hist_list[-1] += array.array('I', [100]).tobytes()
+    write_size = db._compact_hashX(hashX, hist_map, hist_list,
+                                   write_items, keys_to_delete)
+    assert write_size == len(hist_list[-1])
+    assert write_items == [(hashX + pack('>H', 2), hist_list[-1])]
+    assert len(keys_to_delete) == 1
+    assert write_items[0][0] in keys_to_delete
+    assert len(hist_map) == len(pairs)
+
+
+def check_written(db, histories):
+    for hashX, hist in histories.items():
+        db_hist = array.array('I', db.get_history_txnums(hashX, limit=None))
+        assert hist == db_hist
+
+def compact_history(db):
+    '''Synchronously compact the DB history.'''
+    db.first_sync = False
+    db.comp_cursor = 0
+
+    db.comp_flush_count = max(db.comp_flush_count, 1)
+    limit = 5 * 1000
+
+    write_size = 0
+    while db.comp_cursor != -1:
+        write_size += db._compact_history(limit)
+    assert write_size != 0
+
+def run_test(db_dir):
+    environ.clear()
+    environ['DB_DIRECTORY'] = db_dir
+    environ['DAEMON_URL'] = ''
+    env = Env()
+    db = DB(env)
+    # Test abstract compaction
+    check_hashX_compaction(db)
+    # Now test in with random data
+    histories = create_histories(db)
+    check_written(db, histories)
+    compact_history(db)
+    check_written(db, histories)
+
+def test_compaction(tmpdir):
+    db_dir = str(tmpdir)
+    print('Temp dir: {}'.format(db_dir))
+    run_test(db_dir)