diff --git a/daemon/jsonrpc.c b/daemon/jsonrpc.c
index d0944b8f3..11c61aebf 100644
--- a/daemon/jsonrpc.c
+++ b/daemon/jsonrpc.c
@@ -254,6 +254,7 @@ static const struct json_command *cmdlist[] = {
 	&newhtlc_command,
 	&fulfillhtlc_command,
 	&failhtlc_command,
+	&close_command,
 	/* Developer/debugging options. */
 	&echo_command,
 	&rhash_command,
diff --git a/daemon/jsonrpc.h b/daemon/jsonrpc.h
index d1518ddba..a0edd9e1a 100644
--- a/daemon/jsonrpc.h
+++ b/daemon/jsonrpc.h
@@ -62,4 +62,5 @@ extern const struct json_command newhtlc_command;
 extern const struct json_command fulfillhtlc_command;
 extern const struct json_command failhtlc_command;
 extern const struct json_command mocktime_command;
+extern const struct json_command close_command;
 #endif /* LIGHTNING_DAEMON_JSONRPC_H */
diff --git a/daemon/lightningd.c b/daemon/lightningd.c
index d4baa0def..6b5034f9d 100644
--- a/daemon/lightningd.c
+++ b/daemon/lightningd.c
@@ -79,6 +79,9 @@ static void config_register_opts(struct lightningd_state *dstate)
 	opt_register_arg("--max-anchor-confirms", opt_set_u32, opt_show_u32,
 			 &dstate->config.anchor_confirms_max,
 			 "Maximum confirmations other side can wait for anchor transaction");
+	opt_register_arg("--forever-confirms", opt_set_u32, opt_show_u32,
+			 &dstate->config.forever_confirms,
+			 "Confirmations after which we consider a reorg impossible");
 	opt_register_arg("--commit-fee", opt_set_u64, opt_show_u64,
 			 &dstate->config.commitment_fee,
 			 "Satoshis to offer for commitment transaction fee");
@@ -120,6 +123,9 @@ static void default_config(struct config *config)
 	/* More than 10 confirms seems overkill. */
 	config->anchor_confirms_max = 10;
 
+	/* At some point, you've got to let it go... */
+	config->forever_confirms = 100;
+	
 	/* FIXME: These should float with bitcoind's recommendations! */
 
 	/* Pay hefty fee (10x current suggested minimum). */
diff --git a/daemon/lightningd.h b/daemon/lightningd.h
index 6f56acfec..39e462abe 100644
--- a/daemon/lightningd.h
+++ b/daemon/lightningd.h
@@ -26,6 +26,9 @@ struct config {
 	/* How long will we accept them waiting? */
 	u32 anchor_confirms_max;
 
+	/* How many blocks until we stop watching a close commit? */
+	u32 forever_confirms;
+
 	/* What are we prepared to pay in commitment fee (satoshis). */
 	u64 commitment_fee;
 
diff --git a/daemon/packets.c b/daemon/packets.c
index f4e8afb1d..06566125e 100644
--- a/daemon/packets.c
+++ b/daemon/packets.c
@@ -1,5 +1,6 @@
 #include "bitcoin/script.h"
 #include "bitcoin/tx.h"
+#include "close_tx.h"
 #include "controlled_time.h"
 #include "find_p2sh_out.h"
 #include "lightningd.h"
@@ -242,32 +243,32 @@ Pkt *pkt_err(const tal_t *ctx, const char *msg, ...)
 Pkt *pkt_close(const tal_t *ctx, const struct peer *peer)
 {
 	CloseChannel *c = tal(ctx, CloseChannel);
-	struct signature sig;
 
 	close_channel__init(c);
 
-	/* FIXME:  If we're not connected, we don't create close tx. */
-	if (!peer->close_tx) {
-		c->close_fee = 0;
-		memset(&sig, 0, sizeof(sig));
-		c->sig = signature_to_proto(c, &sig);
-	} else {
-		c->close_fee = peer->close_tx->fee;
-		peer_sign_mutual_close(peer, peer->close_tx, &sig);
-		c->sig = signature_to_proto(c, &sig);
-	}
+	c->close_fee = peer->close_tx->fee;
+	c->sig = signature_to_proto(c, &peer->our_close_sig.sig);
 
 	return make_pkt(ctx, PKT__PKT_CLOSE, c);
 }
 
 Pkt *pkt_close_complete(const tal_t *ctx, const struct peer *peer)
 {
-	FIXME_STUB(peer);
+	CloseChannelComplete *c = tal(ctx, CloseChannelComplete);
+
+	close_channel_complete__init(c);
+	assert(peer->close_tx);
+	c->sig = signature_to_proto(c, &peer->our_close_sig.sig);
+
+	return make_pkt(ctx, PKT__PKT_CLOSE_COMPLETE, c);
 }
 
 Pkt *pkt_close_ack(const tal_t *ctx, const struct peer *peer)
 {
-	FIXME_STUB(peer);
+	CloseChannelAck *a = tal(ctx, CloseChannelAck);
+
+	close_channel_ack__init(a);
+	return make_pkt(ctx, PKT__PKT_CLOSE_ACK, a);
 }
 
 Pkt *pkt_err_unexpected(const tal_t *ctx, const Pkt *pkt)
@@ -758,15 +759,57 @@ Pkt *accept_pkt_update_signature(const tal_t *ctx,
 	return NULL;
 }
 
+static bool peer_sign_close_tx(struct peer *peer, const Signature *theirs)
+{
+	struct bitcoin_signature theirsig;
+
+	/* We never sign twice! */
+	assert(peer->close_tx->input[0].script_length == 0);
+
+	theirsig.stype = SIGHASH_ALL;
+	if (!proto_to_signature(theirs, &theirsig.sig))
+		return false;
+
+	/* Their sig + ours should sign the close tx. */
+	if (!check_2of2_sig(peer->dstate->secpctx,
+			    peer->close_tx, 0,
+			    peer->anchor.redeemscript,
+			    tal_count(peer->anchor.redeemscript),
+			    &peer->them.commitkey, &peer->us.commitkey,
+			    &theirsig, &peer->our_close_sig))
+		return false;
+
+	/* Complete the close_tx, using signatures. */
+	peer->close_tx->input[0].script
+		= scriptsig_p2sh_2of2(peer->close_tx,
+				      &theirsig, &peer->our_close_sig,
+				      &peer->them.commitkey,
+				      &peer->us.commitkey);
+	peer->close_tx->input[0].script_length
+		= tal_count(peer->close_tx->input[0].script);
+	return true;
+}
+
 Pkt *accept_pkt_close(const tal_t *ctx, struct peer *peer, const Pkt *pkt)
 {
-	FIXME_STUB(peer);
+	const CloseChannel *c = pkt->close;
+
+	/* FIXME: Don't accept tiny close fee! */
+	if (!peer_create_close_tx(peer, c->close_fee))
+		return pkt_err(ctx, "Invalid close fee");
+
+	if (!peer_sign_close_tx(peer, c->sig))
+		return pkt_err(ctx, "Invalid signature");
+	return NULL;
 }
 
 Pkt *accept_pkt_close_complete(const tal_t *ctx,
 			       struct peer *peer, const Pkt *pkt)
 {
-	FIXME_STUB(peer);
+	const CloseChannelComplete *c = pkt->close_complete;
+	if (!peer_sign_close_tx(peer, c->sig))
+		return pkt_err(ctx, "Invalid signature");
+	return NULL;
 }
 
 Pkt *accept_pkt_simultaneous_close(const tal_t *ctx,
@@ -776,7 +819,8 @@ Pkt *accept_pkt_simultaneous_close(const tal_t *ctx,
 	FIXME_STUB(peer);
 }
 
+/* FIXME: Since this packet is empty, is it worth having? */
 Pkt *accept_pkt_close_ack(const tal_t *ctx, struct peer *peer, const Pkt *pkt)
 {
-	FIXME_STUB(peer);
+	return NULL;
 }
diff --git a/daemon/peer.c b/daemon/peer.c
index cb94c6c1f..013c5814d 100644
--- a/daemon/peer.c
+++ b/daemon/peer.c
@@ -293,6 +293,9 @@ static void peer_disconnect(struct io_conn *conn, struct peer *peer)
 	}
 
 	/* FIXME: Try to reconnect. */
+	if (peer->cond == PEER_CLOSING
+	    || peer->cond == PEER_CLOSED)
+		return;
 
 	state(peer, peer, CMD_CLOSE, NULL, &outpkt, &broadcast);
 	/* Can't send packet, so ignore it. */
@@ -339,6 +342,7 @@ static struct peer *new_peer(struct lightningd_state *dstate,
 	peer->num_htlcs = 0;
 	peer->close_tx = NULL;
 	peer->cstate = NULL;
+	peer->close_watch_timeout = NULL;
 
 	/* If we free peer, conn should be closed, but can't be freed
 	 * immediately so don't make peer a parent. */
@@ -597,6 +601,38 @@ static bool txmatch(const struct bitcoin_tx *txa, const struct bitcoin_tx *txb)
 	return true;
 }
 
+static bool is_mutual_close(const struct bitcoin_tx *tx,
+			    const struct bitcoin_tx *close_tx)
+{
+	varint_t i;
+
+	/* Haven't created mutual close yet?  This isn't one then. */
+	if (!close_tx)
+		return false;
+
+	/* We know it spends anchor, but do txouts match? */
+	if (tx->output_count != close_tx->output_count)
+		return false;
+	for (i = 0; i < tx->output_count; i++) {
+		if (tx->output[i].amount != close_tx->output[i].amount)
+			return false;
+		if (tx->output[i].script_length
+		    != close_tx->output[i].script_length)
+			return false;
+		if (memcmp(tx->output[i].script, close_tx->output[i].script,
+			   tx->output[i].script_length) != 0)
+			return false;
+	}
+	return true;
+}
+
+static void close_depth_cb(struct peer *peer, int depth)
+{
+	if (depth >= peer->dstate->config.forever_confirms) {
+		state_event(peer, BITCOIN_CLOSE_DONE, NULL);
+	}
+}
+
 /* We assume the tx is valid!  Don't do a blockchain.info and feed this
  * invalid transactions! */
 static void anchor_spent(struct peer *peer,
@@ -609,6 +645,8 @@ static void anchor_spent(struct peer *peer,
 	idata.btc = (struct bitcoin_event *)tx;
 	if (txmatch(tx, peer->them.commit))
 		state_event(peer, w->theyspent, &idata);
+	else if (is_mutual_close(tx, peer->close_tx))
+		add_close_tx_watch(peer, tx, close_depth_cb);
 	else
 		state_event(peer, w->otherspent, &idata);
 }
@@ -656,29 +694,82 @@ void peer_watch_tx(struct peer *peer,
 	FIXME_STUB(peer);
 }
 
+bool peer_create_close_tx(struct peer *peer, u64 fee_satoshis)
+{
+	struct channel_state cstate;
+
+	assert(!peer->close_tx);
+	
+	/* We don't need a deep copy here, just fee levels. */
+	cstate = *peer->cstate;
+	if (!adjust_fee(peer->us.offer_anchor == CMD_OPEN_WITH_ANCHOR,
+			peer->anchor.satoshis,
+			fee_satoshis,
+			&cstate.a, &cstate.b))
+		return false;
+
+	log_debug(peer->log,
+		  "creating close-tx: to %02x%02x%02x%02x/%02x%02x%02x%02x, amounts %u/%u",
+		  peer->us.finalkey.der[0], peer->us.finalkey.der[1],
+		  peer->us.finalkey.der[2], peer->us.finalkey.der[3],
+		  peer->them.finalkey.der[0], peer->them.finalkey.der[1],
+		  peer->them.finalkey.der[2], peer->them.finalkey.der[3],
+		  cstate.a.pay_msat / 1000,
+		  cstate.b.pay_msat / 1000);
+
+ 	peer->close_tx = create_close_tx(peer->dstate->secpctx, peer,
+ 					 &peer->us.finalkey,
+ 					 &peer->them.finalkey,
+					 &peer->anchor.txid,
+					 peer->anchor.index,
+ 					 peer->anchor.satoshis,
+ 					 cstate.a.pay_msat / 1000,
+ 					 cstate.b.pay_msat / 1000);
+
+	peer->our_close_sig.stype = SIGHASH_ALL;
+	peer_sign_mutual_close(peer, peer->close_tx, &peer->our_close_sig.sig);
+	return true;
+}
+
 static void send_close_timeout(struct peer *peer)
 {
+	/* FIXME: Remove any close_tx watches! */
 	state_event(peer, INPUT_CLOSE_COMPLETE_TIMEOUT, NULL);
 }
 
 void peer_watch_close(struct peer *peer,
 		      enum state_input done, enum state_input timedout)
 {
-	/* We save some work by assuming this. */
-	assert(timedout == INPUT_CLOSE_COMPLETE_TIMEOUT);
+	/* We save some work by assuming these. */
+	assert(done == BITCOIN_CLOSE_DONE);
+
+	/* FIXME: Dynamic closing fee! */
+	if (!peer->close_tx)
+		peer_create_close_tx(peer, peer->dstate->config.closing_fee);
 
-	/* FIXME: We didn't send CLOSE, so timeout immediately */
+	/* FIXME: We can't send CLOSE, so timeout immediately */
 	if (!peer->conn) {
-		(void)send_close_timeout;
-		/* FIXME: oneshot_timeout(peer->dstate, peer, 0, send_close_timeout, peer); */
+		assert(timedout == INPUT_CLOSE_COMPLETE_TIMEOUT);
+		oneshot_timeout(peer->dstate, peer, 0,
+				send_close_timeout, peer);
 		return;
 	}
 
-	FIXME_STUB(peer);
+	/* Give them a reasonable time to respond. */
+	/* FIXME: config? */
+	if (timedout != INPUT_NONE) {
+		assert(timedout == INPUT_CLOSE_COMPLETE_TIMEOUT);
+		peer->close_watch_timeout
+			= oneshot_timeout(peer->dstate, peer, 120,
+					  send_close_timeout, peer);
+	}
+
+	/* anchor_spent will get called, we match against close_tx there. */
 }
 void peer_unwatch_close_timeout(struct peer *peer, enum state_input timedout)
 {
-	FIXME_STUB(peer);
+	assert(peer->close_watch_timeout);
+	peer->close_watch_timeout = tal_free(peer->close_watch_timeout);
 }
 bool peer_watch_our_htlc_outputs(struct peer *peer,
 				 const struct bitcoin_tx *tx,
@@ -767,36 +858,9 @@ bool committed_to_htlcs(const struct peer *peer)
 const struct bitcoin_tx *bitcoin_close(const tal_t *ctx,
 				       const struct peer *peer)
 {
-#if 0
-	struct bitcoin_tx *close_tx;
-	u8 *redeemscript;
-
-	close_tx = create_close_tx(ctx, peer->us.openpkt, peer->them.openpkt,
-				   peer->anchorpkt, 
-				   peer->cstate.a.pay_msat / 1000,
-				   peer->cstate.b.pay_msat / 1000);
-
-	/* This is what the anchor pays to. */
-	redeemscript = bitcoin_redeem_2of2(close_tx, &peer->us.commitkey,
-					   &peer->them.commitkey);
-	
-	/* Combined signatures must validate correctly. */
-	if (!check_2of2_sig(close_tx, 0, redeemscript, tal_count(redeemscript),
-			    &peer->us.finalkey, &peer->them.finalkey,
-			    &peer->us.closesig, &peer->them.closesig))
-		fatal("bitcoin_close signature failed");
-
-	/* Create p2sh input for close_tx */
-	close_tx->input[0].script = scriptsig_p2sh_2of2(close_tx,
-							&peer->us.closesig,
-							&peer->them.closesig,
-							&peer->us.finalkey,
-							&peer->them.finalkey);
-	close_tx->input[0].script_length = tal_count(close_tx->input[0].script);
-
-	return close_tx;
-#endif
-	FIXME_STUB(peer);
+	/* Must be signed! */
+	assert(peer->close_tx->input[0].script_length != 0);
+	return peer->close_tx;
 }
 
 /* Create a bitcoin spend tx (to spend our commit's outputs) */
@@ -1448,3 +1512,48 @@ const struct json_command failhtlc_command = {
 	"Fail htlc proposed by {id} which has redeem hash {rhash}",
 	"Returns an empty result on success"
 };
+
+static void json_close(struct command *cmd,
+		       const char *buffer, const jsmntok_t *params)
+{
+	struct peer *peer;
+	jsmntok_t *idtok;
+	struct pubkey id;
+
+	json_get_params(buffer, params,
+			"id", &idtok,
+			NULL);
+
+	if (!idtok) {
+		command_fail(cmd, "Need id");
+		return;
+	}
+
+	if (!pubkey_from_hexstr(cmd->dstate->secpctx,
+				buffer + idtok->start,
+				idtok->end - idtok->start, &id)) {
+		command_fail(cmd, "Not a valid id");
+		return;
+	}
+	peer = find_peer(cmd->dstate, &id);
+	if (!peer) {
+		command_fail(cmd, "Could not find peer with that id");
+		return;
+	}
+	if (peer->cond == PEER_CLOSING) {
+		command_fail(cmd, "Peer is already closing");
+		return;
+	}
+
+	/* Unlike other things, CMD_CLOSE is always valid. */
+	log_debug(peer->log, "Sending CMD_CLOSE");
+	state_event(peer, CMD_CLOSE, NULL);
+	command_success(cmd, null_response(cmd));
+}
+	
+const struct json_command close_command = {
+	"close",
+	json_close,
+	"Close the channel with peer {id}",
+	"Returns an empty result on success"
+};
diff --git a/daemon/peer.h b/daemon/peer.h
index 904cd5708..c81414ef4 100644
--- a/daemon/peer.h
+++ b/daemon/peer.h
@@ -104,8 +104,9 @@ struct peer {
 	/* Number of HTLC updates (== number of previous commit txs) */
 	u64 num_htlcs;
 
-	/* Closing tx, once we've generated it */
+	/* Closing tx and signature once we've generated it */
 	struct bitcoin_tx *close_tx;
+	struct bitcoin_signature our_close_sig;
 	
 	/* Current ongoing packetflow */
 	struct io_data *io_data;
@@ -116,6 +117,9 @@ struct peer {
 	/* Things we're watching for (see watches.c) */
 	struct list_head watches;
 
+	/* Timeout for close_watch. */
+	struct oneshot *close_watch_timeout;
+	
 	/* Private keys for dealing with this peer. */
 	struct peer_secrets *secrets;
 
@@ -135,4 +139,6 @@ void make_commit_txs(const tal_t *ctx,
 void peer_add_htlc_expiry(struct peer *peer,
 			  const struct abs_locktime *expiry);
 
+bool peer_create_close_tx(struct peer *peer, u64 fee_satoshis);
+
 #endif /* LIGHTNING_DAEMON_PEER_H */
diff --git a/daemon/test/test.sh b/daemon/test/test.sh
index 66e574ae8..69aecf1c0 100755
--- a/daemon/test/test.sh
+++ b/daemon/test/test.sh
@@ -1,4 +1,4 @@
-#! /bin/sh -e
+#! /bin/sh -ex
 
 # We steal the test-cli scripts.
 cd test-cli
@@ -138,8 +138,33 @@ sleep 1
 # Back to how we were before.
 check_status 949999000 49000000 "" 0 1000000 ""
 
+$LCLI1 close $ID2
+
+sleep 1
+
+# They should be waiting for close.
+$LCLI1 getpeers | tr -s '\012\011 ' ' ' | fgrep '"STATE_CLOSE_WAIT_CLOSE"'
+$LCLI2 getpeers | tr -s '\012\011 ' ' ' | fgrep '"STATE_CLOSE_WAIT_CLOSE"'
+
+# Give it 99 blocks.
+$CLI generate 99
+
+# Make sure they saw it!
+$LCLI1 dev-mocktime $(($EXPIRY + 32))
+$LCLI2 dev-mocktime $(($EXPIRY + 32))
+sleep 1
+$LCLI1 getpeers | tr -s '\012\011 ' ' ' | fgrep '"STATE_CLOSE_WAIT_CLOSE"'
+$LCLI2 getpeers | tr -s '\012\011 ' ' ' | fgrep '"STATE_CLOSE_WAIT_CLOSE"'
+
+# Now the final one.
+$CLI generate 1
+$LCLI1 dev-mocktime $(($EXPIRY + 33))
+$LCLI2 dev-mocktime $(($EXPIRY + 33))
 sleep 1
 
+$LCLI1 getpeers | tr -s '\012\011 ' ' ' | fgrep '"peers" : [ ]'
+$LCLI2 getpeers | tr -s '\012\011 ' ' ' | fgrep '"peers" : [ ]'
+
 $LCLI1 stop
 $LCLI2 stop
 scripts/shutdown.sh
diff --git a/daemon/watch.c b/daemon/watch.c
index dc56467cc..7bdc30912 100644
--- a/daemon/watch.c
+++ b/daemon/watch.c
@@ -167,6 +167,24 @@ void add_commit_tx_watch_(struct peer *peer,
 	 * watch anything else. */
 }
 
+static void cb_no_arg(struct peer *peer, int depth, void *vcb)
+{
+	void (*cb)(struct peer *peer, int depth) = vcb;
+	cb(peer, depth);
+}
+
+void add_close_tx_watch(struct peer *peer,
+			const struct bitcoin_tx *tx,
+			void (*cb)(struct peer *peer, int depth))
+{
+	struct sha256_double txid;
+	bitcoin_txid(tx, &txid);
+	insert_txwatch(peer, peer->dstate, peer, &txid, cb_no_arg, cb);
+
+	/* We are already watching the anchor txo, so we don't need to
+	 * watch anything else. */
+}
+
 static void tx_watched_inputs(struct lightningd_state *dstate,
 			      const struct bitcoin_tx *tx, void *unused)
 {
diff --git a/daemon/watch.h b/daemon/watch.h
index d7ed44daa..d616480d0 100644
--- a/daemon/watch.h
+++ b/daemon/watch.h
@@ -94,5 +94,9 @@ void add_commit_tx_watch_(struct peer *peer,
 						 int depth),		\
 			     (cbdata))
 
+void add_close_tx_watch(struct peer *peer,
+			const struct bitcoin_tx *tx,
+			void (*cb)(struct peer *peer, int depth));
+
 void setup_watch_timer(struct lightningd_state *dstate);
 #endif /* LIGHTNING_DAEMON_WATCH_H */