diff --git a/lightningd/sphinx.c b/lightningd/sphinx.c
index 0bd99c7ab..7027faf0b 100644
--- a/lightningd/sphinx.c
+++ b/lightningd/sphinx.c
@@ -12,11 +12,13 @@
 
 #include <sodium/crypto_auth_hmacsha256.h>
 #include <sodium/crypto_stream_chacha20.h>
+#include <wire/wire.h>
 
 #define BLINDING_FACTOR_SIZE 32
 #define SHARED_SECRET_SIZE 32
 #define NUM_STREAM_BYTES ((2 * NUM_MAX_HOPS + 2) * SECURITY_PARAMETER)
 #define KEY_LEN 32
+#define ONION_REPLY_SIZE 128
 
 struct hop_params {
 	u8 secret[SHARED_SECRET_SIZE];
@@ -494,3 +496,91 @@ struct route_step *process_onionpacket(
 
 	return step;
 }
+
+u8 *create_onionreply(tal_t *ctx, const u8 *shared_secret,
+		      const u8 *failure_msg)
+{
+	size_t msglen = tal_len(failure_msg);
+	size_t padlen = ONION_REPLY_SIZE - msglen;
+	u8 *reply = tal_arr(ctx, u8, 0), *payload = tal_arr(ctx, u8, 0);
+	u8 key[KEY_LEN];
+	u8 hmac[20];
+
+	towire_u16(&payload, msglen);
+	towire(&payload, failure_msg, msglen);
+	towire_u16(&payload, padlen);
+	towire_pad(&payload, padlen);
+	assert(tal_len(payload) == ONION_REPLY_SIZE + 4);
+
+	generate_key(key, "um", 2, shared_secret);
+
+	compute_hmac(hmac, payload, tal_len(payload), key, KEY_LEN);
+	towire(&reply, hmac, sizeof(hmac));
+	towire(&reply, payload, tal_len(payload));
+	tal_free(payload);
+
+	return reply;
+}
+
+u8 *wrap_onionreply(tal_t *ctx, const u8 *shared_secret, const u8 *reply)
+{
+	u8 key[KEY_LEN];
+	size_t streamlen = tal_len(reply);
+	u8 stream[streamlen];
+	u8 *result = tal_arr(ctx, u8, streamlen);
+	generate_key(key, "ammag", 5, shared_secret);
+	generate_cipher_stream(stream, key, streamlen);
+	xorbytes(result, stream, reply, streamlen);
+	return result;
+}
+
+struct onionreply *unwrap_onionreply(tal_t *ctx, u8 **shared_secrets,
+				     const int numhops, const u8 *reply)
+{
+	tal_t *tmpctx = tal_tmpctx(ctx);
+	struct onionreply *oreply = tal(tmpctx, struct onionreply);
+	u8 *msg = tal_arr(oreply, u8, tal_len(reply));
+	u8 key[KEY_LEN], hmac[20];
+	const u8 *cursor;
+	size_t max;
+	u16 msglen;
+
+	memcpy(msg, reply, tal_len(reply));
+	oreply->origin_index = -1;
+
+	for (int i = 0; i < numhops; i++) {
+		/* Since the encryption is just XORing with the cipher
+		 * stream encryption is identical to decryption */
+		msg = wrap_onionreply(tmpctx, shared_secrets[i], msg);
+
+		/* Check if the HMAC matches, this means that this is
+		 * the origin */
+		generate_key(key, "um", 2, shared_secrets[i]);
+		compute_hmac(hmac, msg + sizeof(hmac),
+			     tal_len(msg) - sizeof(hmac), key, KEY_LEN);
+		if (memcmp(hmac, msg, sizeof(hmac)) == 0) {
+			oreply->origin_index = i;
+			break;
+		}
+	}
+	if (oreply->origin_index == -1) {
+		goto fail;
+	}
+
+	cursor = msg + sizeof(hmac);
+	max = tal_len(msg) - sizeof(hmac);
+	msglen = fromwire_u16(&cursor, &max);
+
+	if (msglen > ONION_REPLY_SIZE) {
+		goto fail;
+	}
+
+	oreply->msg = tal_arr(oreply, u8, msglen);
+	fromwire(&cursor, &max, oreply->msg, msglen);
+
+	tal_steal(ctx, oreply);
+	tal_free(tmpctx);
+	return oreply;
+fail:
+	return tal_free(tmpctx);
+}
diff --git a/lightningd/sphinx.h b/lightningd/sphinx.h
index 28e255045..8851b2485 100644
--- a/lightningd/sphinx.h
+++ b/lightningd/sphinx.h
@@ -121,7 +121,7 @@ u8 *serialize_onionpacket(
 	const struct onionpacket *packet);
 
 /**
- * parese_onionpacket - Parse an onionpacket from a buffer.
+ * parse_onionpacket - Parse an onionpacket from a buffer.
  *
  * @ctx: tal context to allocate from
  * @src: buffer to read the packet from
@@ -137,4 +137,41 @@ void pubkey_hash160(
 	u8 *dst,
 	const struct pubkey *pubkey);
 
+struct onionreply {
+	/* Node index in the path that is replying */
+	int origin_index;
+	u8 *msg;
+};
+
+/**
+ * create_onionreply - Format a failure message so we can return it
+ *
+ * @ctx: tal context to allocate from
+ * @shared_secret: The shared secret used in the forward direction, used for the
+ *     HMAC
+ * @failure_msg: message (must support tal_len)
+ */
+u8 *create_onionreply(tal_t *ctx, const u8 *shared_secret, const u8 *failure_msg);
+
+/**
+ * wrap_onionreply - Add another encryption layer to the reply.
+ *
+ * @ctx: tal context to allocate from
+ * @shared_secret: the shared secret associated with the HTLC, used for the
+ *     encryption.
+ * @reply: the reply to wrap
+ */
+u8 *wrap_onionreply(tal_t *ctx, const u8 *shared_secret, const u8 *reply);
+
+/**
+ * unwrap_onionreply - Remove layers, check integrity and parse reply
+ *
+ * @ctx: tal context to allocate from
+ * @shared_secrets: shared secrets from the forward path
+ * @numhops: path length and number of shared_secrets provided
+ * @reply: the incoming reply
+ */
+struct onionreply *unwrap_onionreply(tal_t *ctx, u8 **shared_secrets,
+				     const int numhops, const u8 *reply);
+
 #endif /* LIGHTNING_DAEMON_SPHINX_H */