diff --git a/close_tx.h b/close_tx.h
index aa26d691e..e52349e83 100644
--- a/close_tx.h
+++ b/close_tx.h
@@ -6,6 +6,7 @@
 #include <ccan/tal/tal.h>
 
 struct sha256_double;
+struct pubkey;
 
 /* Create close tx to spend the anchor tx output; doesn't fill in
  * input scriptsig. */
diff --git a/daemon/packets.c b/daemon/packets.c
index 537a71a60..e8eb03771 100644
--- a/daemon/packets.c
+++ b/daemon/packets.c
@@ -219,7 +219,23 @@ Pkt *pkt_err(const tal_t *ctx, const char *msg, ...)
 
 Pkt *pkt_close(const tal_t *ctx, const struct peer *peer)
 {
-	FIXME_STUB(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);
+	}
+
+	return make_pkt(ctx, PKT__PKT_CLOSE, c);
 }
 
 Pkt *pkt_close_complete(const tal_t *ctx, const struct peer *peer)
diff --git a/daemon/peer.c b/daemon/peer.c
index b0b5c66e3..4552b6ada 100644
--- a/daemon/peer.c
+++ b/daemon/peer.c
@@ -1,4 +1,5 @@
 #include "bitcoind.h"
+#include "close_tx.h"
 #include "commit_tx.h"
 #include "cryptopkt.h"
 #include "dns.h"
@@ -10,6 +11,7 @@
 #include "peer.h"
 #include "secrets.h"
 #include "state.h"
+#include "timeout.h"
 #include <bitcoin/base58.h>
 #include <bitcoin/script.h>
 #include <bitcoin/tx.h>
@@ -251,6 +253,7 @@ static struct peer *new_peer(struct lightningd_state *dstate,
 	peer->cmd = INPUT_NONE;
 	peer->current_htlc = NULL;
 	peer->num_htlcs = 0;
+	peer->close_tx = NULL;
 
 	/* If we free peer, conn should be closed, but can't be freed
 	 * immediately so don't make peer a parent. */
@@ -569,9 +572,25 @@ void peer_watch_tx(struct peer *peer,
 {
 	FIXME_STUB(peer);
 }
+
+static void send_close_timeout(struct peer *peer)
+{
+	update_state(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);
+
+	/* FIXME: We didn't send CLOSE, so timeout immediately */
+	if (!peer->conn) {
+		(void)send_close_timeout;
+		/* FIXME: oneshot_timeout(peer->dstate, peer, 0, send_close_timeout, peer); */
+		return;
+	}
+
 	FIXME_STUB(peer);
 }
 void peer_unwatch_close_timeout(struct peer *peer, enum state_input timedout)
diff --git a/daemon/peer.h b/daemon/peer.h
index 78b982e59..cc520074a 100644
--- a/daemon/peer.h
+++ b/daemon/peer.h
@@ -94,6 +94,9 @@ struct peer {
 	struct htlc_progress *current_htlc;
 	/* Number of HTLC updates (== number of previous commit txs) */
 	u64 num_htlcs;
+
+	/* Closing tx, once we've generated it */
+	struct bitcoin_tx *close_tx;
 	
 	/* Current ongoing packetflow */
 	struct io_data *io_data;
diff --git a/daemon/secrets.c b/daemon/secrets.c
index 1bee2af24..17118b200 100644
--- a/daemon/secrets.c
+++ b/daemon/secrets.c
@@ -55,6 +55,19 @@ void peer_sign_theircommit(const struct peer *peer,
 		      sig);
 }
 
+void peer_sign_mutual_close(const struct peer *peer,
+			    struct bitcoin_tx *close,
+			    struct signature *sig)
+{
+	sign_tx_input(peer->dstate->secpctx,
+		      close, 0,
+		      peer->anchor.redeemscript,
+		      tal_count(peer->anchor.redeemscript),
+		      &peer->secrets->commit,
+		      &peer->us.commitkey,
+		      sig);
+}
+
 static void new_keypair(struct lightningd_state *dstate,
 			struct privkey *privkey, struct pubkey *pubkey)
 {
diff --git a/daemon/secrets.h b/daemon/secrets.h
index 1125550ce..48ebba57f 100644
--- a/daemon/secrets.h
+++ b/daemon/secrets.h
@@ -16,6 +16,10 @@ void peer_sign_theircommit(const struct peer *peer,
 			   struct bitcoin_tx *commit,
 			   struct signature *sig);
 
+void peer_sign_mutual_close(const struct peer *peer,
+			    struct bitcoin_tx *close,
+			    struct signature *sig);
+
 void peer_secrets_init(struct peer *peer);
 
 void peer_get_revocation_hash(const struct peer *peer, u64 index,