diff --git a/core/transaction_pool.go b/core/transaction_pool.go
index 16f66efdcf..a0fb2a7a05 100644
--- a/core/transaction_pool.go
+++ b/core/transaction_pool.go
@@ -138,7 +138,6 @@ func (pool *TxPool) resetState() {
 			}
 		}
 	}
-
 	// Check the queue and move transactions over to the pending if possible
 	// or remove those that have become invalid
 	pool.checkQueue()
@@ -290,17 +289,15 @@ func (pool *TxPool) addTx(hash common.Hash, addr common.Address, tx *types.Trans
 }
 
 // Add queues a single transaction in the pool if it is valid.
-func (self *TxPool) Add(tx *types.Transaction) (err error) {
+func (self *TxPool) Add(tx *types.Transaction) error {
 	self.mu.Lock()
 	defer self.mu.Unlock()
 
-	err = self.add(tx)
-	if err == nil {
-		// check and validate the queueue
-		self.checkQueue()
+	if err := self.add(tx); err != nil {
+		return err
 	}
-
-	return
+	self.checkQueue()
+	return nil
 }
 
 // AddTransactions attempts to queue all valid transactions in txs.
@@ -406,51 +403,55 @@ func (pool *TxPool) checkQueue() {
 		pool.resetState()
 	}
 
-	var addq txQueue
+	var promote txQueue
 	for address, txs := range pool.queue {
-		// guessed nonce is the nonce currently kept by the tx pool (pending state)
-		guessedNonce := pool.pendingState.GetNonce(address)
-		// true nonce is the nonce known by the last state
 		currentState, err := pool.currentState()
 		if err != nil {
 			glog.Errorf("could not get current state: %v", err)
 			return
 		}
-		trueNonce := currentState.GetNonce(address)
-		addq := addq[:0]
+		balance := currentState.GetBalance(address)
+
+		var (
+			guessedNonce = pool.pendingState.GetNonce(address) // nonce currently kept by the tx pool (pending state)
+			trueNonce    = currentState.GetNonce(address)      // nonce known by the last state
+		)
+		promote = promote[:0]
 		for hash, tx := range txs {
-			if tx.Nonce() < trueNonce {
-				// Drop queued transactions whose nonce is lower than
-				// the account nonce because they have been processed.
+			// Drop processed or out of fund transactions
+			if tx.Nonce() < trueNonce || balance.Cmp(tx.Cost()) < 0 {
+				if glog.V(logger.Core) {
+					glog.Infof("removed tx (%v) from pool queue: low tx nonce or out of funds\n", tx)
+				}
 				delete(txs, hash)
-			} else {
-				// Collect the remaining transactions for the next pass.
-				addq = append(addq, txQueueEntry{hash, address, tx})
-			}
-		}
-		// Find the next consecutive nonce range starting at the
-		// current account nonce.
-		sort.Sort(addq)
-		for i, e := range addq {
-			// start deleting the transactions from the queue if they exceed the limit
-			if i > maxQueued {
-				delete(pool.queue[address], e.hash)
 				continue
 			}
-
-			if e.Nonce() > guessedNonce {
-				if len(addq)-i > maxQueued {
+			// Collect the remaining transactions for the next pass.
+			promote = append(promote, txQueueEntry{hash, address, tx})
+		}
+		// Find the next consecutive nonce range starting at the current account nonce,
+		// pushing the guessed nonce forward if we add consecutive transactions.
+		sort.Sort(promote)
+		for i, entry := range promote {
+			// If we reached a gap in the nonces, enforce transaction limit and stop
+			if entry.Nonce() > guessedNonce {
+				if len(promote)-i > maxQueued {
 					if glog.V(logger.Debug) {
-						glog.Infof("Queued tx limit exceeded for %s. Tx %s removed\n", common.PP(address[:]), common.PP(e.hash[:]))
+						glog.Infof("Queued tx limit exceeded for %s. Tx %s removed\n", common.PP(address[:]), common.PP(entry.hash[:]))
 					}
-					for j := i + maxQueued; j < len(addq); j++ {
-						delete(txs, addq[j].hash)
+					for _, drop := range promote[i+maxQueued:] {
+						delete(txs, drop.hash)
 					}
 				}
 				break
 			}
-			delete(txs, e.hash)
-			pool.addTx(e.hash, address, e.Transaction)
+			// Otherwise promote the transaction and move the guess nonce if needed
+			pool.addTx(entry.hash, address, entry.Transaction)
+			delete(txs, entry.hash)
+
+			if entry.Nonce() == guessedNonce {
+				guessedNonce++
+			}
 		}
 		// Delete the entire queue entry if it became empty.
 		if len(txs) == 0 {
@@ -460,20 +461,56 @@ func (pool *TxPool) checkQueue() {
 }
 
 // validatePool removes invalid and processed transactions from the main pool.
+// If a transaction is removed for being invalid (e.g. out of funds), all sub-
+// sequent (Still valid) transactions are moved back into the future queue. This
+// is important to prevent a drained account from DOSing the network with non
+// executable transactions.
 func (pool *TxPool) validatePool() {
 	state, err := pool.currentState()
 	if err != nil {
 		glog.V(logger.Info).Infoln("failed to get current state: %v", err)
 		return
 	}
+	balanceCache := make(map[common.Address]*big.Int)
+
+	// Clean up the pending pool, accumulating invalid nonces
+	gaps := make(map[common.Address]uint64)
+
 	for hash, tx := range pool.pending {
-		from, _ := tx.From() // err already checked
-		// perform light nonce validation
-		if state.GetNonce(from) > tx.Nonce() {
+		sender, _ := tx.From() // err already checked
+
+		// Perform light nonce and balance validation
+		balance := balanceCache[sender]
+		if balance == nil {
+			balance = state.GetBalance(sender)
+			balanceCache[sender] = balance
+		}
+		if past := state.GetNonce(sender) > tx.Nonce(); past || balance.Cmp(tx.Cost()) < 0 {
+			// Remove an already past it invalidated transaction
 			if glog.V(logger.Core) {
-				glog.Infof("removed tx (%x) from pool: low tx nonce\n", hash[:4])
+				glog.Infof("removed tx (%v) from pool: low tx nonce or out of funds\n", tx)
 			}
 			delete(pool.pending, hash)
+
+			// Track the smallest invalid nonce to postpone subsequent transactions
+			if !past {
+				if prev, ok := gaps[sender]; !ok || tx.Nonce() < prev {
+					gaps[sender] = tx.Nonce()
+				}
+			}
+		}
+	}
+	// Move all transactions after a gap back to the future queue
+	if len(gaps) > 0 {
+		for hash, tx := range pool.pending {
+			sender, _ := tx.From()
+			if gap, ok := gaps[sender]; ok && tx.Nonce() >= gap {
+				if glog.V(logger.Core) {
+					glog.Infof("postponed tx (%v) due to introduced gap\n", tx)
+				}
+				pool.queueTx(hash, tx)
+				delete(pool.pending, hash)
+			}
 		}
 	}
 }
diff --git a/core/transaction_pool_test.go b/core/transaction_pool_test.go
index 229dcacf37..c24489e6bc 100644
--- a/core/transaction_pool_test.go
+++ b/core/transaction_pool_test.go
@@ -79,7 +79,7 @@ func TestTransactionQueue(t *testing.T) {
 	tx := transaction(0, big.NewInt(100), key)
 	from, _ := tx.From()
 	currentState, _ := pool.currentState()
-	currentState.AddBalance(from, big.NewInt(1))
+	currentState.AddBalance(from, big.NewInt(1000))
 	pool.queueTx(tx.Hash(), tx)
 
 	pool.checkQueue()
@@ -104,15 +104,17 @@ func TestTransactionQueue(t *testing.T) {
 	tx1 := transaction(0, big.NewInt(100), key)
 	tx2 := transaction(10, big.NewInt(100), key)
 	tx3 := transaction(11, big.NewInt(100), key)
+	from, _ = tx1.From()
+	currentState, _ = pool.currentState()
+	currentState.AddBalance(from, big.NewInt(1000))
 	pool.queueTx(tx1.Hash(), tx1)
 	pool.queueTx(tx2.Hash(), tx2)
 	pool.queueTx(tx3.Hash(), tx3)
-	from, _ = tx1.From()
 
 	pool.checkQueue()
 
 	if len(pool.pending) != 1 {
-		t.Error("expected tx pool to be 1 =")
+		t.Error("expected tx pool to be 1, got", len(pool.pending))
 	}
 	if len(pool.queue[from]) != 2 {
 		t.Error("expected len(queue) == 2, got", len(pool.queue[from]))
@@ -261,3 +263,264 @@ func TestRemovedTxEvent(t *testing.T) {
 		t.Error("expected 1 pending tx, got", len(pool.pending))
 	}
 }
+
+// Tests that if an account runs out of funds, any pending and queued transactions
+// are dropped.
+func TestTransactionDropping(t *testing.T) {
+	// Create a test account and fund it
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000))
+
+	// Add some pending and some queued transactions
+	var (
+		tx0  = transaction(0, big.NewInt(100), key)
+		tx1  = transaction(1, big.NewInt(200), key)
+		tx10 = transaction(10, big.NewInt(100), key)
+		tx11 = transaction(11, big.NewInt(200), key)
+	)
+	pool.addTx(tx0.Hash(), account, tx0)
+	pool.addTx(tx1.Hash(), account, tx1)
+	pool.queueTx(tx10.Hash(), tx10)
+	pool.queueTx(tx11.Hash(), tx11)
+
+	// Check that pre and post validations leave the pool as is
+	if len(pool.pending) != 2 {
+		t.Errorf("pending transaction mismatch: have %d, want %d", len(pool.pending), 2)
+	}
+	if len(pool.queue[account]) != 2 {
+		t.Errorf("queued transaction mismatch: have %d, want %d", len(pool.queue), 2)
+	}
+	pool.resetState()
+	if len(pool.pending) != 2 {
+		t.Errorf("pending transaction mismatch: have %d, want %d", len(pool.pending), 2)
+	}
+	if len(pool.queue[account]) != 2 {
+		t.Errorf("queued transaction mismatch: have %d, want %d", len(pool.queue), 2)
+	}
+	// Reduce the balance of the account, and check that invalidated transactions are dropped
+	state.AddBalance(account, big.NewInt(-750))
+	pool.resetState()
+
+	if _, ok := pool.pending[tx0.Hash()]; !ok {
+		t.Errorf("funded pending transaction missing: %v", tx0)
+	}
+	if _, ok := pool.pending[tx1.Hash()]; ok {
+		t.Errorf("out-of-fund pending transaction present: %v", tx1)
+	}
+	if _, ok := pool.queue[account][tx10.Hash()]; !ok {
+		t.Errorf("funded queued transaction missing: %v", tx10)
+	}
+	if _, ok := pool.queue[account][tx11.Hash()]; ok {
+		t.Errorf("out-of-fund queued transaction present: %v", tx11)
+	}
+}
+
+// Tests that if a transaction is dropped from the current pending pool (e.g. out
+// of fund), all consecutive (still valid, but not executable) transactions are
+// postponed back into the future queue to prevent broadcating them.
+func TestTransactionPostponing(t *testing.T) {
+	// Create a test account and fund it
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000))
+
+	// Add a batch consecutive pending transactions for validation
+	txns := []*types.Transaction{}
+	for i := 0; i < 100; i++ {
+		var tx *types.Transaction
+		if i%2 == 0 {
+			tx = transaction(uint64(i), big.NewInt(100), key)
+		} else {
+			tx = transaction(uint64(i), big.NewInt(500), key)
+		}
+		pool.addTx(tx.Hash(), account, tx)
+		txns = append(txns, tx)
+	}
+	// Check that pre and post validations leave the pool as is
+	if len(pool.pending) != len(txns) {
+		t.Errorf("pending transaction mismatch: have %d, want %d", len(pool.pending), len(txns))
+	}
+	if len(pool.queue[account]) != 0 {
+		t.Errorf("queued transaction mismatch: have %d, want %d", len(pool.queue), 0)
+	}
+	pool.resetState()
+	if len(pool.pending) != len(txns) {
+		t.Errorf("pending transaction mismatch: have %d, want %d", len(pool.pending), len(txns))
+	}
+	if len(pool.queue[account]) != 0 {
+		t.Errorf("queued transaction mismatch: have %d, want %d", len(pool.queue), 0)
+	}
+	// Reduce the balance of the account, and check that transactions are reorganized
+	state.AddBalance(account, big.NewInt(-750))
+	pool.resetState()
+
+	if _, ok := pool.pending[txns[0].Hash()]; !ok {
+		t.Errorf("tx %d: valid and funded transaction missing from pending pool: %v", 0, txns[0])
+	}
+	if _, ok := pool.queue[account][txns[0].Hash()]; ok {
+		t.Errorf("tx %d: valid and funded transaction present in future queue: %v", 0, txns[0])
+	}
+	for i, tx := range txns[1:] {
+		if i%2 == 1 {
+			if _, ok := pool.pending[tx.Hash()]; ok {
+				t.Errorf("tx %d: valid but future transaction present in pending pool: %v", i+1, tx)
+			}
+			if _, ok := pool.queue[account][tx.Hash()]; !ok {
+				t.Errorf("tx %d: valid but future transaction missing from future queue: %v", i+1, tx)
+			}
+		} else {
+			if _, ok := pool.pending[tx.Hash()]; ok {
+				t.Errorf("tx %d: out-of-fund transaction present in pending pool: %v", i+1, tx)
+			}
+			if _, ok := pool.queue[account][tx.Hash()]; ok {
+				t.Errorf("tx %d: out-of-fund transaction present in future queue: %v", i+1, tx)
+			}
+		}
+	}
+}
+
+// Tests that if the transaction count belonging to a single account goes above
+// some threshold, the higher transactions are dropped to prevent DOS attacks.
+func TestTransactionQueueLimiting(t *testing.T) {
+	// Create a test account and fund it
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000000))
+
+	// Keep queuing up transactions and make sure all above a limit are dropped
+	for i := uint64(1); i <= maxQueued+5; i++ {
+		if err := pool.Add(transaction(i, big.NewInt(100000), key)); err != nil {
+			t.Fatalf("tx %d: failed to add transaction: %v", i, err)
+		}
+		if len(pool.pending) != 0 {
+			t.Errorf("tx %d: pending pool size mismatch: have %d, want %d", i, len(pool.pending), 0)
+		}
+		if i <= maxQueued {
+			if len(pool.queue[account]) != int(i) {
+				t.Errorf("tx %d: queue size mismatch: have %d, want %d", i, len(pool.queue[account]), i)
+			}
+		} else {
+			if len(pool.queue[account]) != maxQueued {
+				t.Errorf("tx %d: queue limit mismatch: have %d, want %d", i, len(pool.queue[account]), maxQueued)
+			}
+		}
+	}
+}
+
+// Tests that even if the transaction count belonging to a single account goes
+// above some threshold, as long as the transactions are executable, they are
+// accepted.
+func TestTransactionPendingLimiting(t *testing.T) {
+	// Create a test account and fund it
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000000))
+
+	// Keep queuing up transactions and make sure all above a limit are dropped
+	for i := uint64(0); i < maxQueued+5; i++ {
+		if err := pool.Add(transaction(i, big.NewInt(100000), key)); err != nil {
+			t.Fatalf("tx %d: failed to add transaction: %v", i, err)
+		}
+		if len(pool.pending) != int(i)+1 {
+			t.Errorf("tx %d: pending pool size mismatch: have %d, want %d", i, len(pool.pending), i+1)
+		}
+		if len(pool.queue[account]) != 0 {
+			t.Errorf("tx %d: queue size mismatch: have %d, want %d", i, len(pool.queue[account]), 0)
+		}
+	}
+}
+
+// Tests that the transaction limits are enforced the same way irrelevant whether
+// the transactions are added one by one or in batches.
+func TestTransactionQueueLimitingEquivalency(t *testing.T)   { testTransactionLimitingEquivalency(t, 1) }
+func TestTransactionPendingLimitingEquivalency(t *testing.T) { testTransactionLimitingEquivalency(t, 0) }
+
+func testTransactionLimitingEquivalency(t *testing.T, origin uint64) {
+	// Add a batch of transactions to a pool one by one
+	pool1, key1 := setupTxPool()
+	account1, _ := transaction(0, big.NewInt(0), key1).From()
+	state1, _ := pool1.currentState()
+	state1.AddBalance(account1, big.NewInt(1000000))
+
+	for i := uint64(0); i < maxQueued+5; i++ {
+		if err := pool1.Add(transaction(origin+i, big.NewInt(100000), key1)); err != nil {
+			t.Fatalf("tx %d: failed to add transaction: %v", i, err)
+		}
+	}
+	// Add a batch of transactions to a pool in one bit batch
+	pool2, key2 := setupTxPool()
+	account2, _ := transaction(0, big.NewInt(0), key2).From()
+	state2, _ := pool2.currentState()
+	state2.AddBalance(account2, big.NewInt(1000000))
+
+	txns := []*types.Transaction{}
+	for i := uint64(0); i < maxQueued+5; i++ {
+		txns = append(txns, transaction(origin+i, big.NewInt(100000), key2))
+	}
+	pool2.AddTransactions(txns)
+
+	// Ensure the batch optimization honors the same pool mechanics
+	if len(pool1.pending) != len(pool2.pending) {
+		t.Errorf("pending transaction count mismatch: one-by-one algo: %d, batch algo: %d", len(pool1.pending), len(pool2.pending))
+	}
+	if len(pool1.queue[account1]) != len(pool2.queue[account2]) {
+		t.Errorf("queued transaction count mismatch: one-by-one algo: %d, batch algo: %d", len(pool1.queue[account1]), len(pool2.queue[account2]))
+	}
+}
+
+// Benchmarks the speed of validating the contents of the pending queue of the
+// transaction pool.
+func BenchmarkValidatePool100(b *testing.B)   { benchmarkValidatePool(b, 100) }
+func BenchmarkValidatePool1000(b *testing.B)  { benchmarkValidatePool(b, 1000) }
+func BenchmarkValidatePool10000(b *testing.B) { benchmarkValidatePool(b, 10000) }
+
+func benchmarkValidatePool(b *testing.B, size int) {
+	// Add a batch of transactions to a pool one by one
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000000))
+
+	for i := 0; i < size; i++ {
+		tx := transaction(uint64(i), big.NewInt(100000), key)
+		pool.addTx(tx.Hash(), account, tx)
+	}
+	// Benchmark the speed of pool validation
+	b.ResetTimer()
+	for i := 0; i < b.N; i++ {
+		pool.validatePool()
+	}
+}
+
+// Benchmarks the speed of scheduling the contents of the future queue of the
+// transaction pool.
+func BenchmarkCheckQueue100(b *testing.B)   { benchmarkCheckQueue(b, 100) }
+func BenchmarkCheckQueue1000(b *testing.B)  { benchmarkCheckQueue(b, 1000) }
+func BenchmarkCheckQueue10000(b *testing.B) { benchmarkCheckQueue(b, 10000) }
+
+func benchmarkCheckQueue(b *testing.B, size int) {
+	// Add a batch of transactions to a pool one by one
+	pool, key := setupTxPool()
+	account, _ := transaction(0, big.NewInt(0), key).From()
+	state, _ := pool.currentState()
+	state.AddBalance(account, big.NewInt(1000000))
+
+	for i := 0; i < size; i++ {
+		tx := transaction(uint64(1+i), big.NewInt(100000), key)
+		pool.queueTx(tx.Hash(), tx)
+	}
+	// Benchmark the speed of pool validation
+	b.ResetTimer()
+	for i := 0; i < b.N; i++ {
+		pool.checkQueue()
+	}
+}