diff --git a/CHANGELOG.md b/CHANGELOG.md
index 3ce0b33b7d..a8280aa2f1 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -31,6 +31,7 @@
 * (store) [#1526](https://github.com/crypto-org-chain/cronos/pull/1526) Cache index/filters in rocksdb application.db to reduce ram usage.
 * (store)[#1529](https://github.com/crypto-org-chain/cronos/pull/1529) Enable pinL0FilterAndIndexBlocksInCache.
 * (store)[#1547](https://github.com/crypto-org-chain/cronos/pull/1547) Disable memiavl cache if block-stm is enabled.
+* (app) [#1563](https://github.com/crypto-org-chain/cronos/pull/1563) Only replace tx if new priority is larger.
 
 ### Bug Fixes
 
diff --git a/app/app.go b/app/app.go
index 7da2128af5..7e503881e2 100644
--- a/app/app.go
+++ b/app/app.go
@@ -375,6 +375,10 @@ func New(
 			TxPriority:      mempool.NewDefaultTxPriority(),
 			SignerExtractor: evmapp.NewEthSignerExtractionAdapter(mempool.NewDefaultSignerExtractionAdapter()),
 			MaxTx:           maxTxs,
+			TxReplacement: func(op, np int64, oTx, nTx sdk.Tx) bool {
+				// tx is only replaced if new priority is higher than old priority
+				return np > op
+			},
 		})
 		handler := baseapp.NewDefaultProposalHandler(mempool, app)
 
diff --git a/integration_tests/test_mempool.py b/integration_tests/test_mempool.py
index bdd921cab1..f70c663e49 100644
--- a/integration_tests/test_mempool.py
+++ b/integration_tests/test_mempool.py
@@ -80,3 +80,37 @@ def test_blocked_address(cronos_mempool):
     rsp = cli.transfer("signer1", cli.address("validator"), "1basecro")
     assert rsp["code"] != 0
     assert "signer is blocked" in rsp["raw_log"]
+
+
+@pytest.mark.flaky(max_runs=5)
+def test_tx_replacement(cronos_mempool):
+    w3: Web3 = cronos_mempool.w3
+    account = "community"
+    nonce = w3.eth.get_transaction_count(ADDRS[account])
+    gas_price = w3.eth.gas_price
+    reduction = 1000000
+    # the second tx should replace the first tx with higher priority,
+    # but the third one shouldn't replace the second one.
+    prices = [
+        gas_price,
+        gas_price + 2 * reduction,
+        gas_price + reduction,
+    ]
+    txs = [
+        sign_transaction(
+            w3,
+            {
+                "to": ADDRS[account],
+                "value": 1,
+                "gas": 21000,
+                "gasPrice": price,
+                "nonce": nonce,
+            },
+            KEYS[account],
+        )
+        for price in prices
+    ]
+
+    txhashes = [w3.eth.send_raw_transaction(tx.rawTransaction) for tx in txs]
+    receipt = w3.eth.wait_for_transaction_receipt(txhashes[1])
+    assert receipt.status == 1