diff --git a/Cargo.lock b/Cargo.lock
index 17f2d87d2..55ed996ed 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -285,6 +285,7 @@ dependencies = [
  "heapsize 0.3.3 (registry+https://github.com/rust-lang/crates.io-index)",
  "log 0.3.5 (registry+https://github.com/rust-lang/crates.io-index)",
  "rand 0.3.14 (registry+https://github.com/rust-lang/crates.io-index)",
+ "rustc-serialize 0.3.18 (registry+https://github.com/rust-lang/crates.io-index)",
  "time 0.1.34 (registry+https://github.com/rust-lang/crates.io-index)",
 ]
 
diff --git a/sync/Cargo.toml b/sync/Cargo.toml
index 26a7d463c..2ce65ca77 100644
--- a/sync/Cargo.toml
+++ b/sync/Cargo.toml
@@ -16,6 +16,7 @@ env_logger = "0.3"
 time = "0.1.34"
 rand = "0.3.13"
 heapsize = "0.3"
+rustc-serialize = "0.3"
 
 [features]
 default = []
diff --git a/sync/src/lib.rs b/sync/src/lib.rs
index 6f28fc320..74541660d 100644
--- a/sync/src/lib.rs
+++ b/sync/src/lib.rs
@@ -70,6 +70,8 @@ use io::NetSyncIo;
 mod chain;
 mod io;
 mod range_collection;
+// TODO [todr] Made public to suppress dead code warnings
+pub mod transaction_queue;
 
 #[cfg(test)]
 mod tests;
diff --git a/sync/src/transaction_queue.rs b/sync/src/transaction_queue.rs
new file mode 100644
index 000000000..4f5622a2f
--- /dev/null
+++ b/sync/src/transaction_queue.rs
@@ -0,0 +1,683 @@
+// Copyright 2015, 2016 Ethcore (UK) Ltd.
+// This file is part of Parity.
+
+// Parity is free software: you can redistribute it and/or modify
+// it under the terms of the GNU General Public License as published by
+// the Free Software Foundation, either version 3 of the License, or
+// (at your option) any later version.
+
+// Parity is distributed in the hope that it will be useful,
+// but WITHOUT ANY WARRANTY; without even the implied warranty of
+// MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+// GNU General Public License for more details.
+
+// You should have received a copy of the GNU General Public License
+// along with Parity.  If not, see <http://www.gnu.org/licenses/>.
+
+// TODO [todr] - own transactions should have higher priority
+
+//! Transaction Queue
+
+use std::cmp::{Ordering};
+use std::collections::{HashMap, BTreeSet};
+use util::numbers::{Uint, U256};
+use util::hash::{Address, H256};
+use util::table::*;
+use ethcore::transaction::*;
+
+
+#[derive(Clone, Debug)]
+struct TransactionOrder {
+	nonce_height: U256,
+	gas_price: U256,
+	hash: H256,
+}
+
+impl TransactionOrder {
+	fn for_transaction(tx: &VerifiedTransaction, base_nonce: U256) -> Self {
+		TransactionOrder {
+			nonce_height: tx.nonce() - base_nonce,
+			gas_price: tx.transaction.gas_price,
+			hash: tx.hash(),
+		}
+	}
+
+	fn update_height(mut self, nonce: U256, base_nonce: U256) -> Self {
+		self.nonce_height = nonce - base_nonce;
+		self
+	}
+}
+
+impl Eq for TransactionOrder {}
+impl PartialEq for TransactionOrder {
+	fn eq(&self, other: &TransactionOrder) -> bool {
+		self.cmp(other) == Ordering::Equal
+	}
+}
+impl PartialOrd for TransactionOrder {
+	fn partial_cmp(&self, other: &TransactionOrder) -> Option<Ordering> {
+		Some(self.cmp(other))
+	}
+}
+impl Ord for TransactionOrder {
+	fn cmp(&self, b: &TransactionOrder) -> Ordering {
+		// First check nonce_height
+		if self.nonce_height != b.nonce_height {
+			return self.nonce_height.cmp(&b.nonce_height);
+		}
+
+		// Then compare gas_prices
+		let a_gas = self.gas_price;
+		let b_gas = b.gas_price;
+		if a_gas != b_gas {
+			return a_gas.cmp(&b_gas);
+		}
+
+		// Compare hashes
+		self.hash.cmp(&b.hash)
+	}
+}
+
+struct VerifiedTransaction {
+	transaction: SignedTransaction
+}
+impl VerifiedTransaction {
+	fn new(transaction: SignedTransaction) -> Self {
+		VerifiedTransaction {
+			transaction: transaction
+		}
+	}
+
+	fn hash(&self) -> H256 {
+		self.transaction.hash()
+	}
+
+	fn nonce(&self) -> U256 {
+		self.transaction.nonce
+	}
+
+	fn sender(&self) -> Address {
+		self.transaction.sender().unwrap()
+	}
+}
+
+struct TransactionSet {
+	by_priority: BTreeSet<TransactionOrder>,
+	by_address: Table<Address, U256, TransactionOrder>,
+	limit: usize,
+}
+
+impl TransactionSet {
+	fn insert(&mut self, sender: Address, nonce: U256, order: TransactionOrder) {
+		self.by_priority.insert(order.clone());
+		self.by_address.insert(sender, nonce, order);
+	}
+
+	fn enforce_limit(&mut self, by_hash: &HashMap<H256, VerifiedTransaction>) {
+		let len = self.by_priority.len();
+		if len <= self.limit {
+			return;
+		}
+
+		let to_drop : Vec<&VerifiedTransaction> = {
+			self.by_priority
+				.iter()
+				.skip(self.limit)
+				.map(|order| by_hash.get(&order.hash).expect("Inconsistency in queue detected."))
+				.collect()
+		};
+
+		for tx in to_drop {
+			self.drop(&tx.sender(), &tx.nonce());
+		}
+	}
+
+	fn drop(&mut self, sender: &Address, nonce: &U256) -> Option<TransactionOrder> {
+		if let Some(tx_order) = self.by_address.remove(sender, nonce) {
+			self.by_priority.remove(&tx_order);
+			return Some(tx_order);
+		}
+		None
+	}
+
+	fn clear(&mut self) {
+		self.by_priority.clear();
+		self.by_address.clear();
+	}
+}
+
+#[derive(Debug)]
+/// Current status of the queue
+pub struct TransactionQueueStatus {
+	/// Number of pending transactions (ready to go to block)
+	pub pending: usize,
+	/// Number of future transactions (waiting for transactions with lower nonces first)
+	pub future: usize,
+}
+
+/// TransactionQueue implementation
+pub struct TransactionQueue {
+	/// Priority queue for transactions that can go to block
+	current: TransactionSet,
+	/// Priority queue for transactions that has been received but are not yet valid to go to block
+	future: TransactionSet,
+	/// All transactions managed by queue indexed by hash
+	by_hash: HashMap<H256, VerifiedTransaction>,
+	/// Last nonce of transaction in current (to quickly check next expected transaction)
+	last_nonces: HashMap<Address, U256>,
+}
+
+impl TransactionQueue {
+	/// Creates new instance of this Queue
+	pub fn new() -> Self {
+		Self::with_limits(1024, 1024)
+	}
+
+	/// Create new instance of this Queue with specified limits
+	pub fn with_limits(current_limit: usize, future_limit: usize) -> Self {
+		let current = TransactionSet {
+			by_priority: BTreeSet::new(),
+			by_address: Table::new(),
+			limit: current_limit,
+		};
+		let future = TransactionSet {
+			by_priority: BTreeSet::new(),
+			by_address: Table::new(),
+			limit: future_limit,
+		};
+
+		TransactionQueue {
+			current: current,
+			future: future,
+			by_hash: HashMap::new(),
+			last_nonces: HashMap::new(),
+		}
+	}
+
+	/// Returns current status for this queue
+	pub fn status(&self) -> TransactionQueueStatus {
+		TransactionQueueStatus {
+			pending: self.current.by_priority.len(),
+			future: self.future.by_priority.len(),
+		}
+	}
+
+	/// Adds all signed transactions to queue to be verified and imported
+	pub fn add_all<T>(&mut self, txs: Vec<SignedTransaction>, fetch_nonce: T)
+		where T: Fn(&Address) -> U256 {
+		for tx in txs.into_iter() {
+			self.add(tx, &fetch_nonce);
+		}
+	}
+
+	/// Add signed transaction to queue to be verified and imported
+	pub fn add<T>(&mut self, tx: SignedTransaction, fetch_nonce: &T)
+		where T: Fn(&Address) -> U256 {
+		self.import_tx(VerifiedTransaction::new(tx), fetch_nonce);
+	}
+
+	/// Removes all transactions identified by hashes given in slice
+	///
+	/// If gap is introduced marks subsequent transactions as future
+	pub fn remove_all<T>(&mut self, txs: &[H256], fetch_nonce: T)
+		where T: Fn(&Address) -> U256 {
+		for tx in txs {
+			self.remove(&tx, &fetch_nonce);
+		}
+	}
+
+	/// Removes transaction identified by hashes from queue.
+	///
+	/// If gap is introduced marks subsequent transactions as future
+	pub fn remove<T>(&mut self, hash: &H256, fetch_nonce: &T)
+		where T: Fn(&Address) -> U256 {
+		let transaction = self.by_hash.remove(hash);
+		if transaction.is_none() {
+			// We don't know this transaction
+			return;
+		}
+		let transaction = transaction.unwrap();
+		let sender = transaction.sender();
+		let nonce = transaction.nonce();
+
+		println!("Removing tx: {:?}", transaction.transaction);
+		// Remove from future
+		self.future.drop(&sender, &nonce);
+
+		// Remove from current
+		let order = self.current.drop(&sender, &nonce);
+		if order.is_none() {
+			return;
+		}
+
+		// Let's remove transactions where tx.nonce < current_nonce
+		// and if there are any future transactions matching current_nonce+1 - move to current
+		let current_nonce = fetch_nonce(&sender);
+		// We will either move transaction to future or remove it completely
+		// so there will be no transactions from this sender in current
+		self.last_nonces.remove(&sender);
+
+		let all_nonces_from_sender = match self.current.by_address.row(&sender) {
+			Some(row_map) => row_map.keys().cloned().collect::<Vec<U256>>(),
+			None => vec![],
+		};
+
+		for k in all_nonces_from_sender {
+			// Goes to future or is removed
+			let order = self.current.drop(&sender, &k).unwrap();
+			if k >= current_nonce {
+				println!("Moving to future: {:?}", order);
+				self.future.insert(sender.clone(), k, order.update_height(k, current_nonce));
+			} else {
+				self.by_hash.remove(&order.hash);
+			}
+		}
+		self.future.enforce_limit(&self.by_hash);
+
+		// And now lets check if there is some chain of transactions in future
+		// that should be placed in current
+		if let Some(new_current_top) = self.move_future_txs(sender.clone(), current_nonce - U256::one(), current_nonce) {
+			self.last_nonces.insert(sender, new_current_top);
+		}
+	}
+
+	/// Returns top transactions from the queue
+	pub fn top_transactions(&self, size: usize) -> Vec<SignedTransaction> {
+		self.current.by_priority
+			.iter()
+			.take(size)
+			.map(|t| self.by_hash.get(&t.hash).expect("Transaction Queue Inconsistency"))
+			.map(|t| t.transaction.clone())
+			.collect()
+	}
+
+	/// Removes all elements (in any state) from the queue
+	pub fn clear(&mut self) {
+		self.current.clear();
+		self.future.clear();
+		self.by_hash.clear();
+		self.last_nonces.clear();
+	}
+
+	fn move_future_txs(&mut self, address: Address, current_nonce: U256, first_nonce: U256) -> Option<U256> {
+		println!("Moving from future for: {:?} base: {:?}", current_nonce, first_nonce);
+		let mut current_nonce = current_nonce + U256::one();
+		{
+			let by_nonce = self.future.by_address.row_mut(&address);
+			if let None = by_nonce {
+				return None;
+			}
+			let mut by_nonce = by_nonce.unwrap();
+			while let Some(order) = by_nonce.remove(&current_nonce) {
+				// remove also from priority and hash
+				self.future.by_priority.remove(&order);
+				// Put to current
+				println!("Moved: {:?}", order);
+				let order = order.update_height(current_nonce.clone(), first_nonce);
+				self.current.insert(address.clone(), current_nonce, order);
+				current_nonce = current_nonce + U256::one();
+			}
+		}
+		self.future.by_address.clear_if_empty(&address);
+		// Returns last inserted nonce
+		Some(current_nonce - U256::one())
+	}
+
+	fn import_tx<T>(&mut self, tx: VerifiedTransaction, fetch_nonce: &T)
+		where T: Fn(&Address) -> U256 {
+		let nonce = tx.nonce();
+		let address = tx.sender();
+
+		let next_nonce = self.last_nonces
+			.get(&address)
+			.cloned()
+			.map_or_else(|| fetch_nonce(&address), |n| n + U256::one());
+
+		println!("Expected next: {:?}, got: {:?}", next_nonce, nonce);
+		// Check height
+		if nonce > next_nonce {
+			let order = TransactionOrder::for_transaction(&tx, next_nonce);
+			// Insert to by_hash
+			self.by_hash.insert(tx.hash(), tx);
+			// We have a gap - put to future
+			self.future.insert(address, nonce, order);
+			self.future.enforce_limit(&self.by_hash);
+			return;
+		} else if next_nonce > nonce {
+			// Droping transaction
+			return;
+		}
+
+		let base_nonce = fetch_nonce(&address);
+		let order = TransactionOrder::for_transaction(&tx, base_nonce);
+		// Insert to by_hash
+		self.by_hash.insert(tx.hash(), tx);
+
+		// Insert to current
+		self.current.insert(address.clone(), nonce, order);
+		// But maybe there are some more items waiting in future?
+		let new_last_nonce = self.move_future_txs(address.clone(), nonce, base_nonce);
+		self.last_nonces.insert(address.clone(), new_last_nonce.unwrap_or(nonce));
+		// Enforce limit
+		self.current.enforce_limit(&self.by_hash);
+	}
+}
+
+
+#[cfg(test)]
+mod test {
+	extern crate rustc_serialize;
+	use self::rustc_serialize::hex::FromHex;
+	use std::collections::{HashMap, BTreeSet};
+	use util::crypto::KeyPair;
+	use util::numbers::{U256, Uint};
+	use util::hash::{Address};
+	use util::table::*;
+	use ethcore::transaction::*;
+	use super::*;
+	use super::{TransactionSet, TransactionOrder, VerifiedTransaction};
+
+	fn new_unsigned_tx(nonce: U256) -> Transaction {
+		Transaction {
+			action: Action::Create,
+			value: U256::from(100),
+			data: "3331600055".from_hex().unwrap(),
+			gas: U256::from(100_000),
+			gas_price: U256::one(),
+			nonce: nonce
+		}
+	}
+
+	fn new_tx() -> SignedTransaction {
+		let keypair = KeyPair::create().unwrap();
+		new_unsigned_tx(U256::from(123)).sign(&keypair.secret())
+	}
+
+	fn default_nonce(_address: &Address) -> U256 {
+		U256::from(123)
+	}
+
+	fn new_txs(second_nonce: U256) -> (SignedTransaction, SignedTransaction) {
+		let keypair = KeyPair::create().unwrap();
+		let secret = &keypair.secret();
+		let nonce = U256::from(123);
+		let tx = new_unsigned_tx(nonce);
+		let tx2 = new_unsigned_tx(nonce + second_nonce);
+
+		(tx.sign(secret), tx2.sign(secret))
+	}
+
+	#[test]
+	fn should_create_transaction_set() {
+		// given
+		let mut set = TransactionSet {
+			by_priority: BTreeSet::new(),
+			by_address: Table::new(),
+			limit: 1
+		};
+		let (tx1, tx2) = new_txs(U256::from(1));
+		let tx1 = VerifiedTransaction::new(tx1);
+		let tx2 = VerifiedTransaction::new(tx2);
+		let by_hash = {
+			let mut x = HashMap::new();
+			let tx1 = VerifiedTransaction::new(tx1.transaction.clone());
+			let tx2 = VerifiedTransaction::new(tx2.transaction.clone());
+			x.insert(tx1.hash(), tx1);
+			x.insert(tx2.hash(), tx2);
+			x
+		};
+		// Insert both transactions
+		let order1 = TransactionOrder::for_transaction(&tx1, U256::zero());
+		set.insert(tx1.sender(), tx1.nonce(), order1.clone());
+		let order2 = TransactionOrder::for_transaction(&tx2, U256::zero());
+		set.insert(tx2.sender(), tx2.nonce(), order2.clone());
+		assert_eq!(set.by_priority.len(), 2);
+		assert_eq!(set.by_address.len(), 2);
+
+		// when
+		set.enforce_limit(&by_hash);
+
+		// then
+		assert_eq!(set.by_priority.len(), 1);
+		assert_eq!(set.by_address.len(), 1);
+		assert_eq!(set.by_priority.iter().next().unwrap().clone(), order1);
+		set.clear();
+		assert_eq!(set.by_priority.len(), 0);
+		assert_eq!(set.by_address.len(), 0);
+	}
+
+
+	#[test]
+	fn should_import_tx() {
+		// given
+		let mut txq = TransactionQueue::new();
+		let tx = new_tx();
+
+		// when
+		txq.add(tx, &default_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.pending, 1);
+	}
+
+	#[test]
+	fn should_import_txs_from_same_sender() {
+		// given
+		let mut txq = TransactionQueue::new();
+
+		let (tx, tx2) = new_txs(U256::from(1));
+
+		// when
+		txq.add(tx.clone(), &default_nonce);
+		txq.add(tx2.clone(), &default_nonce);
+
+		// then
+		let top = txq.top_transactions(5);
+		assert_eq!(top[0], tx);
+		assert_eq!(top[1], tx2);
+		assert_eq!(top.len(), 2);
+	}
+
+	#[test]
+	fn should_put_transaction_to_futures_if_gap_detected() {
+		// given
+		let mut txq = TransactionQueue::new();
+
+		let (tx, tx2) = new_txs(U256::from(2));
+
+		// when
+		txq.add(tx.clone(), &default_nonce);
+		txq.add(tx2.clone(), &default_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.pending, 1);
+		assert_eq!(stats.future, 1);
+		let top = txq.top_transactions(5);
+		assert_eq!(top.len(), 1);
+		assert_eq!(top[0], tx);
+	}
+
+	#[test]
+	fn should_move_transactions_if_gap_filled() {
+		// given
+		let mut txq = TransactionQueue::new();
+		let kp = KeyPair::create().unwrap();
+		let secret = kp.secret();
+		let tx = new_unsigned_tx(U256::from(123)).sign(&secret);
+		let tx1 = new_unsigned_tx(U256::from(124)).sign(&secret);
+		let tx2 = new_unsigned_tx(U256::from(125)).sign(&secret);
+
+		txq.add(tx, &default_nonce);
+		assert_eq!(txq.status().pending, 1);
+		txq.add(tx2, &default_nonce);
+		assert_eq!(txq.status().future, 1);
+
+		// when
+		txq.add(tx1, &default_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.pending, 3);
+		assert_eq!(stats.future, 0);
+	}
+
+	#[test]
+	fn should_remove_transaction() {
+		// given
+		let mut txq2 = TransactionQueue::new();
+		let (tx, tx2) = new_txs(U256::from(3));
+		txq2.add(tx.clone(), &default_nonce);
+		txq2.add(tx2.clone(), &default_nonce);
+		assert_eq!(txq2.status().pending, 1);
+		assert_eq!(txq2.status().future, 1);
+
+		// when
+		txq2.remove(&tx.hash(), &default_nonce);
+		txq2.remove(&tx2.hash(), &default_nonce);
+
+
+		// then
+		let stats = txq2.status();
+		assert_eq!(stats.pending, 0);
+		assert_eq!(stats.future, 0);
+	}
+
+	#[test]
+	fn should_move_transactions_to_future_if_gap_introduced() {
+		// given
+		let mut txq = TransactionQueue::new();
+		let (tx, tx2) = new_txs(U256::from(1));
+		let tx3 = new_tx();
+		txq.add(tx2.clone(), &default_nonce);
+		assert_eq!(txq.status().future, 1);
+		txq.add(tx3.clone(), &default_nonce);
+		txq.add(tx.clone(), &default_nonce);
+		assert_eq!(txq.status().pending, 3);
+
+		// when
+		txq.remove(&tx.hash(), &default_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.future, 1);
+		assert_eq!(stats.pending, 1);
+	}
+
+	#[test]
+	fn should_clear_queue() {
+		// given
+		let mut txq = TransactionQueue::new();
+		let (tx, tx2) = new_txs(U256::one());
+
+		// add
+		txq.add(tx2.clone(), &default_nonce);
+		txq.add(tx.clone(), &default_nonce);
+		let stats = txq.status();
+		assert_eq!(stats.pending, 2);
+
+		// when
+		txq.clear();
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.pending, 0);
+	}
+
+	#[test]
+	fn should_drop_old_transactions_when_hitting_the_limit() {
+		// given
+		let mut txq = TransactionQueue::with_limits(1, 1);
+		let (tx, tx2) = new_txs(U256::one());
+		txq.add(tx.clone(), &default_nonce);
+		assert_eq!(txq.status().pending, 1);
+
+		// when
+		txq.add(tx2.clone(), &default_nonce);
+
+		// then
+		let t = txq.top_transactions(2);
+		assert_eq!(txq.status().pending, 1);
+		assert_eq!(t.len(), 1);
+		assert_eq!(t[0], tx);
+	}
+
+	#[test]
+	fn should_limit_future_transactions() {
+		let mut txq = TransactionQueue::with_limits(10, 1);
+		let (tx1, tx2) = new_txs(U256::from(4));
+		let (tx3, tx4) = new_txs(U256::from(4));
+		txq.add(tx1.clone(), &default_nonce);
+		txq.add(tx3.clone(), &default_nonce);
+		assert_eq!(txq.status().pending, 2);
+
+		// when
+		txq.add(tx2.clone(), &default_nonce);
+		assert_eq!(txq.status().future, 1);
+		txq.add(tx4.clone(), &default_nonce);
+
+		// then
+		assert_eq!(txq.status().future, 1);
+	}
+
+	#[test]
+	fn should_drop_transactions_with_old_nonces() {
+		let mut txq = TransactionQueue::new();
+		let tx = new_tx();
+		let last_nonce = tx.nonce.clone() + U256::one();
+		let fetch_last_nonce = |_a: &Address| last_nonce;
+
+		// when
+		txq.add(tx, &fetch_last_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.pending, 0);
+		assert_eq!(stats.future, 0);
+	}
+
+	#[test]
+	fn should_accept_same_transaction_twice() {
+		// given
+		let mut txq = TransactionQueue::new();
+		let (tx1, tx2) = new_txs(U256::from(1));
+		txq.add(tx1.clone(), &default_nonce);
+		txq.add(tx2.clone(), &default_nonce);
+		assert_eq!(txq.status().pending, 2);
+
+		// when
+		txq.remove(&tx1.hash(), &default_nonce);
+		assert_eq!(txq.status().pending, 0);
+		assert_eq!(txq.status().future, 1);
+		txq.add(tx1.clone(), &default_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.future, 0);
+		assert_eq!(stats.pending, 2);
+	}
+
+	#[test]
+	fn should_not_move_to_future_if_state_nonce_is_higher() {
+		// given
+		let next_nonce = |a: &Address| default_nonce(a) + U256::one();
+		let mut txq = TransactionQueue::new();
+		let (tx, tx2) = new_txs(U256::from(1));
+		let tx3 = new_tx();
+		txq.add(tx2.clone(), &default_nonce);
+		assert_eq!(txq.status().future, 1);
+		txq.add(tx3.clone(), &default_nonce);
+		txq.add(tx.clone(), &default_nonce);
+		assert_eq!(txq.status().pending, 3);
+
+		// when
+		txq.remove(&tx.hash(), &next_nonce);
+
+		// then
+		let stats = txq.status();
+		assert_eq!(stats.future, 0);
+		assert_eq!(stats.pending, 2);
+	}
+
+}