diff --git a/config/config.go b/config/config.go
index d84ee6e36..8f6658e11 100644
--- a/config/config.go
+++ b/config/config.go
@@ -46,7 +46,7 @@ type (
 		AddressVersion          byte      `yaml:"AddressVersion"`
 		SecondsPerBlock         int       `yaml:"SecondsPerBlock"`
 		LowPriorityThreshold    float64   `yaml:"LowPriorityThreshold"`
-		MaxTransactionsPerBlock int64     `yaml:"MaxTransactionsPerBlock"`
+		MaxTransactionsPerBlock int       `yaml:"MaxTransactionsPerBlock"`
 		MemPoolSize             int       `yaml:"MemPoolSize"`
 		StandbyValidators       []string  `yaml:"StandbyValidators"`
 		SeedList                []string  `yaml:"SeedList"`
@@ -59,6 +59,13 @@ type (
 		FreeGasLimit util.Fixed8 `yaml:"FreeGasLimit"`
 		// SaveStorageBatch enables storage batch saving before every persist.
 		SaveStorageBatch bool `yaml:"SaveStorageBatch"`
+		// Maximum number of low priority transactions accepted into block.
+		MaxFreeTransactionsPerBlock int `yaml:"MaxFreeTransactionsPerBlock"`
+		// Maximum size of low priority transaction in bytes.
+		MaxFreeTransactionSize int `yaml:"MaxFreeTransactionSize"`
+		// FeePerExtraByte sets the expected per-byte fee for
+		// transactions exceeding the MaxFreeTransactionSize.
+		FeePerExtraByte float64 `yaml:"FeePerExtraByte"`
 	}
 
 	// SystemFee fees related to system.
diff --git a/config/protocol.mainnet.yml b/config/protocol.mainnet.yml
index 601008add..b1f354fab 100644
--- a/config/protocol.mainnet.yml
+++ b/config/protocol.mainnet.yml
@@ -31,6 +31,10 @@ ProtocolConfiguration:
   VerifyBlocks: true
   VerifyTransactions: false
   FreeGasLimit: 10.0
+  MaxTransactionsPerBlock: 500
+  MaxFreeTransactionsPerBlock: 20
+  MaxFreeTransactionSize: 1024
+  FeePerExtraByte: 0.00001
 
 ApplicationConfiguration:
   # LogPath could be set up in case you need stdout logs to some proper file.
diff --git a/config/protocol.testnet.yml b/config/protocol.testnet.yml
index ecfe6e2af..09ea83a23 100644
--- a/config/protocol.testnet.yml
+++ b/config/protocol.testnet.yml
@@ -31,6 +31,10 @@ ProtocolConfiguration:
   VerifyBlocks: true
   VerifyTransactions: false
   FreeGasLimit: 10.0
+  MaxTransactionsPerBlock: 500
+  MaxFreeTransactionsPerBlock: 20
+  MaxFreeTransactionSize: 1024
+  FeePerExtraByte: 0.00001
 
 ApplicationConfiguration:
   # LogPath could be set up in case you need stdout logs to some proper file.
diff --git a/pkg/consensus/consensus.go b/pkg/consensus/consensus.go
index fc9bc88c8..463d99ef8 100644
--- a/pkg/consensus/consensus.go
+++ b/pkg/consensus/consensus.go
@@ -430,6 +430,10 @@ func (s *service) getVerifiedTx(count int) []block.Transaction {
 		txx = pool.GetVerifiedTransactions()
 	}
 
+	if len(txx) > 0 {
+		txx = s.Config.Chain.ApplyPolicyToTxSet(txx)
+	}
+
 	res := make([]block.Transaction, len(txx)+1)
 	var netFee util.Fixed8
 	for i := range txx {
diff --git a/pkg/core/blockchain.go b/pkg/core/blockchain.go
index 5199c643d..a75021378 100644
--- a/pkg/core/blockchain.go
+++ b/pkg/core/blockchain.go
@@ -49,6 +49,9 @@ var (
 	// ErrOOM is returned when adding transaction to the memory pool because
 	// it reached its full capacity.
 	ErrOOM = errors.New("no space left in the memory pool")
+	// ErrPolicy is returned on attempt to add transaction that doesn't
+	// comply with node's configured policy into the mempool.
+	ErrPolicy = errors.New("not allowed by policy")
 )
 var (
 	genAmount         = []int{8, 7, 6, 5, 4, 3, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1}
@@ -125,6 +128,22 @@ func NewBlockchain(s storage.Store, cfg config.ProtocolConfiguration, log *zap.L
 		cfg.MemPoolSize = defaultMemPoolSize
 		log.Info("mempool size is not set or wrong, setting default value", zap.Int("MemPoolSize", cfg.MemPoolSize))
 	}
+	if cfg.MaxTransactionsPerBlock <= 0 {
+		cfg.MaxTransactionsPerBlock = 0
+		log.Info("MaxTransactionsPerBlock is not set or wrong, setting default value (unlimited)", zap.Int("MaxTransactionsPerBlock", cfg.MaxTransactionsPerBlock))
+	}
+	if cfg.MaxFreeTransactionsPerBlock <= 0 {
+		cfg.MaxFreeTransactionsPerBlock = 0
+		log.Info("MaxFreeTransactionsPerBlock is not set or wrong, setting default value (unlimited)", zap.Int("MaxFreeTransactionsPerBlock", cfg.MaxFreeTransactionsPerBlock))
+	}
+	if cfg.MaxFreeTransactionSize <= 0 {
+		cfg.MaxFreeTransactionSize = 0
+		log.Info("MaxFreeTransactionSize is not set or wrong, setting default value (unlimited)", zap.Int("MaxFreeTransactionSize", cfg.MaxFreeTransactionSize))
+	}
+	if cfg.FeePerExtraByte <= 0 {
+		cfg.FeePerExtraByte = 0
+		log.Info("FeePerExtraByte is not set or wrong, setting default value", zap.Float64("FeePerExtraByte", cfg.FeePerExtraByte))
+	}
 	bc := &Blockchain{
 		config:        cfg,
 		dao:           newDao(s),
@@ -1030,6 +1049,24 @@ func (bc *Blockchain) GetMemPool() *mempool.Pool {
 	return &bc.memPool
 }
 
+// ApplyPolicyToTxSet applies configured policies to given transaction set. It
+// expects slice to be ordered by fee and returns a subslice of it.
+func (bc *Blockchain) ApplyPolicyToTxSet(txes []mempool.TxWithFee) []mempool.TxWithFee {
+	if bc.config.MaxTransactionsPerBlock != 0 && len(txes) > bc.config.MaxTransactionsPerBlock {
+		txes = txes[:bc.config.MaxTransactionsPerBlock]
+	}
+	maxFree := bc.config.MaxFreeTransactionsPerBlock
+	if maxFree != 0 {
+		lowStart := sort.Search(len(txes), func(i int) bool {
+			return bc.IsLowPriority(txes[i].Fee)
+		})
+		if lowStart+maxFree < len(txes) {
+			txes = txes[:lowStart+maxFree]
+		}
+	}
+	return txes
+}
+
 // VerifyBlock verifies block against its current state.
 func (bc *Blockchain) VerifyBlock(block *block.Block) error {
 	prevHeader, err := bc.GetHeader(block.PrevHash)
@@ -1127,6 +1164,18 @@ func (bc *Blockchain) PoolTx(t *transaction.Transaction) error {
 	if err := bc.verifyTx(t, nil); err != nil {
 		return err
 	}
+	// Policying.
+	if t.Type != transaction.ClaimType {
+		txSize := io.GetVarSize(t)
+		maxFree := bc.config.MaxFreeTransactionSize
+		if maxFree != 0 && txSize > maxFree {
+			netFee := bc.NetworkFee(t)
+			if bc.IsLowPriority(netFee) ||
+				netFee < util.Fixed8FromFloat(bc.config.FeePerExtraByte)*util.Fixed8(txSize-maxFree) {
+				return ErrPolicy
+			}
+		}
+	}
 	if err := bc.memPool.Add(t, bc); err != nil {
 		switch err {
 		case mempool.ErrOOM:
diff --git a/pkg/core/blockchainer.go b/pkg/core/blockchainer.go
index 79e6bc08f..dae78c48b 100644
--- a/pkg/core/blockchainer.go
+++ b/pkg/core/blockchainer.go
@@ -15,6 +15,7 @@ import (
 // Blockchainer is an interface that abstract the implementation
 // of the blockchain.
 type Blockchainer interface {
+	ApplyPolicyToTxSet([]mempool.TxWithFee) []mempool.TxWithFee
 	GetConfig() config.ProtocolConfiguration
 	AddHeaders(...*block.Header) error
 	AddBlock(*block.Block) error
diff --git a/pkg/network/helper_test.go b/pkg/network/helper_test.go
index 468819736..2759c37df 100644
--- a/pkg/network/helper_test.go
+++ b/pkg/network/helper_test.go
@@ -26,6 +26,9 @@ type testChain struct {
 	blockheight uint32
 }
 
+func (chain testChain) ApplyPolicyToTxSet([]mempool.TxWithFee) []mempool.TxWithFee {
+	panic("TODO")
+}
 func (chain testChain) GetConfig() config.ProtocolConfiguration {
 	panic("TODO")
 }
diff --git a/pkg/network/server.go b/pkg/network/server.go
index 0c8bdee4b..dacac6461 100644
--- a/pkg/network/server.go
+++ b/pkg/network/server.go
@@ -786,15 +786,14 @@ func (s *Server) verifyAndPoolTX(t *transaction.Transaction) RelayReason {
 	if t.Type == transaction.MinerType {
 		return RelayInvalid
 	}
-	// TODO: Implement Plugin.CheckPolicy?
-	//if (!Plugin.CheckPolicy(transaction))
-	// return RelayResultReason.PolicyFail;
 	if err := s.chain.PoolTx(t); err != nil {
 		switch err {
 		case core.ErrAlreadyExists:
 			return RelayAlreadyExists
 		case core.ErrOOM:
 			return RelayOutOfMemory
+		case core.ErrPolicy:
+			return RelayPolicyFail
 		default:
 			return RelayInvalid
 		}