diff --git a/.changelog/2761.breaking.md b/.changelog/2761.breaking.md
new file mode 100644
index 00000000000..7a778cad183
--- /dev/null
+++ b/.changelog/2761.breaking.md
@@ -0,0 +1 @@
+go/consensus: Introduce gas cost based on tx size
diff --git a/go/consensus/genesis/genesis.go b/go/consensus/genesis/genesis.go
index 7ab7a851763..0dc44b72f22 100644
--- a/go/consensus/genesis/genesis.go
+++ b/go/consensus/genesis/genesis.go
@@ -24,8 +24,16 @@ type Parameters struct {
 	MaxBlockSize   uint64          `json:"max_block_size"`
 	MaxBlockGas    transaction.Gas `json:"max_block_gas"`
 	MaxEvidenceAge uint64          `json:"max_evidence_age"`
+
+	// GasCosts are the base transaction gas costs.
+	GasCosts transaction.Costs `json:"gas_costs,omitempty"`
 }
 
+const (
+	// GasOpTxByte is the gas operation identifier for costing each transaction byte.
+	GasOpTxByte transaction.Op = "tx_byte"
+)
+
 // SanityCheck does basic sanity checking on the genesis state.
 func (g *Genesis) SanityCheck() error {
 	if g.Parameters.TimeoutCommit < 1*time.Millisecond && !g.Parameters.SkipTimeoutCommit {
diff --git a/go/consensus/tendermint/abci/gas.go b/go/consensus/tendermint/abci/gas.go
index fac7898cb3a..e392cd14f95 100644
--- a/go/consensus/tendermint/abci/gas.go
+++ b/go/consensus/tendermint/abci/gas.go
@@ -2,6 +2,7 @@ package abci
 
 import (
 	"errors"
+	"fmt"
 	"math"
 
 	"github.com/oasislabs/oasis-core/go/consensus/api/transaction"
@@ -53,7 +54,7 @@ func (ga *basicGasAccountant) UseGas(multiplier int, op transaction.Op, costs tr
 	}
 
 	if ga.usedGas+amount > ga.maxUsedGas {
-		return ErrOutOfGas
+		return fmt.Errorf("%w (limit: %d wanted: %d)", ErrOutOfGas, ga.maxUsedGas, ga.usedGas+amount)
 	}
 
 	ga.usedGas += amount
diff --git a/go/consensus/tendermint/abci/gas_test.go b/go/consensus/tendermint/abci/gas_test.go
index b5a5f0cfb26..e349d4bd9a4 100644
--- a/go/consensus/tendermint/abci/gas_test.go
+++ b/go/consensus/tendermint/abci/gas_test.go
@@ -1,6 +1,7 @@
 package abci
 
 import (
+	"errors"
 	"math"
 	"testing"
 
@@ -44,13 +45,13 @@ func TestBasicGasAccountant(t *testing.T) {
 	// Overflow.
 	err = a.UseGas(1, overflowOp, costs)
 	require.Error(err, "UseGas should fail on overflow")
-	require.Equal(ErrGasOverflow, err)
+	require.True(errors.Is(err, ErrGasOverflow))
 	require.EqualValues(30, a.GasUsed(), "GasUsed")
 
 	// Out of gas.
 	err = a.UseGas(1, expensiveOp, costs)
 	require.Error(err, "UseGas should fail when out of gas")
-	require.Equal(ErrOutOfGas, err)
+	require.True(errors.Is(err, ErrOutOfGas))
 	require.EqualValues(30, a.GasUsed(), "GasUsed")
 
 	require.EqualValues(100, a.GasWanted(), "GasWanted")
@@ -123,7 +124,7 @@ func TestCompositeGasAccountant(t *testing.T) {
 	// Overflow.
 	err = c.UseGas(1, overflowOp, costs)
 	require.Error(err, "UseGas should fail on overflow")
-	require.Equal(ErrGasOverflow, err)
+	require.True(errors.Is(err, ErrGasOverflow))
 	require.EqualValues(10, c.GasUsed(), "GasUsed")
 	require.EqualValues(10, a.GasUsed(), "GasUsed")
 	require.EqualValues(10, b.GasUsed(), "GasUsed")
@@ -131,7 +132,7 @@ func TestCompositeGasAccountant(t *testing.T) {
 	// Out of gas.
 	err = a.UseGas(1, expensiveOp, costs)
 	require.Error(err, "UseGas should fail when out of gas")
-	require.Equal(ErrOutOfGas, err)
+	require.True(errors.Is(err, ErrOutOfGas))
 	require.EqualValues(10, c.GasUsed(), "GasUsed")
 	require.EqualValues(10, a.GasUsed(), "GasUsed")
 	require.EqualValues(10, b.GasUsed(), "GasUsed")
@@ -146,7 +147,7 @@ func TestCompositeGasAccountant(t *testing.T) {
 
 	err = c.UseGas(1, cheapOp, costs)
 	require.Error(err, "UseGas should fail when out of gas")
-	require.Equal(ErrOutOfGas, err)
+	require.True(errors.Is(err, ErrOutOfGas))
 	require.EqualValues(10, c.GasUsed(), "GasUsed")
 	require.EqualValues(10, a.GasUsed(), "GasUsed")
 	require.EqualValues(10, b.GasUsed(), "GasUsed")
diff --git a/go/consensus/tendermint/abci/mux.go b/go/consensus/tendermint/abci/mux.go
index 4836c488a9b..71a2c77d9a5 100644
--- a/go/consensus/tendermint/abci/mux.go
+++ b/go/consensus/tendermint/abci/mux.go
@@ -9,6 +9,7 @@ import (
 	"encoding/hex"
 	"encoding/json"
 	"fmt"
+	"math"
 	"sort"
 	"sync"
 	"time"
@@ -25,6 +26,7 @@ import (
 	"github.com/oasislabs/oasis-core/go/common/version"
 	consensus "github.com/oasislabs/oasis-core/go/consensus/api"
 	"github.com/oasislabs/oasis-core/go/consensus/api/transaction"
+	consensusGenesis "github.com/oasislabs/oasis-core/go/consensus/genesis"
 	epochtime "github.com/oasislabs/oasis-core/go/epochtime/api"
 	genesis "github.com/oasislabs/oasis-core/go/genesis/api"
 	upgrade "github.com/oasislabs/oasis-core/go/upgrade/api"
@@ -621,7 +623,7 @@ func (mux *abciMux) decodeTx(ctx *Context, rawTx []byte) (*transaction.Transacti
 	return &tx, &sigTx, nil
 }
 
-func (mux *abciMux) processTx(ctx *Context, tx *transaction.Transaction) error {
+func (mux *abciMux) processTx(ctx *Context, tx *transaction.Transaction, txSize int) error {
 	// Pass the transaction through the fee handler if configured.
 	if txAuthHandler := mux.state.txAuthHandler; txAuthHandler != nil {
 		if err := txAuthHandler.AuthenticateTx(ctx, tx); err != nil {
@@ -635,6 +637,15 @@ func (mux *abciMux) processTx(ctx *Context, tx *transaction.Transaction) error {
 		}
 	}
 
+	// Charge gas based on the size of the transaction.
+	params, err := mux.state.ConsensusParameters()
+	if err != nil {
+		return fmt.Errorf("failed to fetch consensus parameters: %w", err)
+	}
+	if err = ctx.Gas().UseGas(txSize, consensusGenesis.GasOpTxByte, params.GasCosts); err != nil {
+		return err
+	}
+
 	// Route to correct handler.
 	app := mux.appsByMethod[tx.Method]
 	if app == nil {
@@ -678,7 +689,7 @@ func (mux *abciMux) executeTx(ctx *Context, rawTx []byte) error {
 	// Set authenticated transaction signer.
 	ctx.SetTxSigner(sigTx.Signature.PublicKey)
 
-	return mux.processTx(ctx, tx)
+	return mux.processTx(ctx, tx, len(rawTx))
 }
 
 func (mux *abciMux) EstimateGas(caller signature.PublicKey, tx *transaction.Transaction) (transaction.Gas, error) {
@@ -689,11 +700,26 @@ func (mux *abciMux) EstimateGas(caller signature.PublicKey, tx *transaction.Tran
 	ctx := mux.state.NewContext(ContextSimulateTx, time.Time{})
 	defer ctx.Close()
 
+	// Modify transaction to include maximum possible gas in order to estimate the upper limit on
+	// the serialized transaction size. For amount, use a reasonable amount (in theory the actual
+	// amount could be bigger depending on the gas price).
+	tx.Fee = &transaction.Fee{
+		Gas: transaction.Gas(math.MaxUint64),
+	}
+	_ = tx.Fee.Amount.FromUint64(math.MaxUint64)
+
 	ctx.SetTxSigner(caller)
+	mockSignedTx := transaction.SignedTransaction{
+		Signed: signature.Signed{
+			Blob: cbor.Marshal(tx),
+			// Signature is fixed-size, so we can leave it as default.
+		},
+	}
+	txSize := len(cbor.Marshal(mockSignedTx))
 
 	// Ignore any errors that occurred during simulation as we only need to estimate gas even if the
 	// transaction seems like it will fail.
-	_ = mux.processTx(ctx, tx)
+	_ = mux.processTx(ctx, tx, txSize)
 
 	return ctx.Gas().GasUsed(), nil
 }
diff --git a/go/oasis-node/cmd/debug/txsource/workload/oversized.go b/go/oasis-node/cmd/debug/txsource/workload/oversized.go
index 21f5256774f..08b8bc0cacd 100644
--- a/go/oasis-node/cmd/debug/txsource/workload/oversized.go
+++ b/go/oasis-node/cmd/debug/txsource/workload/oversized.go
@@ -13,6 +13,7 @@ import (
 	"github.com/oasislabs/oasis-core/go/common/logging"
 	consensus "github.com/oasislabs/oasis-core/go/consensus/api"
 	"github.com/oasislabs/oasis-core/go/consensus/api/transaction"
+	consensusGenesis "github.com/oasislabs/oasis-core/go/consensus/genesis"
 	staking "github.com/oasislabs/oasis-core/go/staking/api"
 )
 
@@ -48,10 +49,11 @@ func (oversized) Run(
 	if err != nil {
 		return fmt.Errorf("failed to query state at genesis: %w", err)
 	}
+	params := genesisDoc.Consensus.Parameters
 
 	var nonce uint64
 	fee := transaction.Fee{
-		Gas: oversizedTxGasAmount,
+		Gas: oversizedTxGasAmount + transaction.Gas(params.MaxTxSize)*params.GasCosts[consensusGenesis.GasOpTxByte],
 	}
 	if err = fee.Amount.FromInt64(oversizedTxGasAmount * gasPrice); err != nil {
 		return fmt.Errorf("Fee amount error: %w", err)
diff --git a/go/oasis-node/cmd/debug/txsource/workload/parallel.go b/go/oasis-node/cmd/debug/txsource/workload/parallel.go
index d4cc2add749..fae3f6bc12a 100644
--- a/go/oasis-node/cmd/debug/txsource/workload/parallel.go
+++ b/go/oasis-node/cmd/debug/txsource/workload/parallel.go
@@ -24,7 +24,6 @@ const (
 	parallelSendWaitTimeoutInterval = 30 * time.Second
 	parallelSendTimeoutInterval     = 60 * time.Second
 	parallelConcurency              = 200
-	parallelTxGasAmount             = 10
 	parallelTxTransferAmount        = 100
 	parallelTxFundInterval          = 10
 )
@@ -43,6 +42,22 @@ func (parallel) Run(
 	ctx := context.Background()
 	var err error
 
+	// Estimate gas needed for the used transfer transaction.
+	var txGasAmount transaction.Gas
+	xfer := &staking.Transfer{
+		To: fundingAccount.Public(),
+	}
+	if err = xfer.Tokens.FromInt64(parallelTxTransferAmount); err != nil {
+		return fmt.Errorf("transfer tokens FromInt64 %d: %w", parallelTxTransferAmount, err)
+	}
+	txGasAmount, err = cnsc.EstimateGas(ctx, &consensus.EstimateGasRequest{
+		Caller:      fundingAccount.Public(),
+		Transaction: staking.NewTransferTx(0, nil, xfer),
+	})
+	if err != nil {
+		return fmt.Errorf("failed to estimate gas: %w", err)
+	}
+
 	accounts := make([]signature.Signer, parallelConcurency)
 	fac := memorySigner.NewFactory()
 	for i := range accounts {
@@ -53,7 +68,7 @@ func (parallel) Run(
 
 		// Initial funding of accounts.
 		fundAmount := parallelTxTransferAmount + // self transfer amount
-			parallelTxFundInterval*parallelTxGasAmount*gasPrice // gas for `parallelTxFundInterval` transfers.
+			parallelTxFundInterval*txGasAmount*gasPrice // gas for `parallelTxFundInterval` transfers.
 		if err = transferFunds(ctx, parallelLogger, cnsc, fundingAccount, accounts[i].Public(), int64(fundAmount)); err != nil {
 			return fmt.Errorf("account funding failure: %w", err)
 		}
@@ -63,9 +78,9 @@ func (parallel) Run(
 	// complete before proceeding with a new batch.
 	var nonce uint64
 	fee := transaction.Fee{
-		Gas: parallelTxGasAmount,
+		Gas: txGasAmount,
 	}
-	if err = fee.Amount.FromInt64(parallelTxGasAmount); err != nil {
+	if err = fee.Amount.FromUint64(uint64(txGasAmount) * gasPrice); err != nil {
 		return fmt.Errorf("Fee amount error: %w", err)
 	}
 
@@ -136,7 +151,7 @@ func (parallel) Run(
 		if i%parallelTxFundInterval == 0 {
 			// Re-fund accounts for next `parallelTxFundInterval` transfers.
 			for i := range accounts {
-				fundAmount := parallelTxFundInterval * parallelTxGasAmount * gasPrice // gas for `parallelTxFundInterval` transfers.
+				fundAmount := parallelTxFundInterval * txGasAmount * gasPrice // gas for `parallelTxFundInterval` transfers.
 				if err = transferFunds(ctx, parallelLogger, cnsc, fundingAccount, accounts[i].Public(), int64(fundAmount)); err != nil {
 					return fmt.Errorf("account funding failure: %w", err)
 				}
diff --git a/go/oasis-node/cmd/genesis/genesis.go b/go/oasis-node/cmd/genesis/genesis.go
index a191d5658bc..ef968d24477 100644
--- a/go/oasis-node/cmd/genesis/genesis.go
+++ b/go/oasis-node/cmd/genesis/genesis.go
@@ -86,6 +86,7 @@ const (
 	cfgConsensusMaxBlockSizeBytes  = "consensus.tendermint.max_block_size"
 	cfgConsensusMaxBlockGas        = "consensus.tendermint.max_block_gas"
 	cfgConsensusMaxEvidenceAge     = "consensus.tendermint.max_evidence_age"
+	CfgConsensusGasCostsTxByte     = "consensus.gas_costs.tx_byte"
 
 	// Consensus backend config flag.
 	cfgConsensusBackend = "consensus.backend"
@@ -223,6 +224,9 @@ func doInitGenesis(cmd *cobra.Command, args []string) {
 			MaxBlockSize:       uint64(viper.GetSizeInBytes(cfgConsensusMaxBlockSizeBytes)),
 			MaxBlockGas:        transaction.Gas(viper.GetUint64(cfgConsensusMaxBlockGas)),
 			MaxEvidenceAge:     viper.GetUint64(cfgConsensusMaxEvidenceAge),
+			GasCosts: transaction.Costs{
+				consensusGenesis.GasOpTxByte: transaction.Gas(viper.GetUint64(CfgConsensusGasCostsTxByte)),
+			},
 		},
 	}
 
@@ -720,6 +724,7 @@ func init() {
 	initGenesisFlags.String(cfgConsensusMaxBlockSizeBytes, "21mb", "tendermint maximum block size (in bytes)")
 	initGenesisFlags.Uint64(cfgConsensusMaxBlockGas, 0, "tendermint max gas used per block")
 	initGenesisFlags.Uint64(cfgConsensusMaxEvidenceAge, 100000, "tendermint max evidence age (in blocks)")
+	initGenesisFlags.Uint64(CfgConsensusGasCostsTxByte, 1, "consensus gas costs: each transaction byte")
 
 	// Consensus backend flag.
 	initGenesisFlags.String(cfgConsensusBackend, tendermint.BackendName, "consensus backend")
diff --git a/go/oasis-test-runner/oasis/oasis.go b/go/oasis-test-runner/oasis/oasis.go
index 196ce890188..2225372975d 100644
--- a/go/oasis-test-runner/oasis/oasis.go
+++ b/go/oasis-test-runner/oasis/oasis.go
@@ -220,6 +220,9 @@ type NetworkCfg struct { // nolint: maligned
 	// ConsensusTimeoutCommit is the consensus commit timeout.
 	ConsensusTimeoutCommit time.Duration `json:"consensus_timeout_commit"`
 
+	// ConsensusGasCostsTxByte is the gas cost of each transaction byte.
+	ConsensusGasCostsTxByte uint64 `json:"consensus_gas_costs_tx_byte"`
+
 	// HaltEpoch is the halt epoch height flag.
 	HaltEpoch uint64 `json:"halt_epoch"`
 
@@ -678,6 +681,7 @@ func (net *Network) makeGenesis() error {
 		"--registry.debug.allow_unroutable_addresses", "true",
 		"--" + genesis.CfgRegistryDebugAllowTestRuntimes, "true",
 		"--scheduler.max_validators_per_entity", strconv.Itoa(len(net.Validators())),
+		"--" + genesis.CfgConsensusGasCostsTxByte, strconv.FormatUint(net.cfg.ConsensusGasCostsTxByte, 10),
 	}
 	if net.cfg.EpochtimeMock {
 		args = append(args, "--epochtime.debug.mock_backend")
diff --git a/go/oasis-test-runner/scenario/e2e/basic.go b/go/oasis-test-runner/scenario/e2e/basic.go
index e50f1ddc8e1..fbc0f928eaf 100644
--- a/go/oasis-test-runner/scenario/e2e/basic.go
+++ b/go/oasis-test-runner/scenario/e2e/basic.go
@@ -95,6 +95,7 @@ func (sc *basicImpl) Fixture() (*oasis.NetworkFixture, error) {
 			NodeBinary:                        viper.GetString(cfgNodeBinary),
 			RuntimeLoaderBinary:               viper.GetString(cfgRuntimeLoader),
 			DefaultLogWatcherHandlerFactories: DefaultBasicLogWatcherHandlerFactories,
+			ConsensusGasCostsTxByte:           1,
 		},
 		Entities: []oasis.EntityCfg{
 			oasis.EntityCfg{IsDebugTestEntity: true},
diff --git a/go/oasis-test-runner/scenario/e2e/gas_fees_staking.go b/go/oasis-test-runner/scenario/e2e/gas_fees_staking.go
index 474f8afd807..222f6542dad 100644
--- a/go/oasis-test-runner/scenario/e2e/gas_fees_staking.go
+++ b/go/oasis-test-runner/scenario/e2e/gas_fees_staking.go
@@ -84,6 +84,7 @@ func (sc *gasFeesImpl) Fixture() (*oasis.NetworkFixture, error) {
 		EpochtimeMock:                     true,
 		StakingGenesis:                    "tests/fixture-data/gas-fees/staking-genesis.json",
 		DefaultLogWatcherHandlerFactories: DefaultBasicLogWatcherHandlerFactories,
+		ConsensusGasCostsTxByte:           0, // So we can control gas more easily.
 	}
 	f.Entities = []oasis.EntityCfg{
 		oasis.EntityCfg{IsDebugTestEntity: true},