diff --git a/.changelog/4386.bugfix.md b/.changelog/4386.bugfix.md
new file mode 100644
index 00000000000..5581939c607
--- /dev/null
+++ b/.changelog/4386.bugfix.md
@@ -0,0 +1,5 @@
+runtime: Propagate panics during transaction/local RPC/policy dispatch
+
+A panic during transaction/local RPC/policy dispatch signals a serious
+problem so it should be propagated and the runtime should crash to force
+state reset.
diff --git a/runtime/src/dispatcher.rs b/runtime/src/dispatcher.rs
index 7c4dd3e305a..b052e011376 100644
--- a/runtime/src/dispatcher.rs
+++ b/runtime/src/dispatcher.rs
@@ -684,6 +684,10 @@ impl Dispatcher {
         inputs: TxnBatch,
         state: TxDispatchState,
     ) -> Result<Body, Error> {
+        // Make sure to abort the process on panic during transaction processing as that indicates
+        // a serious problem and should make sure to clean up the process.
+        let _guard = AbortOnPanic;
+
         debug!(self.logger, "Received transaction batch request";
             "state_root" => ?state.header.state_root,
             "round" => state.header.round + 1,
@@ -721,7 +725,8 @@ impl Dispatcher {
                 )
             }
         })
-        .await?
+        .await
+        .unwrap() // Propagate panics during transaction dispatch.
     }
 
     async fn dispatch_rpc(
@@ -841,6 +846,10 @@ impl Dispatcher {
         ctx: Context,
         request: Vec<u8>,
     ) -> Result<Body, Error> {
+        // Make sure to abort the process on panic during local RPC processing as that indicates a
+        // serious problem and should make sure to clean up the process.
+        let _guard = AbortOnPanic;
+
         debug!(self.logger, "Received local RPC call request");
 
         let req: RpcRequest = cbor::from_slice(&request)
@@ -869,7 +878,8 @@ impl Dispatcher {
             let response = cbor::to_vec(response);
             Ok(Body::RuntimeLocalRPCCallResponse { response })
         })
-        .await?
+        .await
+        .unwrap() // Propagate panics during local RPC dispatch.
     }
 
     fn handle_km_policy_update(
@@ -878,6 +888,10 @@ impl Dispatcher {
         _ctx: Context,
         signed_policy_raw: Vec<u8>,
     ) -> Result<Body, Error> {
+        // Make sure to abort the process on panic during policy processing as that indicates a
+        // serious problem and should make sure to clean up the process.
+        let _guard = AbortOnPanic;
+
         debug!(self.logger, "Received km policy update request");
         rpc_dispatcher.handle_km_policy_update(signed_policy_raw);
         debug!(self.logger, "KM policy update request complete");