diff --git a/lnwallet/channel.go b/lnwallet/channel.go
index 03ddff35..96b38b11 100644
--- a/lnwallet/channel.go
+++ b/lnwallet/channel.go
@@ -1646,7 +1646,7 @@ func (lc *LightningChannel) SettleHTLC(preimage [32]byte) (uint32, error) {
 	lc.Lock()
 	defer lc.Unlock()
 
-	var targetHTLC *list.Element
+	var targetHTLC *PaymentDescriptor
 
 	// TODO(roasbeef): optimize
 	paymentHash := fastsha256.Sum256(preimage[:])
@@ -1658,7 +1658,7 @@ func (lc *LightningChannel) SettleHTLC(preimage [32]byte) (uint32, error) {
 
 		if !htlc.settled && bytes.Equal(htlc.RHash[:], paymentHash[:]) {
 			htlc.settled = true
-			targetHTLC = e
+			targetHTLC = htlc
 			break
 		}
 	}
@@ -1666,20 +1666,18 @@ func (lc *LightningChannel) SettleHTLC(preimage [32]byte) (uint32, error) {
 		return 0, fmt.Errorf("invalid payment hash")
 	}
 
-	parentPd := targetHTLC.Value.(*PaymentDescriptor)
-
 	pd := &PaymentDescriptor{
-		Amount:      parentPd.Amount,
+		Amount:      targetHTLC.Amount,
 		RPreimage:   preimage,
 		Index:       lc.ourLogCounter,
-		ParentIndex: parentPd.Index,
+		ParentIndex: targetHTLC.Index,
 		EntryType:   Settle,
 	}
 
 	lc.ourUpdateLog.PushBack(pd)
 	lc.ourLogCounter++
 
-	return targetHTLC.Value.(*PaymentDescriptor).Index, nil
+	return targetHTLC.Index, nil
 }
 
 // ReceiveHTLCSettle attempts to settle an existing outgoing HTLC indexed by an
@@ -1715,32 +1713,41 @@ func (lc *LightningChannel) ReceiveHTLCSettle(preimage [32]byte, logIndex uint32
 	return nil
 }
 
-// CancelHTLC attempts to cancel a targeted HTLC by its log index, inserting an
-// entry which will remove the target log entry within the next commitment
+// CancelHTLC attempts to cancel a targeted HTLC by its payment hash, inserting
+// an entry which will remove the target log entry within the next commitment
 // update. This method is intended to be called in order to cancel in
 // _incoming_ HTLC.
-func (lc *LightningChannel) CancelHTLC(logIndex uint32) error {
+func (lc *LightningChannel) CancelHTLC(rHash [32]byte) (uint32, error) {
 	lc.Lock()
 	defer lc.Unlock()
 
-	addEntry, ok := lc.theirLogIndex[logIndex]
-	if !ok {
-		return fmt.Errorf("unable to find HTLC to cancel")
+	var addEntry *PaymentDescriptor
+	for e := lc.theirUpdateLog.Front(); e != nil; e = e.Next() {
+		htlc := e.Value.(*PaymentDescriptor)
+		if htlc.EntryType != Add {
+			continue
+		}
+
+		if !htlc.settled && bytes.Equal(htlc.RHash[:], rHash[:]) {
+			addEntry = htlc
+			break
+		}
+	}
+	if addEntry == nil {
+		return 0, fmt.Errorf("unable to find HTLC to cancel")
 	}
 
-	htlc := addEntry.Value.(*PaymentDescriptor)
-
 	pd := &PaymentDescriptor{
-		Amount:      htlc.Amount,
+		Amount:      addEntry.Amount,
 		Index:       lc.ourLogCounter,
-		ParentIndex: htlc.Index,
+		ParentIndex: addEntry.Index,
 		EntryType:   Cancel,
 	}
 
 	lc.ourUpdateLog.PushBack(pd)
 	lc.ourLogCounter++
 
-	return nil
+	return addEntry.Index, nil
 }
 
 // ReceiveCancelHTLC attempts to cancel a targeted HTLC by its log index,
diff --git a/lnwallet/channel_test.go b/lnwallet/channel_test.go
index d10a89bd..b21d81ed 100644
--- a/lnwallet/channel_test.go
+++ b/lnwallet/channel_test.go
@@ -1180,12 +1180,12 @@ func TestCancelHTLC(t *testing.T) {
 		Amount:           htlcAmt,
 		Expiry:           10,
 	}
+	paymentHash := htlc.RedemptionHashes[0]
 
 	if _, err := aliceChannel.AddHTLC(htlc); err != nil {
 		t.Fatalf("unable to add alice htlc: %v", err)
 	}
-	bobHtlcIndex, err := bobChannel.ReceiveHTLC(htlc)
-	if err != nil {
+	if _, err := bobChannel.ReceiveHTLC(htlc); err != nil {
 		t.Fatalf("unable to add bob htlc: %v", err)
 	}
 	if err := forceStateTransition(aliceChannel, bobChannel); err != nil {
@@ -1202,10 +1202,11 @@ func TestCancelHTLC(t *testing.T) {
 
 	// Now, with the HTLC committed on both sides, trigger a cancellation
 	// from Bob to Alice, removing the HTLC.
-	if err := bobChannel.CancelHTLC(bobHtlcIndex); err != nil {
+	htlcCancelIndex, err := bobChannel.CancelHTLC(paymentHash)
+	if err != nil {
 		t.Fatalf("unable to cancel HTLC: %v", err)
 	}
-	if err := aliceChannel.ReceiveCancelHTLC(bobHtlcIndex); err != nil {
+	if err := aliceChannel.ReceiveCancelHTLC(htlcCancelIndex); err != nil {
 		t.Fatalf("unable to recv htlc cancel: %v", err)
 	}