diff --git a/core/src/main/java/bisq/core/btc/wallet/TradeWalletService.java b/core/src/main/java/bisq/core/btc/wallet/TradeWalletService.java
index baf2a035ba..d6f4a8b4f9 100644
--- a/core/src/main/java/bisq/core/btc/wallet/TradeWalletService.java
+++ b/core/src/main/java/bisq/core/btc/wallet/TradeWalletService.java
@@ -177,6 +177,9 @@ public class TradeWalletService {
 
             checkNotNull(wallet, "Wallet must not be null");
             wallet.completeTx(sendRequest);
+            if (removeDust(tradingFeeTx)) {
+                wallet.signTransaction(sendRequest);
+            }
             WalletService.printTx("tradingFeeTx", tradingFeeTx);
 
             if (doBroadcast && callback != null) {
@@ -257,6 +260,7 @@ public class TradeWalletService {
         checkNotNull(wallet, "Wallet must not be null");
         wallet.completeTx(sendRequest);
         Transaction resultTx = sendRequest.tx;
+        removeDust(resultTx);
 
         // Sign all BTC inputs
         for (int i = preparedBsqTxInputsSize; i < resultTx.getInputs().size(); i++) {
@@ -1216,4 +1220,33 @@ public class TradeWalletService {
         tx.getInputs().forEach(input -> input.setSequenceNumber(TransactionInput.NO_SEQUENCE - 1));
         tx.setLockTime(lockTime);
     }
+
+    // BISQ issue #4039: prevent dust outputs from being created.
+    // check all the outputs in a proposed transaction, if any are below the dust threshold
+    // remove them, noting the details in the log. returns 'true' to indicate if any dust was
+    // removed.
+    private boolean removeDust(Transaction transaction) {
+        List<TransactionOutput> originalTransactionOutputs = transaction.getOutputs();
+        List<TransactionOutput> keepTransactionOutputs = new ArrayList<>();
+        for (TransactionOutput transactionOutput: originalTransactionOutputs) {
+            if (transactionOutput.getValue().isLessThan(Restrictions.getMinNonDustOutput())) {
+                log.info("your transaction would have contained a dust output of {}", transactionOutput.toString());
+            }
+            else {
+                keepTransactionOutputs.add(transactionOutput);
+            }
+        }
+        // if dust was detected, keepTransactionOutputs will have fewer elements than originalTransactionOutputs
+        // set the transaction outputs to what we saved in keepTransactionOutputs, thus discarding dust.
+        if (keepTransactionOutputs.size() != originalTransactionOutputs.size()) {
+            log.info("dust output was detected and removed, the new output is as follows:");
+            transaction.clearOutputs();
+            for (TransactionOutput transactionOutput : keepTransactionOutputs) {
+                transaction.addOutput(transactionOutput);
+                log.info("{}", transactionOutput.toString());
+            }
+            return true;    // dust was removed
+        }
+        return false;       // no action necessary
+    }
 }