diff --git a/blockmanager.go b/blockmanager.go
index 95cc7006..7ddc71ce 100644
--- a/blockmanager.go
+++ b/blockmanager.go
@@ -389,7 +389,7 @@ func (b *blockManager) handleTxMsg(tmsg *txMsg) {
 
 	// Process the transaction to include validation, insertion in the
 	// memory pool, orphan handling, etc.
-	err := tmsg.peer.server.txMemPool.ProcessTransaction(tmsg.tx)
+	err := tmsg.peer.server.txMemPool.ProcessTransaction(tmsg.tx, true)
 
 	// Remove transaction from request maps. Either the mempool/chain
 	// already knows about it and as such we shouldn't have any more
diff --git a/mempool.go b/mempool.go
index 86828065..19709b32 100644
--- a/mempool.go
+++ b/mempool.go
@@ -999,7 +999,7 @@ func (mp *txMemPool) processOrphans(hash *btcwire.ShaHash) error {
 // rules, orphan transaction handling, and insertion into the memory pool.
 //
 // This function is safe for concurrent access.
-func (mp *txMemPool) ProcessTransaction(tx *btcutil.Tx) error {
+func (mp *txMemPool) ProcessTransaction(tx *btcutil.Tx, allowOrphan bool) error {
 	// Protect concurrent access.
 	mp.Lock()
 	defer mp.Unlock()
@@ -1026,8 +1026,13 @@ func (mp *txMemPool) ProcessTransaction(tx *btcutil.Tx) error {
 			return err
 		}
 	} else {
-		// When the transaction is an orphan (has inputs missing),
-		// potentially add it to the orphan pool.
+		// The transaction is an orphan (has inputs missing).  Reject
+		// it if the flag to allow orphans is not set.
+		if !allowOrphan {
+			return TxRuleError("transaction spends unknown inputs")
+		}
+
+		// Potentially add the orphan transaction to the orphan pool.
 		err := mp.maybeAddOrphan(tx)
 		if err != nil {
 			return err
diff --git a/rpcserver.go b/rpcserver.go
index c3981a46..bad1c0c4 100644
--- a/rpcserver.go
+++ b/rpcserver.go
@@ -1382,7 +1382,7 @@ func handleSendRawTransaction(s *rpcServer, cmd btcjson.Cmd) (interface{}, error
 	}
 
 	tx := btcutil.NewTx(msgtx)
-	err = s.server.txMemPool.ProcessTransaction(tx)
+	err = s.server.txMemPool.ProcessTransaction(tx, false)
 	if err != nil {
 		// When the error is a rule error, it means the transaction was
 		// simply rejected as opposed to something actually going wrong,