diff --git a/channeldb/invoice_test.go b/channeldb/invoice_test.go
index 3f35586b0..2a5c20e43 100644
--- a/channeldb/invoice_test.go
+++ b/channeldb/invoice_test.go
@@ -2,7 +2,6 @@ package channeldb
 
 import (
 	"crypto/rand"
-	"crypto/sha256"
 	"reflect"
 	"testing"
 	"time"
@@ -67,17 +66,18 @@ func TestInvoiceWorkflow(t *testing.T) {
 	copy(fakeInvoice.Terms.PaymentPreimage[:], rev[:])
 	fakeInvoice.Terms.Value = lnwire.NewMSatFromSatoshis(10000)
 
+	paymentHash := fakeInvoice.Terms.PaymentPreimage.Hash()
+
 	// Add the invoice to the database, this should succeed as there aren't
 	// any existing invoices within the database with the same payment
 	// hash.
-	if _, err := db.AddInvoice(fakeInvoice); err != nil {
+	if _, err := db.AddInvoice(fakeInvoice, paymentHash); err != nil {
 		t.Fatalf("unable to find invoice: %v", err)
 	}
 
 	// Attempt to retrieve the invoice which was just added to the
 	// database. It should be found, and the invoice returned should be
 	// identical to the one created above.
-	paymentHash := sha256.Sum256(fakeInvoice.Terms.PaymentPreimage[:])
 	dbInvoice, err := db.LookupInvoice(paymentHash)
 	if err != nil {
 		t.Fatalf("unable to find invoice: %v", err)
@@ -126,7 +126,7 @@ func TestInvoiceWorkflow(t *testing.T) {
 
 	// Attempt to insert generated above again, this should fail as
 	// duplicates are rejected by the processing logic.
-	if _, err := db.AddInvoice(fakeInvoice); err != ErrDuplicateInvoice {
+	if _, err := db.AddInvoice(fakeInvoice, paymentHash); err != ErrDuplicateInvoice {
 		t.Fatalf("invoice insertion should fail due to duplication, "+
 			"instead %v", err)
 	}
@@ -149,7 +149,8 @@ func TestInvoiceWorkflow(t *testing.T) {
 			t.Fatalf("unable to create invoice: %v", err)
 		}
 
-		if _, err := db.AddInvoice(invoice); err != nil {
+		hash := invoice.Terms.PaymentPreimage.Hash()
+		if _, err := db.AddInvoice(invoice, hash); err != nil {
 			t.Fatalf("unable to add invoice %v", err)
 		}
 
@@ -198,7 +199,9 @@ func TestInvoiceAddTimeSeries(t *testing.T) {
 			t.Fatalf("unable to create invoice: %v", err)
 		}
 
-		if _, err := db.AddInvoice(invoice); err != nil {
+		paymentHash := invoice.Terms.PaymentPreimage.Hash()
+
+		if _, err := db.AddInvoice(invoice, paymentHash); err != nil {
 			t.Fatalf("unable to add invoice %v", err)
 		}
 
@@ -256,9 +259,7 @@ func TestInvoiceAddTimeSeries(t *testing.T) {
 	for i := 10; i < len(invoices); i++ {
 		invoice := &invoices[i]
 
-		paymentHash := sha256.Sum256(
-			invoice.Terms.PaymentPreimage[:],
-		)
+		paymentHash := invoice.Terms.PaymentPreimage.Hash()
 
 		_, err := db.SettleInvoice(paymentHash, 0)
 		if err != nil {
@@ -334,12 +335,13 @@ func TestDuplicateSettleInvoice(t *testing.T) {
 		t.Fatalf("unable to create invoice: %v", err)
 	}
 
-	if _, err := db.AddInvoice(invoice); err != nil {
+	payHash := invoice.Terms.PaymentPreimage.Hash()
+
+	if _, err := db.AddInvoice(invoice, payHash); err != nil {
 		t.Fatalf("unable to add invoice %v", err)
 	}
 
 	// With the invoice in the DB, we'll now attempt to settle the invoice.
-	payHash := sha256.Sum256(invoice.Terms.PaymentPreimage[:])
 	dbInvoice, err := db.SettleInvoice(payHash, amt)
 	if err != nil {
 		t.Fatalf("unable to settle invoice: %v", err)
@@ -397,13 +399,14 @@ func TestQueryInvoices(t *testing.T) {
 			t.Fatalf("unable to create invoice: %v", err)
 		}
 
-		if _, err := db.AddInvoice(invoice); err != nil {
+		paymentHash := invoice.Terms.PaymentPreimage.Hash()
+
+		if _, err := db.AddInvoice(invoice, paymentHash); err != nil {
 			t.Fatalf("unable to add invoice: %v", err)
 		}
 
 		// We'll only settle half of all invoices created.
 		if i%2 == 0 {
-			paymentHash := sha256.Sum256(invoice.Terms.PaymentPreimage[:])
 			if _, err := db.SettleInvoice(paymentHash, i); err != nil {
 				t.Fatalf("unable to settle invoice: %v", err)
 			}
diff --git a/channeldb/invoices.go b/channeldb/invoices.go
index 8584252fd..5764319c4 100644
--- a/channeldb/invoices.go
+++ b/channeldb/invoices.go
@@ -2,7 +2,6 @@ package channeldb
 
 import (
 	"bytes"
-	"crypto/sha256"
 	"encoding/binary"
 	"errors"
 	"fmt"
@@ -16,6 +15,10 @@ import (
 )
 
 var (
+	// UnknownPreimage is an all-zeroes preimage that indicates that the
+	// preimage for this invoice is not yet known.
+	UnknownPreimage lntypes.Preimage
+
 	// invoiceBucket is the name of the bucket within the database that
 	// stores all data related to invoices no matter their final state.
 	// Within the invoice bucket, each invoice is keyed by its invoice ID
@@ -218,7 +221,9 @@ func validateInvoice(i *Invoice) error {
 // insertion will be aborted and rejected due to the strict policy banning any
 // duplicate payment hashes. A side effect of this function is that it sets
 // AddIndex on newInvoice.
-func (d *DB) AddInvoice(newInvoice *Invoice) (uint64, error) {
+func (d *DB) AddInvoice(newInvoice *Invoice, paymentHash lntypes.Hash) (
+	uint64, error) {
+
 	if err := validateInvoice(newInvoice); err != nil {
 		return 0, err
 	}
@@ -245,9 +250,6 @@ func (d *DB) AddInvoice(newInvoice *Invoice) (uint64, error) {
 
 		// Ensure that an invoice an identical payment hash doesn't
 		// already exist within the index.
-		paymentHash := sha256.Sum256(
-			newInvoice.Terms.PaymentPreimage[:],
-		)
 		if invoiceIndex.Get(paymentHash[:]) != nil {
 			return ErrDuplicateInvoice
 		}
@@ -269,6 +271,7 @@ func (d *DB) AddInvoice(newInvoice *Invoice) (uint64, error) {
 
 		newIndex, err := putInvoice(
 			invoices, invoiceIndex, addIndex, newInvoice, invoiceNum,
+			paymentHash,
 		)
 		if err != nil {
 			return err
@@ -744,7 +747,8 @@ func (d *DB) InvoicesSettledSince(sinceSettleIndex uint64) ([]Invoice, error) {
 }
 
 func putInvoice(invoices, invoiceIndex, addIndex *bbolt.Bucket,
-	i *Invoice, invoiceNum uint32) (uint64, error) {
+	i *Invoice, invoiceNum uint32, paymentHash lntypes.Hash) (
+	uint64, error) {
 
 	// Create the invoice key which is just the big-endian representation
 	// of the invoice number.
@@ -763,7 +767,6 @@ func putInvoice(invoices, invoiceIndex, addIndex *bbolt.Bucket,
 	// Add the payment hash to the invoice index. This will let us quickly
 	// identify if we can settle an incoming payment, and also to possibly
 	// allow a single invoice to have multiple payment installations.
-	paymentHash := sha256.Sum256(i.Terms.PaymentPreimage[:])
 	err := invoiceIndex.Put(paymentHash[:], invoiceKey[:])
 	if err != nil {
 		return 0, err
diff --git a/htlcswitch/link.go b/htlcswitch/link.go
index b432eec07..98aa8d582 100644
--- a/htlcswitch/link.go
+++ b/htlcswitch/link.go
@@ -2569,6 +2569,19 @@ func (l *channelLink) processExitHop(pd *lnwallet.PaymentDescriptor,
 		return true, nil
 	}
 
+	// Reject invoices with unknown preimages.
+	if invoice.Terms.PaymentPreimage == channeldb.UnknownPreimage {
+		log.Errorf("rejecting htlc because preimage is unknown")
+
+		failure := lnwire.NewFailUnknownPaymentHash(pd.Amount)
+		l.sendHTLCError(
+			pd.HtlcIndex, failure, obfuscator,
+			pd.SourceRef,
+		)
+
+		return true, nil
+	}
+
 	// If the invoice is already settled, we choose to accept the payment to
 	// simplify failure recovery.
 	//
diff --git a/invoices/invoiceregistry.go b/invoices/invoiceregistry.go
index 881118206..5914b7aec 100644
--- a/invoices/invoiceregistry.go
+++ b/invoices/invoiceregistry.go
@@ -392,7 +392,7 @@ func (i *InvoiceRegistry) AddInvoice(invoice *channeldb.Invoice,
 		return spew.Sdump(invoice)
 	}))
 
-	addIndex, err := i.cdb.AddInvoice(invoice)
+	addIndex, err := i.cdb.AddInvoice(invoice, paymentHash)
 	if err != nil {
 		return 0, err
 	}
diff --git a/lnrpc/invoicesrpc/addinvoice.go b/lnrpc/invoicesrpc/addinvoice.go
index 42b79cbd0..bedeefc8d 100644
--- a/lnrpc/invoicesrpc/addinvoice.go
+++ b/lnrpc/invoicesrpc/addinvoice.go
@@ -4,19 +4,20 @@ import (
 	"bytes"
 	"context"
 	"crypto/rand"
+	"errors"
 	"fmt"
 	"math"
 	"time"
 
-	"github.com/lightningnetwork/lnd/lntypes"
-	"github.com/lightningnetwork/lnd/netann"
-	"github.com/lightningnetwork/lnd/zpay32"
-
 	"github.com/btcsuite/btcd/chaincfg"
 	"github.com/btcsuite/btcutil"
 	"github.com/davecgh/go-spew/spew"
+
 	"github.com/lightningnetwork/lnd/channeldb"
+	"github.com/lightningnetwork/lnd/lntypes"
 	"github.com/lightningnetwork/lnd/lnwire"
+	"github.com/lightningnetwork/lnd/netann"
+	"github.com/lightningnetwork/lnd/zpay32"
 )
 
 // AddInvoiceConfig contains dependencies for invoice creation.
@@ -61,9 +62,15 @@ type AddInvoiceData struct {
 	Receipt []byte
 
 	// The preimage which will allow settling an incoming HTLC payable to
-	// this preimage.
+	// this preimage. If Preimage is set, Hash should be nil. If both
+	// Preimage and Hash are nil, a random preimage is generated.
 	Preimage *lntypes.Preimage
 
+	// The hash of the preimage. If Hash is set, Preimage should be nil.
+	// This condition indicates that we have a 'hold invoice' for which the
+	// htlc will be accepted and held until the preimage becomes known.
+	Hash *lntypes.Hash
+
 	// The value of this invoice in satoshis.
 	Value btcutil.Amount
 
@@ -87,19 +94,58 @@ type AddInvoiceData struct {
 }
 
 // AddInvoice attempts to add a new invoice to the invoice database. Any
-// duplicated invoices are rejected, therefore all invoices *must* have a unique
-// payment preimage. AddInvoice returns the payment hash and the invoice
-// structure as stored in the database.
+// duplicated invoices are rejected, therefore all invoices *must* have a
+// unique payment preimage.
 func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 	invoice *AddInvoiceData) (*lntypes.Hash, *channeldb.Invoice, error) {
 
-	var paymentPreimage lntypes.Preimage
-	if invoice.Preimage == nil {
+	var (
+		paymentPreimage lntypes.Preimage
+		paymentHash     lntypes.Hash
+	)
+
+	switch {
+
+	// Only either preimage or hash can be set.
+	case invoice.Preimage != nil && invoice.Hash != nil:
+		return nil, nil,
+			errors.New("preimage and hash both set")
+
+	// Prevent the unknown preimage magic value from being used for a
+	// regular invoice. This would cause the invoice the be handled as if it
+	// was a hold invoice.
+	case invoice.Preimage != nil &&
+		*invoice.Preimage == channeldb.UnknownPreimage:
+
+		return nil, nil,
+			fmt.Errorf("cannot use all zeroes as a preimage")
+
+	// Prevent the hash of the unknown preimage magic value to be used for a
+	// hold invoice. This would make it impossible to settle the invoice,
+	// because it would still be interpreted as not having a preimage.
+	case invoice.Hash != nil &&
+		*invoice.Hash == channeldb.UnknownPreimage.Hash():
+
+		return nil, nil,
+			fmt.Errorf("cannot use hash of all zeroes preimage")
+
+	// If no hash or preimage is given, generate a random preimage.
+	case invoice.Preimage == nil && invoice.Hash == nil:
 		if _, err := rand.Read(paymentPreimage[:]); err != nil {
 			return nil, nil, err
 		}
-	} else {
+		paymentHash = paymentPreimage.Hash()
+
+	// If just a hash is given, we create a hold invoice by setting the
+	// preimage to unknown.
+	case invoice.Preimage == nil && invoice.Hash != nil:
+		paymentPreimage = channeldb.UnknownPreimage
+		paymentHash = *invoice.Hash
+
+	// A specific preimage was supplied. Use that for the invoice.
+	case invoice.Preimage != nil && invoice.Hash == nil:
 		paymentPreimage = *invoice.Preimage
+		paymentHash = invoice.Preimage.Hash()
 	}
 
 	// The size of the memo, receipt and description hash attached must not
@@ -134,10 +180,6 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 		)
 	}
 
-	// Next, generate the payment hash itself from the preimage. This will
-	// be used by clients to query for the state of a particular invoice.
-	rHash := paymentPreimage.Hash()
-
 	// We also create an encoded payment request which allows the
 	// caller to compactly send the invoice to the payer. We'll create a
 	// list of options to be added to the encoded payment request. For now
@@ -332,7 +374,7 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 	// Create and encode the payment request as a bech32 (zpay32) string.
 	creationDate := time.Now()
 	payReq, err := zpay32.NewInvoice(
-		cfg.ChainParams, rHash, creationDate, options...,
+		cfg.ChainParams, paymentHash, creationDate, options...,
 	)
 	if err != nil {
 		return nil, nil, err
@@ -365,10 +407,10 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 	)
 
 	// With all sanity checks passed, write the invoice to the database.
-	_, err = cfg.AddInvoice(newInvoice, rHash)
+	_, err = cfg.AddInvoice(newInvoice, paymentHash)
 	if err != nil {
 		return nil, nil, err
 	}
 
-	return &rHash, newInvoice, nil
+	return &paymentHash, newInvoice, nil
 }
diff --git a/lnrpc/invoicesrpc/utils.go b/lnrpc/invoicesrpc/utils.go
index bbba240a3..b911602c7 100644
--- a/lnrpc/invoicesrpc/utils.go
+++ b/lnrpc/invoicesrpc/utils.go
@@ -65,11 +65,10 @@ func CreateRPCInvoice(invoice *channeldb.Invoice,
 			invoice.Terms.State)
 	}
 
-	return &lnrpc.Invoice{
+	rpcInvoice := &lnrpc.Invoice{
 		Memo:            string(invoice.Memo[:]),
 		Receipt:         invoice.Receipt[:],
 		RHash:           decoded.PaymentHash[:],
-		RPreimage:       preimage[:],
 		Value:           int64(satAmt),
 		CreationDate:    invoice.CreationDate.Unix(),
 		SettleDate:      settleDate,
@@ -87,7 +86,13 @@ func CreateRPCInvoice(invoice *channeldb.Invoice,
 		AmtPaidMsat:     int64(invoice.AmtPaid),
 		AmtPaid:         int64(invoice.AmtPaid),
 		State:           state,
-	}, nil
+	}
+
+	if preimage != channeldb.UnknownPreimage {
+		rpcInvoice.RPreimage = preimage[:]
+	}
+
+	return rpcInvoice, nil
 }
 
 // CreateRPCRouteHints takes in the decoded form of an invoice's route hints
diff --git a/witness_beacon.go b/witness_beacon.go
index 998269845..1d368c581 100644
--- a/witness_beacon.go
+++ b/witness_beacon.go
@@ -85,7 +85,9 @@ func (p *preimageBeacon) LookupPreimage(
 
 	// If we've found the invoice, then we can return the preimage
 	// directly.
-	if err != channeldb.ErrInvoiceNotFound {
+	if err != channeldb.ErrInvoiceNotFound &&
+		invoice.Terms.PaymentPreimage != channeldb.UnknownPreimage {
+
 		return invoice.Terms.PaymentPreimage, true
 	}