diff --git a/channeldb/kvdb/config.go b/channeldb/kvdb/config.go
index ccd1c1d75..9ea50adc0 100644
--- a/channeldb/kvdb/config.go
+++ b/channeldb/kvdb/config.go
@@ -30,6 +30,8 @@ type BoltConfig struct {
 
 // EtcdConfig holds etcd configuration.
 type EtcdConfig struct {
+	Embedded bool `long:"embedded" description:"Use embedded etcd instance instead of the external one."`
+
 	Host string `long:"host" description:"Etcd database host."`
 
 	User string `long:"user" description:"Etcd database user."`
diff --git a/lncfg/db.go b/lncfg/db.go
index 2f0eade59..63b58c469 100644
--- a/lncfg/db.go
+++ b/lncfg/db.go
@@ -38,7 +38,7 @@ func (db *DB) Validate() error {
 	case BoltBackend:
 
 	case EtcdBackend:
-		if db.Etcd.Host == "" {
+		if !db.Etcd.Embedded && db.Etcd.Host == "" {
 			return fmt.Errorf("etcd host must be set")
 		}
 
@@ -76,8 +76,12 @@ func (db *DB) GetBackends(ctx context.Context, dbPath string,
 	)
 
 	if db.Backend == EtcdBackend {
-		// Prefix will separate key/values in the db.
-		remoteDB, err = kvdb.GetEtcdBackend(ctx, networkName, db.Etcd)
+		if db.Etcd.Embedded {
+			remoteDB, _, err = kvdb.GetEtcdTestBackend(dbPath, dbName)
+		} else {
+			// Prefix will separate key/values in the db.
+			remoteDB, err = kvdb.GetEtcdBackend(ctx, networkName, db.Etcd)
+		}
 		if err != nil {
 			return nil, err
 		}