diff --git a/CHANGELOG.md b/CHANGELOG.md
index 8b36b8a1d4f6..4b91d5e05ea7 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -44,6 +44,7 @@ Every module contains its own CHANGELOG.md. Please refer to the module you are i
 
 * (x/validate) [#21822](https://github.com/cosmos/cosmos-sdk/pull/21822) New module solely responsible for providing ante/post handlers and tx validators for v2. It can be extended by the app developer to provide extra tx validators.
     * In comparison to x/auth/tx/config, there is no app config to skip ante/post handlers, as overwriting them in baseapp or not injecting the x/validate module has the same effect.
+* (baseapp) [#21979](https://github.com/cosmos/cosmos-sdk/pull/21979) Create CheckTxHandler to allow extending the logic of CheckTx.
 
 ### Improvements
 
diff --git a/baseapp/abci.go b/baseapp/abci.go
index f0f24ef52844..27118f0f3b10 100644
--- a/baseapp/abci.go
+++ b/baseapp/abci.go
@@ -367,18 +367,27 @@ func (app *BaseApp) CheckTx(req *abci.CheckTxRequest) (*abci.CheckTxResponse, er
 		return nil, fmt.Errorf("unknown RequestCheckTx type: %s", req.Type)
 	}
 
-	gInfo, result, anteEvents, err := app.runTx(mode, req.Tx)
-	if err != nil {
-		return responseCheckTxWithEvents(err, gInfo.GasWanted, gInfo.GasUsed, anteEvents, app.trace), nil
+	if app.checkTxHandler == nil {
+		gInfo, result, anteEvents, err := app.runTx(mode, req.Tx, nil)
+		if err != nil {
+			return responseCheckTxWithEvents(err, gInfo.GasWanted, gInfo.GasUsed, anteEvents, app.trace), nil
+		}
+
+		return &abci.CheckTxResponse{
+			GasWanted: int64(gInfo.GasWanted), // TODO: Should type accept unsigned ints?
+			GasUsed:   int64(gInfo.GasUsed),   // TODO: Should type accept unsigned ints?
+			Log:       result.Log,
+			Data:      result.Data,
+			Events:    sdk.MarkEventsToIndex(result.Events, app.indexEvents),
+		}, nil
 	}
 
-	return &abci.CheckTxResponse{
-		GasWanted: int64(gInfo.GasWanted), // TODO: Should type accept unsigned ints?
-		GasUsed:   int64(gInfo.GasUsed),   // TODO: Should type accept unsigned ints?
-		Log:       result.Log,
-		Data:      result.Data,
-		Events:    sdk.MarkEventsToIndex(result.Events, app.indexEvents),
-	}, nil
+	// Create wrapper to avoid users overriding the execution mode
+	runTx := func(txBytes []byte, tx sdk.Tx) (gInfo sdk.GasInfo, result *sdk.Result, anteEvents []abci.Event, err error) {
+		return app.runTx(mode, txBytes, tx)
+	}
+
+	return app.checkTxHandler(runTx, req)
 }
 
 // PrepareProposal implements the PrepareProposal ABCI method and returns a
diff --git a/baseapp/baseapp.go b/baseapp/baseapp.go
index 2e3640519f9c..f486ecc38e82 100644
--- a/baseapp/baseapp.go
+++ b/baseapp/baseapp.go
@@ -91,6 +91,7 @@ type BaseApp struct {
 	prepareCheckStater sdk.PrepareCheckStater         // logic to run during commit using the checkState
 	precommiter        sdk.Precommiter                // logic to run during commit using the deliverState
 	versionModifier    server.VersionModifier         // interface to get and set the app version
+	checkTxHandler     sdk.CheckTxHandler
 
 	addrPeerFilter sdk.PeerFilter // filter peers by address and port
 	idPeerFilter   sdk.PeerFilter // filter peers by node ID
@@ -683,7 +684,6 @@ func (app *BaseApp) getContextForTx(mode execMode, txBytes []byte) sdk.Context {
 // a branched multi-store.
 func (app *BaseApp) cacheTxContext(ctx sdk.Context, txBytes []byte) (sdk.Context, storetypes.CacheMultiStore) {
 	ms := ctx.MultiStore()
-	// TODO: https://github.com/cosmos/cosmos-sdk/issues/2824
 	msCache := ms.CacheMultiStore()
 	if msCache.TracingEnabled() {
 		msCache = msCache.SetTracingContext(
@@ -756,7 +756,7 @@ func (app *BaseApp) deliverTx(tx []byte) *abci.ExecTxResult {
 		telemetry.SetGauge(float32(gInfo.GasWanted), "tx", "gas", "wanted")
 	}()
 
-	gInfo, result, anteEvents, err := app.runTx(execModeFinalize, tx)
+	gInfo, result, anteEvents, err := app.runTx(execModeFinalize, tx, nil)
 	if err != nil {
 		resultStr = "failed"
 		resp = responseExecTxResultWithEvents(
@@ -813,7 +813,9 @@ func (app *BaseApp) endBlock(_ context.Context) (sdk.EndBlock, error) {
 // Note, gas execution info is always returned. A reference to a Result is
 // returned if the tx does not run out of gas and if all the messages are valid
 // and execute successfully. An error is returned otherwise.
-func (app *BaseApp) runTx(mode execMode, txBytes []byte) (gInfo sdk.GasInfo, result *sdk.Result, anteEvents []abci.Event, err error) {
+// both txbytes and the decoded tx are passed to runTx to avoid the state machine encoding the tx and decoding the transaction twice
+// passing the decoded tx to runTX is optional, it will be decoded if the tx is nil
+func (app *BaseApp) runTx(mode execMode, txBytes []byte, tx sdk.Tx) (gInfo sdk.GasInfo, result *sdk.Result, anteEvents []abci.Event, err error) {
 	// NOTE: GasWanted should be returned by the AnteHandler. GasUsed is
 	// determined by the GasMeter. We need access to the context to get the gas
 	// meter, so we initialize upfront.
@@ -861,9 +863,12 @@ func (app *BaseApp) runTx(mode execMode, txBytes []byte) (gInfo sdk.GasInfo, res
 		defer consumeBlockGas()
 	}
 
-	tx, err := app.txDecoder(txBytes)
-	if err != nil {
-		return sdk.GasInfo{GasUsed: 0, GasWanted: 0}, nil, nil, sdkerrors.ErrTxDecode.Wrap(err.Error())
+	// if the transaction is not decoded, decode it here
+	if tx == nil {
+		tx, err = app.txDecoder(txBytes)
+		if err != nil {
+			return sdk.GasInfo{GasUsed: 0, GasWanted: 0}, nil, nil, sdkerrors.ErrTxDecode.Wrap(err.Error())
+		}
 	}
 
 	msgs := tx.GetMsgs()
@@ -1099,7 +1104,7 @@ func (app *BaseApp) PrepareProposalVerifyTx(tx sdk.Tx) ([]byte, error) {
 		return nil, err
 	}
 
-	_, _, _, err = app.runTx(execModePrepareProposal, bz)
+	_, _, _, err = app.runTx(execModePrepareProposal, bz, tx)
 	if err != nil {
 		return nil, err
 	}
@@ -1118,7 +1123,7 @@ func (app *BaseApp) ProcessProposalVerifyTx(txBz []byte) (sdk.Tx, error) {
 		return nil, err
 	}
 
-	_, _, _, err = app.runTx(execModeProcessProposal, txBz)
+	_, _, _, err = app.runTx(execModeProcessProposal, txBz, tx)
 	if err != nil {
 		return nil, err
 	}
diff --git a/baseapp/options.go b/baseapp/options.go
index 05962ec06c0a..bd47dce6a006 100644
--- a/baseapp/options.go
+++ b/baseapp/options.go
@@ -354,6 +354,15 @@ func (app *BaseApp) SetPrepareProposal(handler sdk.PrepareProposalHandler) {
 	app.prepareProposal = handler
 }
 
+// SetCheckTx sets the checkTx function for the BaseApp.
+func (app *BaseApp) SetCheckTxHandler(handler sdk.CheckTxHandler) {
+	if app.sealed {
+		panic("SetCheckTx() on sealed BaseApp")
+	}
+
+	app.checkTxHandler = handler
+}
+
 func (app *BaseApp) SetExtendVoteHandler(handler sdk.ExtendVoteHandler) {
 	if app.sealed {
 		panic("SetExtendVoteHandler() on sealed BaseApp")
diff --git a/baseapp/test_helpers.go b/baseapp/test_helpers.go
index fcd0e55c8447..7cae8e541b7d 100644
--- a/baseapp/test_helpers.go
+++ b/baseapp/test_helpers.go
@@ -19,13 +19,13 @@ func (app *BaseApp) SimCheck(txEncoder sdk.TxEncoder, tx sdk.Tx) (sdk.GasInfo, *
 		return sdk.GasInfo{}, nil, errorsmod.Wrapf(sdkerrors.ErrInvalidRequest, "%s", err)
 	}
 
-	gasInfo, result, _, err := app.runTx(execModeCheck, bz)
+	gasInfo, result, _, err := app.runTx(execModeCheck, bz, tx)
 	return gasInfo, result, err
 }
 
 // Simulate executes a tx in simulate mode to get result and gas info.
 func (app *BaseApp) Simulate(txBytes []byte) (sdk.GasInfo, *sdk.Result, error) {
-	gasInfo, result, _, err := app.runTx(execModeSimulate, txBytes)
+	gasInfo, result, _, err := app.runTx(execModeSimulate, txBytes, nil)
 	return gasInfo, result, err
 }
 
@@ -36,7 +36,7 @@ func (app *BaseApp) SimDeliver(txEncoder sdk.TxEncoder, tx sdk.Tx) (sdk.GasInfo,
 		return sdk.GasInfo{}, nil, errorsmod.Wrapf(sdkerrors.ErrInvalidRequest, "%s", err)
 	}
 
-	gasInfo, result, _, err := app.runTx(execModeFinalize, bz)
+	gasInfo, result, _, err := app.runTx(execModeFinalize, bz, tx)
 	return gasInfo, result, err
 }
 
diff --git a/docs/build/abci/04-checktx.md b/docs/build/abci/04-checktx.md
new file mode 100644
index 000000000000..a2c5f2d707d6
--- /dev/null
+++ b/docs/build/abci/04-checktx.md
@@ -0,0 +1,50 @@
+# CheckTx
+
+CheckTx is called by the `BaseApp` when comet receives a transaction from a client, over the p2p network or RPC. The CheckTx method is responsible for validating the transaction and returning an error if the transaction is invalid. 
+
+```mermaid
+graph TD
+    subgraph SDK[Cosmos SDK]
+        B[Baseapp]
+        A[AnteHandlers]
+        B <-->|Validate TX| A
+    end
+    C[CometBFT] <-->|CheckTx|SDK
+    U((User)) -->|Submit TX| C
+    N[P2P] -->|Receive TX| C
+```
+
+```go reference
+https://github.com/cosmos/cosmos-sdk/blob/31c604762a434c7b676b6a89897ecbd7c4653a23/baseapp/abci.go#L350-L390
+```
+
+## CheckTx Handler
+
+`CheckTxHandler` allows users to extend the logic of `CheckTx`. `CheckTxHandler` is called by pasding context and the transaction bytes received through ABCI. It is required that the handler returns deterministic results given the same transaction bytes. 
+
+:::note
+we return the raw decoded transaction here to avoid decoding it twice.
+:::
+
+```go
+type CheckTxHandler func(ctx sdk.Context, tx []byte) (Tx, error)
+```
+
+Setting a custom `CheckTxHandler` is optional. It can be done from your app.go file:
+
+```go
+func NewSimApp(
+	logger log.Logger,
+	db corestore.KVStoreWithBatch,
+	traceStore io.Writer,
+	loadLatest bool,
+	appOpts servertypes.AppOptions,
+	baseAppOptions ...func(*baseapp.BaseApp),
+) *SimApp {
+  ...
+  // Create ChecktxHandler
+  checktxHandler := abci.NewCustomCheckTxHandler(...)
+  app.SetCheckTxHandler(checktxHandler)
+  ...
+}
+```
diff --git a/docs/build/building-apps/02-app-mempool.md b/docs/build/building-apps/02-app-mempool.md
index a9a38fa6d0b3..9ef17bec631f 100644
--- a/docs/build/building-apps/02-app-mempool.md
+++ b/docs/build/building-apps/02-app-mempool.md
@@ -22,7 +22,7 @@ Notably it introduces the `PrepareProposal` and `ProcessProposal` steps of ABCI+
 
 ## Mempool
 
-+ Before we delve into `PrepareProposal` and `ProcessProposal`, let's first walk through the mempool concepts.
+* Before we delve into `PrepareProposal` and `ProcessProposal`, let's first walk through the mempool concepts.
 
 There are countless designs that an application developer can write for a mempool, the SDK opted to provide only simple mempool implementations.
 Namely, the SDK provides the following mempools:
diff --git a/types/abci.go b/types/abci.go
index 30e6beee391e..bcbc791388f3 100644
--- a/types/abci.go
+++ b/types/abci.go
@@ -23,6 +23,11 @@ type ProcessProposalHandler func(Context, *abci.ProcessProposalRequest) (*abci.P
 // PrepareProposalHandler defines a function type alias for preparing a proposal
 type PrepareProposalHandler func(Context, *abci.PrepareProposalRequest) (*abci.PrepareProposalResponse, error)
 
+// CheckTxHandler defines a function type alias for executing logic before transactions are executed.
+// `RunTx` is a function type alias for executing logic before transactions are executed.
+// The passed in runtx does not override antehandlers, the execution mode is not passed into runtx to avoid overriding the execution mode.
+type CheckTxHandler func(func(txBytes []byte, tx Tx) (gInfo GasInfo, result *Result, anteEvents []abci.Event, err error), *abci.CheckTxRequest) (*abci.CheckTxResponse, error)
+
 // ExtendVoteHandler defines a function type alias for extending a pre-commit vote.
 type ExtendVoteHandler func(Context, *abci.ExtendVoteRequest) (*abci.ExtendVoteResponse, error)