diff --git a/src/qt/walletmodel.cpp b/src/qt/walletmodel.cpp
--- a/src/qt/walletmodel.cpp
+++ b/src/qt/walletmodel.cpp
@@ -220,7 +220,9 @@
         return TransactionCreationFailed;
     }
 
-    // Reject absurdly high fee
+    // Reject absurdly high fee. (This can never happen because the
+    // wallet never creates transactions with fee greater than
+    // m_default_max_tx_fee. This merely a belt-and-suspenders check).
     if (nFeeRequired > m_wallet->getDefaultMaxTxFee()) {
         return AbsurdFee;
     }
diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -3194,12 +3194,6 @@
         }
     }
 
-    if (nFeeRet > this->m_default_max_tx_fee) {
-        strFailReason =
-            TransactionErrorString(TransactionError::MAX_FEE_EXCEEDED);
-        return false;
-    }
-
     return true;
 }
 
@@ -3522,15 +3516,6 @@
 
             Amount nFeeNeeded = GetMinimumFee(*this, nBytes, coinControl);
 
-            // If we made it here and we aren't even able to meet the relay fee
-            // on the next pass, give up because we must be at the maximum
-            // allowed fee.
-            if (nFeeNeeded < chain().relayMinFee().GetFee(nBytes)) {
-                strFailReason =
-                    _("Transaction too large for fee policy").translated;
-                return false;
-            }
-
             if (nFeeRet >= nFeeNeeded) {
                 // Reduce fee to only the needed amount if possible. This
                 // prevents potential overpayment in fees if the coins selected
@@ -3663,6 +3648,12 @@
         }
     }
 
+    if (nFeeRet > m_default_max_tx_fee) {
+        strFailReason =
+            TransactionErrorString(TransactionError::MAX_FEE_EXCEEDED);
+        return false;
+    }
+
     if (gArgs.GetBoolArg("-walletrejectlongchains",
                          DEFAULT_WALLET_REJECT_LONG_CHAINS)) {
         // Lastly, ensure this tx will pass the mempool's chain limits
diff --git a/test/functional/rpc_psbt.py b/test/functional/rpc_psbt.py
--- a/test/functional/rpc_psbt.py
+++ b/test/functional/rpc_psbt.py
@@ -91,7 +91,7 @@
         assert_greater_than(0.07, res["fee"])
 
         # feeRate of 10 BCH / KB produces a total fee well above -maxtxfee
-        # previously this was silenty capped at -maxtxfee
+        # previously this was silently capped at -maxtxfee
         assert_raises_rpc_error(
             -4,
             "Fee exceeds maximum configured by -maxtxfee",
diff --git a/test/functional/wallet_create_tx.py b/test/functional/wallet_create_tx.py
--- a/test/functional/wallet_create_tx.py
+++ b/test/functional/wallet_create_tx.py
@@ -6,6 +6,7 @@
 from test_framework.test_framework import BitcoinTestFramework
 from test_framework.util import (
     assert_equal,
+    assert_raises_rpc_error,
 )
 from test_framework.blocktools import (
     TIME_GENESIS_BLOCK,
@@ -26,6 +27,10 @@
         self.nodes[0].generate(200)
         self.nodes[0].setmocktime(0)
 
+        self.test_anti_fee_sniping()
+        self.test_tx_size_too_large()
+
+    def test_anti_fee_sniping(self):
         self.log.info(
             'Check that we have some (old) blocks and that anti-fee-sniping is disabled')
         assert_equal(self.nodes[0].getblockchaininfo()['blocks'], 200)
@@ -42,6 +47,43 @@
             self.nodes[0].gettransaction(txid)['hex'])
         assert 0 < tx['locktime'] <= 201
 
+    def test_tx_size_too_large(self):
+        # More than 10kB of outputs, so that we hit -maxtxfee with a high
+        # feerate
+        outputs = {self.nodes[0].getnewaddress(): 0.000025 for i in range(400)}
+        raw_tx = self.nodes[0].createrawtransaction(inputs=[], outputs=outputs)
+
+        for fee_setting in ['-minrelaytxfee=0.01',
+                            '-mintxfee=0.01', '-paytxfee=0.01']:
+            self.log.info(
+                'Check maxtxfee in combination with {}'.format(fee_setting))
+            self.restart_node(0, extra_args=[fee_setting])
+            assert_raises_rpc_error(
+                -6,
+                "Fee exceeds maximum configured by -maxtxfee",
+                lambda: self.nodes[0].sendmany(dummy="", amounts=outputs),
+            )
+            assert_raises_rpc_error(
+                -4,
+                "Fee exceeds maximum configured by -maxtxfee",
+                lambda: self.nodes[0].fundrawtransaction(hexstring=raw_tx),
+            )
+
+        self.log.info('Check maxtxfee in combination with settxfee')
+        self.restart_node(0)
+        self.nodes[0].settxfee(0.01)
+        assert_raises_rpc_error(
+            -6,
+            "Fee exceeds maximum configured by -maxtxfee",
+            lambda: self.nodes[0].sendmany(dummy="", amounts=outputs),
+        )
+        assert_raises_rpc_error(
+            -4,
+            "Fee exceeds maximum configured by -maxtxfee",
+            lambda: self.nodes[0].fundrawtransaction(hexstring=raw_tx),
+        )
+        self.nodes[0].settxfee(0)
+
 
 if __name__ == '__main__':
     CreateTxWalletTest().main()