diff --git a/src/bitcoin/electrum/mod.rs b/src/bitcoin/electrum/mod.rs
index 8b9745c76..4cfe8441f 100644
--- a/src/bitcoin/electrum/mod.rs
+++ b/src/bitcoin/electrum/mod.rs
@@ -6,6 +6,7 @@ use bdk_electrum::bdk_chain::{
     spk_client::{FullScanRequest, SyncRequest},
     ChainPosition,
 };
+use utils::tip_from_block_id;
 
 pub mod client;
 mod utils;
@@ -136,7 +137,8 @@ impl Electrum {
         const FETCH_PREV_TXOUTS: bool = false;
         const STOP_GAP: usize = 50;
 
-        let (chain_update, mut graph_update, keychain_update) = if !self.is_rescanning() {
+        let is_rescanning = self.is_rescanning();
+        let (chain_update, mut graph_update, keychain_update) = if !is_rescanning {
             log::info!("Performing sync.");
             let mut request = SyncRequest::from_chain_tip(local_chain_tip.clone())
                 .cache_graph_txs(self.bdk_wallet.graph());
@@ -197,25 +199,37 @@ impl Electrum {
         if let Some(keychain_update) = keychain_update {
             self.bdk_wallet.apply_keychain_update(keychain_update);
         }
-        let changeset = self.bdk_wallet.apply_connected_chain_update(chain_update);
-
-        let mut changes_iter = changeset.into_iter();
-        let reorg_common_ancestor = loop {
-            match changes_iter.next() {
-                Some((height, Some(_))) => {
-                    // `BlockHash` being `Some(_)` means a checkpoint at this height was added to the chain.
-                    // Since we iterate in ascending height order, we'll see the lowest block height first.
-                    // If the lowest height it adds is higher than our height before syncing, we're good.
-                    // Else if it's adding a block at height before syncing or lower, it's a reorg.
-                    break if height > local_chain_tip.height() {
-                        None
-                    } else {
-                        log::info!("Block chain reorganization detected.");
-                        Some(self.bdk_wallet.find_block_at_or_before_height(height))
-                    };
+
+        let reorg_common_ancestor = if !is_rescanning {
+            let changeset = self.bdk_wallet.apply_connected_chain_update(chain_update);
+            let mut changes_iter = changeset.into_iter();
+            loop {
+                match changes_iter.next() {
+                    Some((height, Some(_))) => {
+                        // `BlockHash` being `Some(_)` means a checkpoint at this height was added to the chain.
+                        // Since we iterate in ascending height order, we'll see the lowest block height first.
+                        // If the lowest height it adds is higher than our height before syncing, we're good.
+                        // Else if it's adding a block at height before syncing or lower, it's a reorg.
+                        break if height > local_chain_tip.height() {
+                            None
+                        } else {
+                            log::info!("Block chain reorganization detected.");
+                            Some(self.bdk_wallet.find_block_at_or_before_height(height))
+                        };
+                    }
+                    Some((_, None)) => continue,
+                    None => break None,
                 }
-                Some((_, None)) => continue,
-                None => break None,
+            }
+        } else {
+            // If there was a rescan and the new height is lower, we need to indicate the reorg.
+            // There might still have been a reorg in other cases, but they will be picked up
+            // by rescan logic.
+            self.bdk_wallet.replace_chain_from_tip(chain_update);
+            if self.local_chain().tip().height() < local_chain_tip.height() {
+                Some(tip_from_block_id(self.local_chain().tip().block_id()))
+            } else {
+                None
             }
         };
 
diff --git a/src/bitcoin/electrum/wallet.rs b/src/bitcoin/electrum/wallet.rs
index 2e467f214..cdb51719b 100644
--- a/src/bitcoin/electrum/wallet.rs
+++ b/src/bitcoin/electrum/wallet.rs
@@ -308,6 +308,12 @@ impl BdkWallet {
         unreachable!("There must be at least the genesis block.")
     }
 
+    /// Replace the local chain with a new one from the given tip.
+    /// Panics if tip does not contain genesis block.
+    pub fn replace_chain_from_tip(&mut self, tip: CheckPoint) {
+        self.local_chain = LocalChain::from_tip(tip).expect("must contain genesis block");
+    }
+
     /// Apply an update to the local chain.
     /// Panics if update does not connect to the local chain.
     pub fn apply_connected_chain_update(&mut self, chain_update: CheckPoint) -> ChainChangeSet {