diff --git a/federationsender/consumers/roomserver.go b/federationsender/consumers/roomserver.go
index 67d08b33..90123947 100644
--- a/federationsender/consumers/roomserver.go
+++ b/federationsender/consumers/roomserver.go
@@ -188,11 +188,30 @@ func (s *OutputRoomEventConsumer) processInvite(oie api.OutputNewInviteEvent) er
 		return nil
 	}
 
+	// Ignore invites that don't have state keys - they are invalid.
+	if oie.Event.StateKey() == nil {
+		return fmt.Errorf("event %q doesn't have state key", oie.Event.EventID())
+	}
+
+	// Don't try to handle events that are actually destined for us.
+	stateKey := *oie.Event.StateKey()
+	_, destination, err := gomatrixserverlib.SplitID('@', stateKey)
+	if err != nil {
+		log.WithFields(log.Fields{
+			"event_id":  oie.Event.EventID(),
+			"state_key": stateKey,
+		}).Info("failed to split destination from state key")
+		return nil
+	}
+	if s.cfg.Matrix.ServerName == destination {
+		return nil
+	}
+
 	// Try to extract the room invite state. The roomserver will have stashed
 	// this for us in invite_room_state if it didn't already exist.
 	strippedState := []gomatrixserverlib.InviteV2StrippedState{}
 	if inviteRoomState := gjson.GetBytes(oie.Event.Unsigned(), "invite_room_state"); inviteRoomState.Exists() {
-		if err := json.Unmarshal([]byte(inviteRoomState.Raw), &strippedState); err != nil {
+		if err = json.Unmarshal([]byte(inviteRoomState.Raw), &strippedState); err != nil {
 			log.WithError(err).Warn("failed to extract invite_room_state from event unsigned")
 		}
 	}
diff --git a/federationsender/federationsender.go b/federationsender/federationsender.go
index cf439552..8e2f256d 100644
--- a/federationsender/federationsender.go
+++ b/federationsender/federationsender.go
@@ -24,6 +24,7 @@ import (
 	"github.com/matrix-org/dendrite/federationsender/producers"
 	"github.com/matrix-org/dendrite/federationsender/queue"
 	"github.com/matrix-org/dendrite/federationsender/storage"
+	"github.com/matrix-org/dendrite/federationsender/types"
 	roomserverAPI "github.com/matrix-org/dendrite/roomserver/api"
 	"github.com/matrix-org/gomatrixserverlib"
 	"github.com/sirupsen/logrus"
@@ -42,9 +43,14 @@ func SetupFederationSenderComponent(
 		logrus.WithError(err).Panic("failed to connect to federation sender db")
 	}
 
-	roomserverProducer := producers.NewRoomserverProducer(rsAPI, base.Cfg.Matrix.ServerName)
+	roomserverProducer := producers.NewRoomserverProducer(
+		rsAPI, base.Cfg.Matrix.ServerName, base.Cfg.Matrix.KeyID, base.Cfg.Matrix.PrivateKey,
+	)
 
-	queues := queue.NewOutgoingQueues(base.Cfg.Matrix.ServerName, federation, roomserverProducer)
+	statistics := &types.Statistics{}
+	queues := queue.NewOutgoingQueues(
+		base.Cfg.Matrix.ServerName, federation, roomserverProducer, statistics,
+	)
 
 	rsConsumer := consumers.NewOutputRoomEventConsumer(
 		base.Cfg, base.KafkaConsumer, queues,
@@ -63,6 +69,7 @@ func SetupFederationSenderComponent(
 
 	queryAPI := internal.NewFederationSenderInternalAPI(
 		federationSenderDB, base.Cfg, roomserverProducer, federation, keyRing,
+		statistics,
 	)
 	queryAPI.SetupHTTP(http.DefaultServeMux)
 
diff --git a/federationsender/internal/api.go b/federationsender/internal/api.go
index 89a1fda4..48179522 100644
--- a/federationsender/internal/api.go
+++ b/federationsender/internal/api.go
@@ -9,6 +9,7 @@ import (
 	"github.com/matrix-org/dendrite/federationsender/api"
 	"github.com/matrix-org/dendrite/federationsender/producers"
 	"github.com/matrix-org/dendrite/federationsender/storage"
+	"github.com/matrix-org/dendrite/federationsender/types"
 	"github.com/matrix-org/gomatrixserverlib"
 	"github.com/matrix-org/util"
 )
@@ -18,6 +19,7 @@ type FederationSenderInternalAPI struct {
 	api.FederationSenderInternalAPI
 	db         storage.Database
 	cfg        *config.Dendrite
+	statistics *types.Statistics
 	producer   *producers.RoomserverProducer
 	federation *gomatrixserverlib.FederationClient
 	keyRing    *gomatrixserverlib.KeyRing
@@ -28,6 +30,7 @@ func NewFederationSenderInternalAPI(
 	producer *producers.RoomserverProducer,
 	federation *gomatrixserverlib.FederationClient,
 	keyRing *gomatrixserverlib.KeyRing,
+	statistics *types.Statistics,
 ) *FederationSenderInternalAPI {
 	return &FederationSenderInternalAPI{
 		db:         db,
@@ -35,6 +38,7 @@ func NewFederationSenderInternalAPI(
 		producer:   producer,
 		federation: federation,
 		keyRing:    keyRing,
+		statistics: statistics,
 	}
 }
 
diff --git a/federationsender/internal/perform.go b/federationsender/internal/perform.go
index ff7f821c..431b2a2d 100644
--- a/federationsender/internal/perform.go
+++ b/federationsender/internal/perform.go
@@ -25,10 +25,12 @@ func (r *FederationSenderInternalAPI) PerformDirectoryLookup(
 		request.RoomAlias,
 	)
 	if err != nil {
+		r.statistics.ForServer(request.ServerName).Failure()
 		return err
 	}
 	response.RoomID = dir.RoomID
 	response.ServerNames = dir.Servers
+	r.statistics.ForServer(request.ServerName).Success()
 	return nil
 }
 
@@ -61,6 +63,7 @@ func (r *FederationSenderInternalAPI) PerformJoin(
 		)
 		if err != nil {
 			// TODO: Check if the user was not allowed to join the room.
+			r.statistics.ForServer(serverName).Failure()
 			return fmt.Errorf("r.federation.MakeJoin: %w", err)
 		}
 
@@ -112,6 +115,7 @@ func (r *FederationSenderInternalAPI) PerformJoin(
 		)
 		if err != nil {
 			logrus.WithError(err).Warnf("r.federation.SendJoin failed")
+			r.statistics.ForServer(serverName).Failure()
 			continue
 		}
 
@@ -137,6 +141,7 @@ func (r *FederationSenderInternalAPI) PerformJoin(
 		}
 
 		// We're all good.
+		r.statistics.ForServer(serverName).Success()
 		return nil
 	}
 
@@ -170,6 +175,7 @@ func (r *FederationSenderInternalAPI) PerformLeave(
 		if err != nil {
 			// TODO: Check if the user was not allowed to leave the room.
 			logrus.WithError(err).Warnf("r.federation.MakeLeave failed")
+			r.statistics.ForServer(serverName).Failure()
 			continue
 		}
 
@@ -221,9 +227,11 @@ func (r *FederationSenderInternalAPI) PerformLeave(
 		)
 		if err != nil {
 			logrus.WithError(err).Warnf("r.federation.SendLeave failed")
+			r.statistics.ForServer(serverName).Failure()
 			continue
 		}
 
+		r.statistics.ForServer(serverName).Success()
 		return nil
 	}
 
diff --git a/federationsender/producers/roomserver.go b/federationsender/producers/roomserver.go
index 48aeed8c..76fedf53 100644
--- a/federationsender/producers/roomserver.go
+++ b/federationsender/producers/roomserver.go
@@ -16,6 +16,7 @@ package producers
 
 import (
 	"context"
+	"crypto/ed25519"
 
 	"github.com/matrix-org/dendrite/roomserver/api"
 	"github.com/matrix-org/gomatrixserverlib"
@@ -25,15 +26,20 @@ import (
 type RoomserverProducer struct {
 	InputAPI   api.RoomserverInternalAPI
 	serverName gomatrixserverlib.ServerName
+	keyID      gomatrixserverlib.KeyID
+	privateKey ed25519.PrivateKey
 }
 
 // NewRoomserverProducer creates a new RoomserverProducer
 func NewRoomserverProducer(
 	rsAPI api.RoomserverInternalAPI, serverName gomatrixserverlib.ServerName,
+	keyID gomatrixserverlib.KeyID, privateKey ed25519.PrivateKey,
 ) *RoomserverProducer {
 	return &RoomserverProducer{
 		InputAPI:   rsAPI,
 		serverName: serverName,
+		keyID:      keyID,
+		privateKey: privateKey,
 	}
 }
 
@@ -43,7 +49,7 @@ func NewRoomserverProducer(
 func (c *RoomserverProducer) SendInviteResponse(
 	ctx context.Context, res gomatrixserverlib.RespInviteV2, roomVersion gomatrixserverlib.RoomVersion,
 ) (string, error) {
-	ev := res.Event.Headered(roomVersion)
+	ev := res.Event.Sign(string(c.serverName), c.keyID, c.privateKey).Headered(roomVersion)
 	ire := api.InputRoomEvent{
 		Kind:          api.KindNew,
 		Event:         ev,
diff --git a/federationsender/queue/destinationqueue.go b/federationsender/queue/destinationqueue.go
index 89526fcf..45faa287 100644
--- a/federationsender/queue/destinationqueue.go
+++ b/federationsender/queue/destinationqueue.go
@@ -18,12 +18,13 @@ import (
 	"context"
 	"encoding/json"
 	"fmt"
-	"sync"
 	"time"
 
 	"github.com/matrix-org/dendrite/federationsender/producers"
+	"github.com/matrix-org/dendrite/federationsender/types"
+	"github.com/matrix-org/gomatrix"
 	"github.com/matrix-org/gomatrixserverlib"
-	"github.com/matrix-org/util"
+	"github.com/sirupsen/logrus"
 	log "github.com/sirupsen/logrus"
 	"go.uber.org/atomic"
 )
@@ -33,92 +34,190 @@ import (
 // ensures that only one request is in flight to a given destination
 // at a time.
 type destinationQueue struct {
-	rsProducer  *producers.RoomserverProducer
-	client      *gomatrixserverlib.FederationClient
-	origin      gomatrixserverlib.ServerName
-	destination gomatrixserverlib.ServerName
-	running     atomic.Bool
-	// The running mutex protects sentCounter, lastTransactionIDs and
-	// pendingEvents, pendingEDUs.
-	runningMutex       sync.Mutex
-	sentCounter        int
-	lastTransactionIDs []gomatrixserverlib.TransactionID
-	pendingEvents      []*gomatrixserverlib.HeaderedEvent
-	pendingEDUs        []*gomatrixserverlib.EDU
-	pendingInvites     []*gomatrixserverlib.InviteV2Request
+	rsProducer         *producers.RoomserverProducer           // roomserver producer
+	client             *gomatrixserverlib.FederationClient     // federation client
+	origin             gomatrixserverlib.ServerName            // origin of requests
+	destination        gomatrixserverlib.ServerName            // destination of requests
+	running            atomic.Bool                             // is the queue worker running?
+	statistics         *types.ServerStatistics                 // statistics about this remote server
+	incomingPDUs       chan *gomatrixserverlib.HeaderedEvent   // PDUs to send
+	incomingEDUs       chan *gomatrixserverlib.EDU             // EDUs to send
+	incomingInvites    chan *gomatrixserverlib.InviteV2Request // invites to send
+	lastTransactionIDs []gomatrixserverlib.TransactionID       // last transaction ID
+	pendingPDUs        []*gomatrixserverlib.HeaderedEvent      // owned by backgroundSend
+	pendingEDUs        []*gomatrixserverlib.EDU                // owned by backgroundSend
+	pendingInvites     []*gomatrixserverlib.InviteV2Request    // owned by backgroundSend
 }
 
 // Send event adds the event to the pending queue for the destination.
 // If the queue is empty then it starts a background goroutine to
 // start sending events to that destination.
 func (oq *destinationQueue) sendEvent(ev *gomatrixserverlib.HeaderedEvent) {
-	oq.runningMutex.Lock()
-	defer oq.runningMutex.Unlock()
-	oq.pendingEvents = append(oq.pendingEvents, ev)
+	if oq.statistics.Blacklisted() {
+		// If the destination is blacklisted then drop the event.
+		return
+	}
 	if !oq.running.Load() {
 		go oq.backgroundSend()
 	}
+	oq.incomingPDUs <- ev
 }
 
 // sendEDU adds the EDU event to the pending queue for the destination.
 // If the queue is empty then it starts a background goroutine to
 // start sending events to that destination.
-func (oq *destinationQueue) sendEDU(e *gomatrixserverlib.EDU) {
-	oq.runningMutex.Lock()
-	defer oq.runningMutex.Unlock()
-	oq.pendingEDUs = append(oq.pendingEDUs, e)
+func (oq *destinationQueue) sendEDU(ev *gomatrixserverlib.EDU) {
+	if oq.statistics.Blacklisted() {
+		// If the destination is blacklisted then drop the event.
+		return
+	}
 	if !oq.running.Load() {
 		go oq.backgroundSend()
 	}
+	oq.incomingEDUs <- ev
 }
 
 // sendInvite adds the invite event to the pending queue for the
 // destination. If the queue is empty then it starts a background
 // goroutine to start sending events to that destination.
 func (oq *destinationQueue) sendInvite(ev *gomatrixserverlib.InviteV2Request) {
-	oq.runningMutex.Lock()
-	defer oq.runningMutex.Unlock()
-	oq.pendingInvites = append(oq.pendingInvites, ev)
+	if oq.statistics.Blacklisted() {
+		// If the destination is blacklisted then drop the event.
+		return
+	}
 	if !oq.running.Load() {
 		go oq.backgroundSend()
 	}
+	oq.incomingInvites <- ev
 }
 
 // backgroundSend is the worker goroutine for sending events.
+// nolint:gocyclo
 func (oq *destinationQueue) backgroundSend() {
-	oq.running.Store(true)
+	// Check if a worker is already running, and if it isn't, then
+	// mark it as started.
+	if !oq.running.CAS(false, true) {
+		return
+	}
 	defer oq.running.Store(false)
 
 	for {
-		transaction, invites := oq.nextTransaction(), oq.nextInvites()
-		if !transaction && !invites {
-			// If the queue is empty then stop processing for this destination.
-			// TODO: Remove this destination from the queue map.
+		// Wait either for incoming events, or until we hit an
+		// idle timeout.
+		select {
+		case pdu := <-oq.incomingPDUs:
+			// Ordering of PDUs is important so we add them to the end
+			// of the queue and they will all be added to transactions
+			// in order.
+			oq.pendingPDUs = append(oq.pendingPDUs, pdu)
+		case edu := <-oq.incomingEDUs:
+			// Likewise for EDUs, although we should probably not try
+			// too hard with some EDUs (like typing notifications) after
+			// a certain amount of time has passed.
+			// TODO: think about EDU expiry some more
+			oq.pendingEDUs = append(oq.pendingEDUs, edu)
+		case invite := <-oq.incomingInvites:
+			// There's no strict ordering requirement for invites like
+			// there is for transactions, so we put the invite onto the
+			// front of the queue. This means that if an invite that is
+			// stuck failing already, that it won't block our new invite
+			// from being sent.
+			oq.pendingInvites = append(
+				[]*gomatrixserverlib.InviteV2Request{invite},
+				oq.pendingInvites...,
+			)
+		case <-time.After(time.Second * 30):
+			// The worker is idle so stop the goroutine. It'll
+			// get restarted automatically the next time we
+			// get an event.
 			return
 		}
 
-		// TODO: handle retries.
-		// TODO: blacklist uncooperative servers.
+		// If we are backing off this server then wait for the
+		// backoff duration to complete first.
+		if backoff, duration := oq.statistics.BackoffDuration(); backoff {
+			<-time.After(duration)
+		}
+
+		// How many things do we have waiting?
+		numPDUs := len(oq.pendingPDUs)
+		numEDUs := len(oq.pendingEDUs)
+		numInvites := len(oq.pendingInvites)
+
+		// If we have pending PDUs or EDUs then construct a transaction.
+		if numPDUs > 0 || numEDUs > 0 {
+			// Try sending the next transaction and see what happens.
+			transaction, terr := oq.nextTransaction(oq.pendingPDUs, oq.pendingEDUs, oq.statistics.SuccessCount())
+			if terr != nil {
+				// We failed to send the transaction.
+				if giveUp := oq.statistics.Failure(); giveUp {
+					// It's been suggested that we should give up because
+					// the backoff has exceeded a maximum allowable value.
+					return
+				}
+			} else if transaction {
+				// If we successfully sent the transaction then clear out
+				// the pending events and EDUs.
+				oq.statistics.Success()
+				// Reallocate so that the underlying arrays can be GC'd, as
+				// opposed to growing forever.
+				for i := 0; i < numPDUs; i++ {
+					oq.pendingPDUs[i] = nil
+				}
+				for i := 0; i < numEDUs; i++ {
+					oq.pendingEDUs[i] = nil
+				}
+				oq.pendingPDUs = append(
+					[]*gomatrixserverlib.HeaderedEvent{},
+					oq.pendingPDUs[numPDUs:]...,
+				)
+				oq.pendingEDUs = append(
+					[]*gomatrixserverlib.EDU{},
+					oq.pendingEDUs[numEDUs:]...,
+				)
+			}
+		}
+
+		// Try sending the next invite and see what happens.
+		if numInvites > 0 {
+			sent, ierr := oq.nextInvites(oq.pendingInvites)
+			if ierr != nil {
+				// We failed to send the transaction so increase the
+				// backoff and give it another go shortly.
+				if giveUp := oq.statistics.Failure(); giveUp {
+					// It's been suggested that we should give up because
+					// the backoff has exceeded a maximum allowable value.
+					return
+				}
+			} else if sent > 0 {
+				// If we successfully sent the invites then clear out
+				// the pending invites.
+				oq.statistics.Success()
+				// Reallocate so that the underlying array can be GC'd, as
+				// opposed to growing forever.
+				oq.pendingInvites = append(
+					[]*gomatrixserverlib.InviteV2Request{},
+					oq.pendingInvites[sent:]...,
+				)
+			}
+		}
 	}
 }
 
 // nextTransaction creates a new transaction from the pending event
 // queue and sends it. Returns true if a transaction was sent or
 // false otherwise.
-func (oq *destinationQueue) nextTransaction() bool {
-	oq.runningMutex.Lock()
-	defer oq.runningMutex.Unlock()
-
-	if len(oq.pendingEvents) == 0 && len(oq.pendingEDUs) == 0 {
-		return false
-	}
-
+func (oq *destinationQueue) nextTransaction(
+	pendingPDUs []*gomatrixserverlib.HeaderedEvent,
+	pendingEDUs []*gomatrixserverlib.EDU,
+	sentCounter uint32,
+) (bool, error) {
 	t := gomatrixserverlib.Transaction{
 		PDUs: []json.RawMessage{},
 		EDUs: []gomatrixserverlib.EDU{},
 	}
 	now := gomatrixserverlib.AsTimestamp(time.Now())
-	t.TransactionID = gomatrixserverlib.TransactionID(fmt.Sprintf("%d-%d", now, oq.sentCounter))
+	t.TransactionID = gomatrixserverlib.TransactionID(fmt.Sprintf("%d-%d", now, sentCounter))
 	t.Origin = oq.origin
 	t.Destination = oq.destination
 	t.OriginServerTS = now
@@ -129,44 +228,54 @@ func (oq *destinationQueue) nextTransaction() bool {
 
 	oq.lastTransactionIDs = []gomatrixserverlib.TransactionID{t.TransactionID}
 
-	for _, pdu := range oq.pendingEvents {
+	for _, pdu := range pendingPDUs {
 		// Append the JSON of the event, since this is a json.RawMessage type in the
 		// gomatrixserverlib.Transaction struct
 		t.PDUs = append(t.PDUs, (*pdu).JSON())
 	}
-	oq.pendingEvents = nil
-	oq.sentCounter += len(t.PDUs)
 
-	for _, edu := range oq.pendingEDUs {
+	for _, edu := range pendingEDUs {
 		t.EDUs = append(t.EDUs, *edu)
 	}
-	oq.pendingEDUs = nil
-	oq.sentCounter += len(t.EDUs)
 
-	util.GetLogger(context.TODO()).Infof("Sending transaction %q containing %d PDUs, %d EDUs", t.TransactionID, len(t.PDUs), len(t.EDUs))
+	logrus.WithField("server_name", oq.destination).Infof("Sending transaction %q containing %d PDUs, %d EDUs", t.TransactionID, len(t.PDUs), len(t.EDUs))
 
+	// TODO: we should check for 500-ish fails vs 400-ish here,
+	// since we shouldn't queue things indefinitely in response
+	// to a 400-ish error
 	_, err := oq.client.SendTransaction(context.TODO(), t)
-	if err != nil {
+	switch e := err.(type) {
+	case nil:
+		// No error was returned so the transaction looks to have
+		// been successfully sent.
+		return true, nil
+	case gomatrix.HTTPError:
+		// We received a HTTP error back. In this instance we only
+		// should report an error if
+		if e.Code >= 400 && e.Code <= 499 {
+			// We tried but the remote side has sent back a client error.
+			// It's no use retrying because it will happen again.
+			return true, nil
+		}
+		// Otherwise, report that we failed to send the transaction
+		// and we will retry again.
+		return false, err
+	default:
 		log.WithFields(log.Fields{
 			"destination": oq.destination,
 			log.ErrorKey:  err,
 		}).Info("problem sending transaction")
+		return false, err
 	}
-
-	return true
 }
 
 // nextInvite takes pending invite events from the queue and sends
 // them. Returns true if a transaction was sent or false otherwise.
-func (oq *destinationQueue) nextInvites() bool {
-	oq.runningMutex.Lock()
-	defer oq.runningMutex.Unlock()
-
-	if len(oq.pendingInvites) == 0 {
-		return false
-	}
-
-	for _, inviteReq := range oq.pendingInvites {
+func (oq *destinationQueue) nextInvites(
+	pendingInvites []*gomatrixserverlib.InviteV2Request,
+) (int, error) {
+	done := 0
+	for _, inviteReq := range pendingInvites {
 		ev, roomVersion := inviteReq.Event(), inviteReq.RoomVersion()
 
 		log.WithFields(log.Fields{
@@ -180,13 +289,32 @@ func (oq *destinationQueue) nextInvites() bool {
 			oq.destination,
 			*inviteReq,
 		)
-		if err != nil {
+		switch e := err.(type) {
+		case nil:
+			done++
+		case gomatrix.HTTPError:
+			log.WithFields(log.Fields{
+				"event_id":    ev.EventID(),
+				"state_key":   ev.StateKey(),
+				"destination": oq.destination,
+				"status_code": e.Code,
+			}).WithError(err).Error("failed to send invite due to HTTP error")
+			// Check whether we should do something about the error or
+			// just accept it as unavoidable.
+			if e.Code >= 400 && e.Code <= 499 {
+				// We tried but the remote side has sent back a client error.
+				// It's no use retrying because it will happen again.
+				done++
+				continue
+			}
+			return done, err
+		default:
 			log.WithFields(log.Fields{
 				"event_id":    ev.EventID(),
 				"state_key":   ev.StateKey(),
 				"destination": oq.destination,
 			}).WithError(err).Error("failed to send invite")
-			continue
+			return done, err
 		}
 
 		if _, err = oq.rsProducer.SendInviteResponse(
@@ -199,10 +327,9 @@ func (oq *destinationQueue) nextInvites() bool {
 				"state_key":   ev.StateKey(),
 				"destination": oq.destination,
 			}).WithError(err).Error("failed to return signed invite to roomserver")
+			return done, err
 		}
 	}
 
-	oq.pendingInvites = nil
-
-	return true
+	return done, nil
 }
diff --git a/federationsender/queue/queue.go b/federationsender/queue/queue.go
index 33abc8fd..aae6c53a 100644
--- a/federationsender/queue/queue.go
+++ b/federationsender/queue/queue.go
@@ -19,18 +19,20 @@ import (
 	"sync"
 
 	"github.com/matrix-org/dendrite/federationsender/producers"
+	"github.com/matrix-org/dendrite/federationsender/types"
 	"github.com/matrix-org/gomatrixserverlib"
+	"github.com/matrix-org/util"
 	log "github.com/sirupsen/logrus"
 )
 
 // OutgoingQueues is a collection of queues for sending transactions to other
 // matrix servers
 type OutgoingQueues struct {
-	rsProducer *producers.RoomserverProducer
-	origin     gomatrixserverlib.ServerName
-	client     *gomatrixserverlib.FederationClient
-	// The queuesMutex protects queues
-	queuesMutex sync.Mutex
+	rsProducer  *producers.RoomserverProducer
+	origin      gomatrixserverlib.ServerName
+	client      *gomatrixserverlib.FederationClient
+	statistics  *types.Statistics
+	queuesMutex sync.Mutex // protects the below
 	queues      map[gomatrixserverlib.ServerName]*destinationQueue
 }
 
@@ -39,15 +41,37 @@ func NewOutgoingQueues(
 	origin gomatrixserverlib.ServerName,
 	client *gomatrixserverlib.FederationClient,
 	rsProducer *producers.RoomserverProducer,
+	statistics *types.Statistics,
 ) *OutgoingQueues {
 	return &OutgoingQueues{
 		rsProducer: rsProducer,
 		origin:     origin,
 		client:     client,
+		statistics: statistics,
 		queues:     map[gomatrixserverlib.ServerName]*destinationQueue{},
 	}
 }
 
+func (oqs *OutgoingQueues) getQueue(destination gomatrixserverlib.ServerName) *destinationQueue {
+	oqs.queuesMutex.Lock()
+	defer oqs.queuesMutex.Unlock()
+	oq := oqs.queues[destination]
+	if oq == nil {
+		oq = &destinationQueue{
+			rsProducer:      oqs.rsProducer,
+			origin:          oqs.origin,
+			destination:     destination,
+			client:          oqs.client,
+			statistics:      oqs.statistics.ForServer(destination),
+			incomingPDUs:    make(chan *gomatrixserverlib.HeaderedEvent, 128),
+			incomingEDUs:    make(chan *gomatrixserverlib.EDU, 128),
+			incomingInvites: make(chan *gomatrixserverlib.InviteV2Request, 128),
+		}
+		oqs.queues[destination] = oq
+	}
+	return oq
+}
+
 // SendEvent sends an event to the destinations
 func (oqs *OutgoingQueues) SendEvent(
 	ev *gomatrixserverlib.HeaderedEvent, origin gomatrixserverlib.ServerName,
@@ -62,27 +86,14 @@ func (oqs *OutgoingQueues) SendEvent(
 	}
 
 	// Remove our own server from the list of destinations.
-	destinations = filterDestinations(oqs.origin, destinations)
+	destinations = filterAndDedupeDests(oqs.origin, destinations)
 
 	log.WithFields(log.Fields{
 		"destinations": destinations, "event": ev.EventID(),
 	}).Info("Sending event")
 
-	oqs.queuesMutex.Lock()
-	defer oqs.queuesMutex.Unlock()
 	for _, destination := range destinations {
-		oq := oqs.queues[destination]
-		if oq == nil {
-			oq = &destinationQueue{
-				rsProducer:  oqs.rsProducer,
-				origin:      oqs.origin,
-				destination: destination,
-				client:      oqs.client,
-			}
-			oqs.queues[destination] = oq
-		}
-
-		oq.sendEvent(ev)
+		oqs.getQueue(destination).sendEvent(ev)
 	}
 
 	return nil
@@ -111,23 +122,11 @@ func (oqs *OutgoingQueues) SendInvite(
 	}
 
 	log.WithFields(log.Fields{
-		"event_id": ev.EventID(),
+		"event_id":    ev.EventID(),
+		"server_name": destination,
 	}).Info("Sending invite")
 
-	oqs.queuesMutex.Lock()
-	defer oqs.queuesMutex.Unlock()
-	oq := oqs.queues[destination]
-	if oq == nil {
-		oq = &destinationQueue{
-			rsProducer:  oqs.rsProducer,
-			origin:      oqs.origin,
-			destination: destination,
-			client:      oqs.client,
-		}
-		oqs.queues[destination] = oq
-	}
-
-	oq.sendInvite(inviteReq)
+	oqs.getQueue(destination).sendInvite(inviteReq)
 
 	return nil
 }
@@ -146,7 +145,7 @@ func (oqs *OutgoingQueues) SendEDU(
 	}
 
 	// Remove our own server from the list of destinations.
-	destinations = filterDestinations(oqs.origin, destinations)
+	destinations = filterAndDedupeDests(oqs.origin, destinations)
 
 	if len(destinations) > 0 {
 		log.WithFields(log.Fields{
@@ -154,35 +153,27 @@ func (oqs *OutgoingQueues) SendEDU(
 		}).Info("Sending EDU event")
 	}
 
-	oqs.queuesMutex.Lock()
-	defer oqs.queuesMutex.Unlock()
 	for _, destination := range destinations {
-		oq := oqs.queues[destination]
-		if oq == nil {
-			oq = &destinationQueue{
-				rsProducer:  oqs.rsProducer,
-				origin:      oqs.origin,
-				destination: destination,
-				client:      oqs.client,
-			}
-			oqs.queues[destination] = oq
-		}
-
-		oq.sendEDU(e)
+		oqs.getQueue(destination).sendEDU(e)
 	}
 
 	return nil
 }
 
-// filterDestinations removes our own server from the list of destinations.
-// Otherwise we could end up trying to talk to ourselves.
-func filterDestinations(origin gomatrixserverlib.ServerName, destinations []gomatrixserverlib.ServerName) []gomatrixserverlib.ServerName {
-	var result []gomatrixserverlib.ServerName
-	for _, destination := range destinations {
-		if destination == origin {
+// filterAndDedupeDests removes our own server from the list of destinations
+// and deduplicates any servers in the list that may appear more than once.
+func filterAndDedupeDests(origin gomatrixserverlib.ServerName, destinations []gomatrixserverlib.ServerName) (
+	result []gomatrixserverlib.ServerName,
+) {
+	strs := make([]string, len(destinations))
+	for i, d := range destinations {
+		strs[i] = string(d)
+	}
+	for _, destination := range util.UniqueStrings(strs) {
+		if gomatrixserverlib.ServerName(destination) == origin {
 			continue
 		}
-		result = append(result, destination)
+		result = append(result, gomatrixserverlib.ServerName(destination))
 	}
 	return result
 }
diff --git a/federationsender/types/statistics.go b/federationsender/types/statistics.go
new file mode 100644
index 00000000..63f82756
--- /dev/null
+++ b/federationsender/types/statistics.go
@@ -0,0 +1,122 @@
+package types
+
+import (
+	"math"
+	"sync"
+	"time"
+
+	"github.com/matrix-org/gomatrixserverlib"
+	"go.uber.org/atomic"
+)
+
+const (
+	// How many times should we tolerate consecutive failures before we
+	// just blacklist the host altogether? Bear in mind that the backoff
+	// is exponential, so the max time here to attempt is 2**failures.
+	FailuresUntilBlacklist = 16 // 16 equates to roughly 18 hours.
+)
+
+// Statistics contains information about all of the remote federated
+// hosts that we have interacted with. It is basically a threadsafe
+// wrapper.
+type Statistics struct {
+	servers map[gomatrixserverlib.ServerName]*ServerStatistics
+	mutex   sync.RWMutex
+}
+
+// ForServer returns server statistics for the given server name. If it
+// does not exist, it will create empty statistics and return those.
+func (s *Statistics) ForServer(serverName gomatrixserverlib.ServerName) *ServerStatistics {
+	// If the map hasn't been initialised yet then do that.
+	if s.servers == nil {
+		s.mutex.Lock()
+		s.servers = make(map[gomatrixserverlib.ServerName]*ServerStatistics)
+		s.mutex.Unlock()
+	}
+	// Look up if we have statistics for this server already.
+	s.mutex.RLock()
+	server, found := s.servers[serverName]
+	s.mutex.RUnlock()
+	// If we don't, then make one.
+	if !found {
+		s.mutex.Lock()
+		server = &ServerStatistics{}
+		s.servers[serverName] = server
+		s.mutex.Unlock()
+	}
+	return server
+}
+
+// ServerStatistics contains information about our interactions with a
+// remote federated host, e.g. how many times we were successful, how
+// many times we failed etc. It also manages the backoff time and black-
+// listing a remote host if it remains uncooperative.
+type ServerStatistics struct {
+	blacklisted    atomic.Bool   // is the remote side dead?
+	backoffUntil   atomic.Value  // time.Time to wait until before sending requests
+	failCounter    atomic.Uint32 // how many times have we failed?
+	successCounter atomic.Uint32 // how many times have we succeeded?
+}
+
+// Success updates the server statistics with a new successful
+// attempt, which increases the sent counter and resets the idle and
+// failure counters. If a host was blacklisted at this point then
+// we will unblacklist it.
+func (s *ServerStatistics) Success() {
+	s.successCounter.Add(1)
+	s.failCounter.Store(0)
+	s.blacklisted.Store(false)
+}
+
+// Failure marks a failure and works out when to backoff until. It
+// returns true if the worker should give up altogether because of
+// too many consecutive failures. At this point the host is marked
+// as blacklisted.
+func (s *ServerStatistics) Failure() bool {
+	// Increase the fail counter.
+	failCounter := s.failCounter.Add(1)
+
+	// Check that we haven't failed more times than is acceptable.
+	if failCounter >= FailuresUntilBlacklist {
+		// We've exceeded the maximum amount of times we're willing
+		// to back off, which is probably in the region of hours by
+		// now. Mark the host as blacklisted and tell the caller to
+		// give up.
+		s.blacklisted.Store(true)
+		return true
+	}
+
+	// We're still under the threshold so work out the exponential
+	// backoff based on how many times we have failed already. The
+	// worker goroutine will wait until this time before processing
+	// anything from the queue.
+	backoffSeconds := time.Second * time.Duration(math.Exp2(float64(failCounter)))
+	s.backoffUntil.Store(
+		time.Now().Add(backoffSeconds),
+	)
+	return false
+}
+
+// BackoffDuration returns both a bool stating whether to wait,
+// and then if true, a duration to wait for.
+func (s *ServerStatistics) BackoffDuration() (bool, time.Duration) {
+	backoff, until := false, time.Second
+	if b, ok := s.backoffUntil.Load().(time.Time); ok {
+		if b.After(time.Now()) {
+			backoff, until = true, time.Until(b)
+		}
+	}
+	return backoff, until
+}
+
+// Blacklisted returns true if the server is blacklisted and false
+// otherwise.
+func (s *ServerStatistics) Blacklisted() bool {
+	return s.blacklisted.Load()
+}
+
+// SuccessCount returns the number of successful requests. This is
+// usually useful in constructing transaction IDs.
+func (s *ServerStatistics) SuccessCount() uint32 {
+	return s.successCounter.Load()
+}
diff --git a/roomserver/internal/input.go b/roomserver/internal/input.go
index 19ebea66..ab3d7516 100644
--- a/roomserver/internal/input.go
+++ b/roomserver/internal/input.go
@@ -58,15 +58,22 @@ func (r *RoomserverInternalAPI) InputRoomEvents(
 	// We lock as processRoomEvent can only be called once at a time
 	r.mutex.Lock()
 	defer r.mutex.Unlock()
+	for i := range request.InputInviteEvents {
+		var loopback *api.InputRoomEvent
+		if loopback, err = processInviteEvent(ctx, r.DB, r, request.InputInviteEvents[i]); err != nil {
+			return err
+		}
+		// The processInviteEvent function can optionally return a
+		// loopback room event containing the invite, for local invites.
+		// If it does, we should process it with the room events below.
+		if loopback != nil {
+			request.InputRoomEvents = append(request.InputRoomEvents, *loopback)
+		}
+	}
 	for i := range request.InputRoomEvents {
 		if response.EventID, err = processRoomEvent(ctx, r.DB, r, request.InputRoomEvents[i]); err != nil {
 			return err
 		}
 	}
-	for i := range request.InputInviteEvents {
-		if err = processInviteEvent(ctx, r.DB, r, request.InputInviteEvents[i]); err != nil {
-			return err
-		}
-	}
 	return nil
 }
diff --git a/roomserver/internal/input_events.go b/roomserver/internal/input_events.go
index 6da63716..b17076ef 100644
--- a/roomserver/internal/input_events.go
+++ b/roomserver/internal/input_events.go
@@ -18,6 +18,7 @@ package internal
 
 import (
 	"context"
+	"errors"
 	"fmt"
 
 	"github.com/matrix-org/dendrite/common"
@@ -132,11 +133,11 @@ func calculateAndSetState(
 func processInviteEvent(
 	ctx context.Context,
 	db storage.Database,
-	ow OutputRoomEventWriter,
+	ow *RoomserverInternalAPI,
 	input api.InputInviteEvent,
-) (err error) {
+) (*api.InputRoomEvent, error) {
 	if input.Event.StateKey() == nil {
-		return fmt.Errorf("invite must be a state event")
+		return nil, fmt.Errorf("invite must be a state event")
 	}
 
 	roomID := input.Event.RoomID()
@@ -151,7 +152,7 @@ func processInviteEvent(
 
 	updater, err := db.MembershipUpdater(ctx, roomID, targetUserID, input.RoomVersion)
 	if err != nil {
-		return err
+		return nil, err
 	}
 	succeeded := false
 	defer func() {
@@ -189,17 +190,27 @@ func processInviteEvent(
 		// For now we will implement option 2. Since in the abesence of a retry
 		// mechanism it will be equivalent to option 1, and we don't have a
 		// signalling mechanism to implement option 3.
-		return nil
+		return nil, nil
+	}
+
+	// Normally, with a federated invite, the federation sender would do
+	// the /v2/invite request (in which the remote server signs the invite)
+	// and then the signed event gets sent back to the roomserver as an input
+	// event. When the invite is local, we don't interact with the federation
+	// sender therefore we need to generate the loopback invite event for
+	// the room ourselves.
+	loopback, err := localInviteLoopback(ow, input)
+	if err != nil {
+		return nil, err
 	}
 
 	event := input.Event.Unwrap()
-
 	if len(input.InviteRoomState) > 0 {
 		// If we were supplied with some invite room state already (which is
 		// most likely to be if the event came in over federation) then use
 		// that.
 		if err = event.SetUnsignedField("invite_room_state", input.InviteRoomState); err != nil {
-			return err
+			return nil, err
 		}
 	} else {
 		// There's no invite room state, so let's have a go at building it
@@ -208,22 +219,52 @@ func processInviteEvent(
 		// the invite room state, if we don't then we just fail quietly.
 		if irs, ierr := buildInviteStrippedState(ctx, db, input); ierr == nil {
 			if err = event.SetUnsignedField("invite_room_state", irs); err != nil {
-				return err
+				return nil, err
 			}
 		}
 	}
 
 	outputUpdates, err := updateToInviteMembership(updater, &event, nil, input.Event.RoomVersion)
 	if err != nil {
-		return err
+		return nil, err
 	}
 
 	if err = ow.WriteOutputEvents(roomID, outputUpdates); err != nil {
-		return err
+		return nil, err
 	}
 
 	succeeded = true
-	return nil
+	return loopback, nil
+}
+
+func localInviteLoopback(
+	ow *RoomserverInternalAPI,
+	input api.InputInviteEvent,
+) (ire *api.InputRoomEvent, err error) {
+	if input.Event.StateKey() == nil {
+		return nil, errors.New("no state key on invite event")
+	}
+	ourServerName := string(ow.Cfg.Matrix.ServerName)
+	_, theirServerName, err := gomatrixserverlib.SplitID('@', *input.Event.StateKey())
+	if err != nil {
+		return nil, err
+	}
+	// Check if the invite originated locally and is destined locally.
+	if input.Event.Origin() == ow.Cfg.Matrix.ServerName && string(theirServerName) == ourServerName {
+		rsEvent := input.Event.Sign(
+			ourServerName,
+			ow.Cfg.Matrix.KeyID,
+			ow.Cfg.Matrix.PrivateKey,
+		).Headered(input.RoomVersion)
+		ire = &api.InputRoomEvent{
+			Kind:          api.KindNew,
+			Event:         rsEvent,
+			AuthEventIDs:  rsEvent.AuthEventIDs(),
+			SendAsServer:  ourServerName,
+			TransactionID: nil,
+		}
+	}
+	return ire, nil
 }
 
 func buildInviteStrippedState(