diff --git a/modules/apps/callbacks/forwarding_test.go b/modules/apps/callbacks/forwarding_test.go
new file mode 100644
index 00000000000..4c28d798bf3
--- /dev/null
+++ b/modules/apps/callbacks/forwarding_test.go
@@ -0,0 +1,189 @@
+package ibccallbacks_test
+
+import (
+	"fmt"
+	"testing"
+
+	"github.com/stretchr/testify/suite"
+
+	sdk "github.com/cosmos/cosmos-sdk/types"
+
+	"github.com/cosmos/ibc-go/modules/apps/callbacks/testing/simapp"
+	callbacktypes "github.com/cosmos/ibc-go/modules/apps/callbacks/types"
+	"github.com/cosmos/ibc-go/v8/modules/apps/transfer/types"
+	clienttypes "github.com/cosmos/ibc-go/v8/modules/core/02-client/types"
+	channeltypes "github.com/cosmos/ibc-go/v8/modules/core/04-channel/types"
+	ibctesting "github.com/cosmos/ibc-go/v8/testing"
+)
+
+func init() {
+	ibctesting.DefaultTestingAppInit = SetupTestingApp
+}
+
+type CallbacksForwardingTestSuite struct {
+	suite.Suite
+
+	coordinator *ibctesting.Coordinator
+
+	chainA *ibctesting.TestChain
+	chainB *ibctesting.TestChain
+	chainC *ibctesting.TestChain
+
+	pathAtoB *ibctesting.Path
+	pathBtoC *ibctesting.Path
+}
+
+// setupChains sets up a coordinator with 3 test chains.
+func (s *CallbacksForwardingTestSuite) setupChains() {
+	s.coordinator = ibctesting.NewCoordinator(s.T(), 3)
+	s.chainA = s.coordinator.GetChain(ibctesting.GetChainID(1))
+	s.chainB = s.coordinator.GetChain(ibctesting.GetChainID(2))
+	s.chainC = s.coordinator.GetChain(ibctesting.GetChainID(3))
+
+	s.pathAtoB = ibctesting.NewTransferPath(s.chainA, s.chainB)
+	s.pathBtoC = ibctesting.NewTransferPath(s.chainB, s.chainC)
+}
+
+func (s *CallbacksForwardingTestSuite) SetupTest() {
+	s.setupChains()
+
+	s.pathAtoB.Setup()
+	s.pathBtoC.Setup()
+}
+
+func TestIBCCallbacksForwardingTestsuite(t *testing.T) {
+	suite.Run(t, new(CallbacksForwardingTestSuite))
+}
+
+// TestForwardingWithMemoCallback tests that, when forwarding a packet with memo from A to B to C,
+// the callback is executed only on the final hop.
+// NOTE: this does not test the full forwarding behaviour (assert on amounts, packets, acks etc)
+// as this is covered in other forwarding tests.
+func (s *CallbacksForwardingTestSuite) TestForwardingWithMemoCallback() {
+	testCases := []struct {
+		name                   string
+		testMemo               string
+		expCallbackMapOnChainB map[callbacktypes.CallbackType]int
+		expCallbackMapOnChainC map[callbacktypes.CallbackType]int
+	}{
+		{
+			name:                   "no memo",
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{},
+		},
+		{
+			name:                   "recv callback",
+			testMemo:               fmt.Sprintf(`{"dest_callback": {"address": "%s"}}`, simapp.SuccessContract),
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeReceivePacket: 1},
+		},
+		{
+			name:                   "ack callback",
+			testMemo:               fmt.Sprintf(`{"src_callback": {"address": "%s"}}`, simapp.SuccessContract),
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeAcknowledgementPacket: 1},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{},
+		},
+		{
+			name:                   "ack and recv callback",
+			testMemo:               fmt.Sprintf(`{"src_callback": {"address": "%s"}, "dest_callback": {"address": "%s"}}`, simapp.SuccessContract, simapp.SuccessContract),
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeAcknowledgementPacket: 1},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeReceivePacket: 1},
+		},
+		{
+			name:                   "ack callback with low gas (error)",
+			testMemo:               fmt.Sprintf(`{"src_callback": {"address": "%s"}}`, simapp.OogErrorContract),
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeAcknowledgementPacket: 1},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{},
+		},
+		{
+			name:                   "recv callback with low gas (error)",
+			testMemo:               fmt.Sprintf(`{"dest_callback": {"address": "%s"}}`, simapp.OogErrorContract),
+			expCallbackMapOnChainB: map[callbacktypes.CallbackType]int{},
+			expCallbackMapOnChainC: map[callbacktypes.CallbackType]int{callbacktypes.CallbackTypeReceivePacket: 1},
+		},
+	}
+	for _, tc := range testCases {
+		s.Run(tc.name, func() {
+			s.SetupTest()
+
+			coinOnA := ibctesting.TestCoin
+			sender := s.chainA.SenderAccounts[0].SenderAccount
+			receiver := s.chainC.SenderAccounts[0].SenderAccount
+			forwarding := types.NewForwarding(false, types.NewHop(
+				s.pathBtoC.EndpointA.ChannelConfig.PortID,
+				s.pathBtoC.EndpointA.ChannelID,
+			))
+			successAck := channeltypes.NewResultAcknowledgement([]byte{byte(1)})
+
+			transferMsg := types.NewMsgTransfer(
+				s.pathAtoB.EndpointA.ChannelConfig.PortID,
+				s.pathAtoB.EndpointA.ChannelID,
+				sdk.NewCoins(coinOnA),
+				sender.GetAddress().String(),
+				receiver.GetAddress().String(),
+				clienttypes.ZeroHeight(),
+				s.chainA.GetTimeoutTimestamp(),
+				tc.testMemo,
+				forwarding,
+			)
+
+			result, err := s.chainA.SendMsgs(transferMsg)
+			s.Require().NoError(err) // message committed
+
+			// parse the packet from result events and recv packet on chainB
+			packetFromAtoB, err := ibctesting.ParsePacketFromEvents(result.Events)
+			s.Require().NoError(err)
+			s.Require().NotNil(packetFromAtoB)
+
+			err = s.pathAtoB.EndpointB.UpdateClient()
+			s.Require().NoError(err)
+
+			result, err = s.pathAtoB.EndpointB.RecvPacketWithResult(packetFromAtoB)
+			s.Require().NoError(err)
+			s.Require().NotNil(result)
+
+			packetFromBtoC, err := ibctesting.ParsePacketFromEvents(result.Events)
+			s.Require().NoError(err)
+			s.Require().NotNil(packetFromBtoC)
+
+			err = s.pathBtoC.EndpointA.UpdateClient()
+			s.Require().NoError(err)
+
+			err = s.pathBtoC.EndpointB.UpdateClient()
+			s.Require().NoError(err)
+
+			result, err = s.pathBtoC.EndpointB.RecvPacketWithResult(packetFromBtoC)
+			s.Require().NoError(err)
+			s.Require().NotNil(result)
+
+			packetOnC, err := ibctesting.ParseRecvPacketFromEvents(result.Events)
+			s.Require().NoError(err)
+			s.Require().NotNil(packetOnC)
+
+			// Ack back to B
+			err = s.pathBtoC.EndpointB.UpdateClient()
+			s.Require().NoError(err)
+
+			err = s.pathBtoC.EndpointA.AcknowledgePacket(packetFromBtoC, successAck.Acknowledgement())
+			s.Require().NoError(err)
+
+			// Ack back to A
+			err = s.pathAtoB.EndpointA.UpdateClient()
+			s.Require().NoError(err)
+
+			err = s.pathAtoB.EndpointA.AcknowledgePacket(packetFromAtoB, successAck.Acknowledgement())
+			s.Require().NoError(err)
+
+			// We never expect chainA to have executed any callback
+			s.Require().Empty(GetSimApp(s.chainA).MockContractKeeper.Counters, "chainA's callbacks counter map is not empty")
+
+			// We expect chainB to have executed callbacks when the memo is of type `src_callback`
+			chainBCallbackMap := GetSimApp(s.chainB).MockContractKeeper.Counters
+			s.Require().Equal(tc.expCallbackMapOnChainB, chainBCallbackMap, "chainB: expected callback counters map to be %v, got %v instead", tc.expCallbackMapOnChainB, chainBCallbackMap)
+
+			// We expect chainC to have executed callbacks when the memo is of type `dest_callback`
+			chainCCallbackMap := GetSimApp(s.chainC).MockContractKeeper.Counters
+			s.Require().Equal(tc.expCallbackMapOnChainC, chainCCallbackMap, "chainC: expected callback counters map to be %v, got %v instead", tc.expCallbackMapOnChainC, chainCCallbackMap)
+		})
+	}
+}