diff --git a/pkg/storage/allocator.go b/pkg/storage/allocator.go
index 43b07ee05bbb..176e9cde1e68 100644
--- a/pkg/storage/allocator.go
+++ b/pkg/storage/allocator.go
@@ -20,6 +20,7 @@ package storage
 
 import (
 	"fmt"
+	"math"
 	"math/rand"
 
 	"golang.org/x/net/context"
@@ -235,9 +236,10 @@ func (a *Allocator) AllocateTarget(
 }
 
 // RemoveTarget returns a suitable replica to remove from the provided replica
-// set. It attempts to consider which of the provided replicas would be the best
-// candidate for removal. It also will exclude any replica that belongs to the
-// range lease holder's store ID.
+// set. It first attempts to randomly select a target from the set of stores
+// that have greater than the average number of replicas. Failing that, it
+// falls back to selecting a random target from any of the existing
+// replicas. It also will exclude any replica that lives on leaseStoreID.
 //
 // TODO(mrtracy): removeTarget eventually needs to accept the attributes from
 // the zone config associated with the provided replicas. This will allow it to
@@ -251,12 +253,12 @@ func (a Allocator) RemoveTarget(
 	}
 
 	// Retrieve store descriptors for the provided replicas from the StorePool.
-	var descriptors []roachpb.StoreDescriptor
+	descriptors := make([]roachpb.StoreDescriptor, 0, len(existing))
 	for _, exist := range existing {
-		if exist.StoreID == leaseStoreID {
-			continue
-		}
 		if desc, ok := a.storePool.getStoreDescriptor(exist.StoreID); ok {
+			if exist.StoreID == leaseStoreID {
+				continue
+			}
 			descriptors = append(descriptors, desc)
 		}
 	}
@@ -330,6 +332,84 @@ func (a Allocator) RebalanceTarget(
 	return a.improve(sl, existingNodes)
 }
 
+// TransferLeaseTarget returns a suitable replica to transfer the range lease
+// to from the provided list. It excludes the current lease holder replica.
+func (a *Allocator) TransferLeaseTarget(
+	constraints config.Constraints,
+	existing []roachpb.ReplicaDescriptor,
+	leaseStoreID roachpb.StoreID,
+	rangeID roachpb.RangeID,
+	checkTransferLeaseSource bool,
+) roachpb.ReplicaDescriptor {
+	if !a.options.AllowRebalance {
+		return roachpb.ReplicaDescriptor{}
+	}
+
+	sl, _, _ := a.storePool.getStoreList(rangeID)
+	sl = sl.filter(constraints)
+
+	source, ok := a.storePool.getStoreDescriptor(leaseStoreID)
+	if !ok {
+		return roachpb.ReplicaDescriptor{}
+	}
+	if checkTransferLeaseSource && !shouldTransferLease(sl, source) {
+		return roachpb.ReplicaDescriptor{}
+	}
+
+	candidates := make([]roachpb.ReplicaDescriptor, 0, len(existing)-1)
+	for _, repl := range existing {
+		if leaseStoreID == repl.StoreID {
+			continue
+		}
+		storeDesc, ok := a.storePool.getStoreDescriptor(repl.StoreID)
+		if !ok {
+			continue
+		}
+		if float64(storeDesc.Capacity.LeaseCount) < sl.candidateLeases.mean-0.5 {
+			candidates = append(candidates, repl)
+		}
+	}
+	if len(candidates) == 0 {
+		return roachpb.ReplicaDescriptor{}
+	}
+	a.randGen.Lock()
+	defer a.randGen.Unlock()
+	return candidates[a.randGen.Intn(len(candidates))]
+}
+
+// ShouldTransferLease returns true if the specified store is overfull in terms
+// of leases with respect to the other stores matching the specified
+// attributes.
+func (a *Allocator) ShouldTransferLease(
+	constraints config.Constraints, leaseStoreID roachpb.StoreID, rangeID roachpb.RangeID,
+) bool {
+	if !a.options.AllowRebalance {
+		return false
+	}
+
+	source, ok := a.storePool.getStoreDescriptor(leaseStoreID)
+	if !ok {
+		return false
+	}
+	sl, _, _ := a.storePool.getStoreList(rangeID)
+	sl = sl.filter(constraints)
+	if log.V(3) {
+		log.Infof(context.TODO(), "transfer-lease-source (lease-holder=%d):\n%s", leaseStoreID, sl)
+	}
+	return shouldTransferLease(sl, source)
+}
+
+func shouldTransferLease(sl StoreList, candidate roachpb.StoreDescriptor) bool {
+	// Allow lease transfer if we're above the overfull threshold, which is
+	// mean*(1+rebalanceThreshold).
+	overfullLeaseThreshold := int32(math.Ceil(sl.candidateLeases.mean * (1 + rebalanceThreshold)))
+	minOverfullThreshold := int32(math.Ceil(sl.candidateLeases.mean + 5))
+	if overfullLeaseThreshold < minOverfullThreshold {
+		overfullLeaseThreshold = minOverfullThreshold
+	}
+	return candidate.Capacity.LeaseCount > overfullLeaseThreshold
+}
+
 // selectGood attempts to select a store from the supplied store list that it
 // considers to be 'Good' relative to the other stores in the list. Any nodes
 // in the supplied 'exclude' list will be disqualified from selection. Returns
diff --git a/pkg/storage/allocator_test.go b/pkg/storage/allocator_test.go
index 82ba633e26e9..ff3ace2176a0 100644
--- a/pkg/storage/allocator_test.go
+++ b/pkg/storage/allocator_test.go
@@ -682,6 +682,96 @@ func TestAllocatorRebalanceByCount(t *testing.T) {
 	}
 }
 
+func TestAllocatorTransferLeaseTarget(t *testing.T) {
+	defer leaktest.AfterTest(t)()
+	stopper, g, _, a, _ := createTestAllocator(true)
+	defer stopper.Stop()
+
+	// 3 stores where the lease count for each store is equal to 10x the store
+	// ID.
+	var stores []*roachpb.StoreDescriptor
+	for i := 1; i <= 3; i++ {
+		stores = append(stores, &roachpb.StoreDescriptor{
+			StoreID:  roachpb.StoreID(i),
+			Node:     roachpb.NodeDescriptor{NodeID: roachpb.NodeID(i)},
+			Capacity: roachpb.StoreCapacity{LeaseCount: int32(10 * i)},
+		})
+	}
+	sg := gossiputil.NewStoreGossiper(g)
+	sg.GossipStores(stores, t)
+
+	existing := []roachpb.ReplicaDescriptor{
+		{StoreID: 1},
+		{StoreID: 2},
+		{StoreID: 3},
+	}
+
+	// TODO(peter): Add test cases for non-empty constraints.
+	testCases := []struct {
+		existing    []roachpb.ReplicaDescriptor
+		leaseholder roachpb.StoreID
+		check       bool
+		expected    roachpb.StoreID
+	}{
+		// No existing lease holder, nothing to do.
+		{existing: existing, leaseholder: 0, check: true, expected: 0},
+		// Store 1 is not a lease transfer source.
+		{existing: existing, leaseholder: 1, check: true, expected: 0},
+		{existing: existing, leaseholder: 1, check: false, expected: 0},
+		// Store 2 is not a lease transfer source.
+		{existing: existing, leaseholder: 2, check: true, expected: 0},
+		{existing: existing, leaseholder: 2, check: false, expected: 1},
+		// Store 3 is a lease transfer source.
+		{existing: existing, leaseholder: 3, check: true, expected: 1},
+		{existing: existing, leaseholder: 3, check: false, expected: 1},
+	}
+	for i, c := range testCases {
+		t.Run(fmt.Sprintf("%d", i), func(t *testing.T) {
+			target := a.TransferLeaseTarget(config.Constraints{},
+				c.existing, c.leaseholder, 0, c.check)
+			if c.expected != target.StoreID {
+				t.Fatalf("expected %d, but found %d", c.expected, target.StoreID)
+			}
+		})
+	}
+}
+
+func TestAllocatorShouldTransferLease(t *testing.T) {
+	defer leaktest.AfterTest(t)()
+	stopper, g, _, a, _ := createTestAllocator(true)
+	defer stopper.Stop()
+
+	// 3 stores where the lease count for each store is equal to 10x the store
+	// ID.
+	var stores []*roachpb.StoreDescriptor
+	for i := 1; i <= 3; i++ {
+		stores = append(stores, &roachpb.StoreDescriptor{
+			StoreID:  roachpb.StoreID(i),
+			Node:     roachpb.NodeDescriptor{NodeID: roachpb.NodeID(i)},
+			Capacity: roachpb.StoreCapacity{LeaseCount: int32(10 * i)},
+		})
+	}
+	sg := gossiputil.NewStoreGossiper(g)
+	sg.GossipStores(stores, t)
+
+	testCases := []struct {
+		leaseholder roachpb.StoreID
+		expected    bool
+	}{
+		{leaseholder: 1, expected: false},
+		{leaseholder: 2, expected: false},
+		{leaseholder: 3, expected: true},
+	}
+	for i, c := range testCases {
+		t.Run(fmt.Sprintf("%d", i), func(t *testing.T) {
+			result := a.ShouldTransferLease(config.Constraints{}, c.leaseholder, 0)
+			if c.expected != result {
+				t.Fatalf("expected %v, but found %v", c.expected, result)
+			}
+		})
+	}
+}
+
 // TestAllocatorRemoveTarget verifies that the replica chosen by RemoveTarget is
 // the one with the lowest capacity.
 func TestAllocatorRemoveTarget(t *testing.T) {
@@ -760,9 +850,9 @@ func TestAllocatorRemoveTarget(t *testing.T) {
 
 	var counts [4]int
 	for i := 0; i < 100; i++ {
-		// Exclude store 1 as a removal target. We should see stores 2 and 3
-		// randomly selected as the removal target.
-		targetRepl, err := a.RemoveTarget(replicas, stores[0].StoreID)
+		// Stores 2 and 3 are overfull, so we should see them randomly selected as
+		// the removal target.
+		targetRepl, err := a.RemoveTarget(replicas, 0)
 		if err != nil {
 			t.Fatal(err)
 		}
diff --git a/pkg/storage/replicate_queue.go b/pkg/storage/replicate_queue.go
index 0d1792c806b8..d5a8ffe7a1f5 100644
--- a/pkg/storage/replicate_queue.go
+++ b/pkg/storage/replicate_queue.go
@@ -119,6 +119,13 @@ func (rq *replicateQueue) shouldQueue(
 	if lease, _ := repl.getLease(); lease != nil {
 		leaseStoreID = lease.Replica.StoreID
 	}
+	if rq.allocator.ShouldTransferLease(
+		zone.Constraints, leaseStoreID, desc.RangeID) {
+		if log.V(2) {
+			log.Infof(ctx, "%s lease transfer needed, enqueuing", repl)
+		}
+		return true, 0
+	}
 	target := rq.allocator.RebalanceTarget(
 		zone.Constraints,
 		desc.Replicas,
@@ -178,19 +185,42 @@ func (rq *replicateQueue) process(
 		}
 	case AllocatorRemove:
 		log.Event(ctx, "removing a replica")
-		// We require the lease in order to process replicas, so
-		// repl.store.StoreID() corresponds to the lease-holder's store ID.
-		removeReplica, err := rq.allocator.RemoveTarget(desc.Replicas, repl.store.StoreID())
-		if err != nil {
-			return err
+		// If the lease holder (our local store) is an overfull store (in terms of
+		// leases) allow transferring the lease away.
+		leaseHolderStoreID := repl.store.StoreID()
+		if rq.allocator.ShouldTransferLease(zone.Constraints, leaseHolderStoreID, desc.RangeID) {
+			leaseHolderStoreID = 0
 		}
-		log.VEventf(ctx, 1, "removing replica %+v due to over-replication", removeReplica)
-		if err = repl.ChangeReplicas(ctx, roachpb.REMOVE_REPLICA, removeReplica, desc); err != nil {
+		removeReplica, err := rq.allocator.RemoveTarget(desc.Replicas, leaseHolderStoreID)
+		if err != nil {
 			return err
 		}
-		// Do not requeue if we removed ourselves.
 		if removeReplica.StoreID == repl.store.StoreID() {
-			return nil
+			// The local replica was selected as the removal target, but that replica
+			// is the leaseholder, so transfer the lease instead. We don't check that
+			// the current store has too many leases in this case under the
+			// assumption that replica balance is a greater concern. Also note that
+			// AllocatorRemove action takes preference over AllocatorNoop
+			// (rebalancing) which is where lease transfer would otherwise occur. We
+			// need to be able to transfer leases in AllocatorRemove in order to get
+			// out of situations where this store is overfull and yet holds all the
+			// leases.
+			target := rq.allocator.TransferLeaseTarget(
+				zone.Constraints, desc.Replicas, repl.store.StoreID(), desc.RangeID,
+				false /* checkTransferLeaseSource */)
+			if target != (roachpb.ReplicaDescriptor{}) {
+				log.VEventf(ctx, 1, "transferring lease to s%d", target.StoreID)
+				if err := repl.AdminTransferLease(target.StoreID); err != nil {
+					return errors.Wrapf(err, "%s: unable to transfer lease to s%d", repl, target.StoreID)
+				}
+				// Do not requeue as we transferred our lease away.
+				return nil
+			}
+		} else {
+			log.VEventf(ctx, 1, "removing replica %+v due to over-replication", removeReplica)
+			if err = repl.ChangeReplicas(ctx, roachpb.REMOVE_REPLICA, removeReplica, desc); err != nil {
+				return err
+			}
 		}
 	case AllocatorRemoveDead:
 		log.Event(ctx, "removing a dead replica")
@@ -206,12 +236,24 @@ func (rq *replicateQueue) process(
 			return err
 		}
 	case AllocatorNoop:
-		log.Event(ctx, "considering a rebalance")
 		// The Noop case will result if this replica was queued in order to
 		// rebalance. Attempt to find a rebalancing target.
-		//
+		log.Event(ctx, "considering a rebalance")
+
 		// We require the lease in order to process replicas, so
 		// repl.store.StoreID() corresponds to the lease-holder's store ID.
+		target := rq.allocator.TransferLeaseTarget(
+			zone.Constraints, desc.Replicas, repl.store.StoreID(), desc.RangeID,
+			true /* checkTransferLeaseSource */)
+		if target.StoreID != 0 {
+			log.VEventf(ctx, 1, "transferring lease to s%d", target.StoreID)
+			if err := repl.AdminTransferLease(target.StoreID); err != nil {
+				return errors.Wrapf(err, "%s: unable to transfer lease to s%d", repl, target.StoreID)
+			}
+			// Do not requeue as we transferred our lease away.
+			return nil
+		}
+
 		rebalanceStore := rq.allocator.RebalanceTarget(
 			zone.Constraints,
 			desc.Replicas,
diff --git a/pkg/storage/replicate_queue_test.go b/pkg/storage/replicate_queue_test.go
index e82b365b5f41..3fe2a1779fb1 100644
--- a/pkg/storage/replicate_queue_test.go
+++ b/pkg/storage/replicate_queue_test.go
@@ -17,6 +17,7 @@
 package storage_test
 
 import (
+	"math"
 	"os"
 	"testing"
 
@@ -47,15 +48,8 @@ func TestReplicateQueueRebalance(t *testing.T) {
 		}
 	}()
 
-	// TODO(peter): Bump this to 10 nodes. Doing so is flaky until we have lease
-	// rebalancing because store 1 can hold on to too many replicas. Consider:
-	//
-	//   [15 4 2 3 3 5 5 0 5 5]
-	//
-	// Store 1 is holding all of the leases so we can't rebalance away from
-	// it. Every other store has within the ceil(average-replicas) threshold. So
-	// there are no rebalancing opportunities for store 8.
-	tc := testcluster.StartTestCluster(t, 5,
+	const numNodes = 10
+	tc := testcluster.StartTestCluster(t, numNodes,
 		base.TestClusterArgs{ReplicationMode: base.ReplicationAuto},
 	)
 	defer tc.Stopper().Stop()
@@ -94,12 +88,14 @@ func TestReplicateQueueRebalance(t *testing.T) {
 		return counts
 	}
 
+	const numRanges = 15
+	const numReplicas = numRanges * 3
+	const minThreshold = 0.9
+	minReplicas := int(math.Floor(minThreshold * (numReplicas / numNodes)))
 	util.SucceedsSoon(t, func() error {
 		counts := countReplicas()
 		for _, c := range counts {
-			// TODO(peter): This is a weak check for rebalancing. When lease
-			// rebalancing is in place we can make this somewhat more robust.
-			if c == 0 {
+			if c < minReplicas {
 				err := errors.Errorf("not balanced: %d", counts)
 				log.Info(context.Background(), err)
 				return err
diff --git a/pkg/storage/simulation/range.go b/pkg/storage/simulation/range.go
index 94be037c5948..0e79162429af 100644
--- a/pkg/storage/simulation/range.go
+++ b/pkg/storage/simulation/range.go
@@ -131,7 +131,7 @@ func (r *Range) getAllocateTarget() (roachpb.StoreID, error) {
 func (r *Range) getRemoveTarget() (roachpb.StoreID, error) {
 	// Pass in an invalid store ID since we don't consider range leases as part
 	// of the simulator.
-	removeStore, err := r.allocator.RemoveTarget(r.desc.Replicas, roachpb.StoreID(-1))
+	removeStore, err := r.allocator.RemoveTarget(r.desc.Replicas, 0)
 	if err != nil {
 		return 0, err
 	}