diff --git a/CHANGELOG.md b/CHANGELOG.md
index aae3bafe..53d3c743 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -8,6 +8,7 @@ and this project adheres to
 
 ## Changed
 
+- Stake: unbonding now automatically pays the rewards ([#170])
 - Update soroban-sdk version from v20.0.3 to v20.1.0 ([#193])
 - Fixes documentation and naming ([#200])
 - Multihop: adds a new field in the Swap struct, that hold max_belief_price ([234])
@@ -19,6 +20,7 @@ and this project adheres to
 - Factory, Multihop, Pool, Pool_stable, Phoenix: adds lp_token decimal's as a const instead a user input ([#241])
 - Factory, Multihop, Pool, Pool_stable: adds a new parameter for creating liquidity pool ([#243])
 
+[#170]: https://github.com/Phoenix-Protocol-Group/phoenix-contracts/pull/170
 [#200]: https://github.com/Phoenix-Protocol-Group/phoenix-contracts/pull/200
 [#234]: https://github.com/Phoenix-Protocol-Group/phoenix-contracts/pull/234
 [#235]: https://github.com/Phoenix-Protocol-Group/phoenix-contracts/pull/235
diff --git a/contracts/stake/src/contract.rs b/contracts/stake/src/contract.rs
index c6f357db..1af9401e 100644
--- a/contracts/stake/src/contract.rs
+++ b/contracts/stake/src/contract.rs
@@ -181,6 +181,14 @@ impl StakingTrait for Staking {
 
         let config = get_config(&env);
 
+        // check for rewards and withdraw them
+        let found_rewards: WithdrawableRewardsResponse =
+            Self::query_withdrawable_rewards(env.clone(), sender.clone());
+
+        if !found_rewards.rewards.is_empty() {
+            Self::withdraw_rewards(env.clone(), sender.clone());
+        }
+
         let mut stakes = get_stakes(&env, &sender);
         remove_stake(&mut stakes.stakes, stake_amount, stake_timestamp);
         stakes.total_stake -= stake_amount as u128;
diff --git a/contracts/stake/src/tests/bond.rs b/contracts/stake/src/tests/bond.rs
index 0ad020fe..052b56e2 100644
--- a/contracts/stake/src/tests/bond.rs
+++ b/contracts/stake/src/tests/bond.rs
@@ -226,3 +226,53 @@ fn unbond_wrong_user_stake_not_found() {
 
     staking.unbond(&user2, &10_000, &2_000);
 }
+
+#[test]
+fn pay_rewards_during_unbond() {
+    const STAKED_AMOUNT: i128 = 1_000;
+    let env = Env::default();
+    env.mock_all_auths();
+
+    let admin = Address::generate(&env);
+    let user = Address::generate(&env);
+    let manager = Address::generate(&env);
+    let owner = Address::generate(&env);
+
+    let lp_token = deploy_token_contract(&env, &admin);
+    let reward_token = deploy_token_contract(&env, &admin);
+    let staking = deploy_staking_contract(&env, admin.clone(), &lp_token.address, &manager, &owner);
+
+    lp_token.mint(&user, &10_000);
+    reward_token.mint(&admin, &10_000);
+
+    staking.create_distribution_flow(&manager, &reward_token.address);
+    staking.fund_distribution(&admin, &0u64, &10_000u64, &reward_token.address, &10_000);
+
+    staking.bond(&user, &STAKED_AMOUNT);
+
+    env.ledger().with_mut(|li| {
+        li.timestamp = 5_000;
+    });
+    staking.distribute_rewards();
+
+    // user has bonded for 5_000 time, initial rewards are 10_000
+    // so user should have 5_000 rewards
+    // 5_000 rewards are still undistributed
+    assert_eq!(
+        staking.query_undistributed_rewards(&reward_token.address),
+        5_000
+    );
+    assert_eq!(
+        staking
+            .query_withdrawable_rewards(&user)
+            .rewards
+            .iter()
+            .map(|reward| reward.reward_amount)
+            .sum::<u128>(),
+        5_000
+    );
+
+    assert_eq!(reward_token.balance(&user), 0);
+    staking.unbond(&user, &STAKED_AMOUNT, &0);
+    assert_eq!(reward_token.balance(&user), 5_000);
+}