diff --git a/crates/file_store/src/entry_iter.rs b/crates/file_store/src/entry_iter.rs
index 8b284f1814..0ad58f933b 100644
--- a/crates/file_store/src/entry_iter.rs
+++ b/crates/file_store/src/entry_iter.rs
@@ -50,7 +50,34 @@ where
             }
 
             let pos_before_read = self.db_file.stream_position()?;
-            match bincode_options().deserialize_from(&mut self.db_file) {
+            // An entry can never be larger than the bytes remaining in the file. Bounding the
+            // deserializer by that amount makes a corrupt/oversized length prefix fail with
+            // `bincode::ErrorKind::SizeLimit` (mapped to `StoreError::Bincode` below) instead of
+            // attempting an unbounded allocation and panicking with `capacity overflow`.
+            //
+            // The factor of 9 accounts for how bincode charges reads: every length literal it
+            // decodes is charged a full `size_of::<u64>()` (8 bytes) even when the varint
+            // encoding occupies one byte on disk, and the payload length is charged again. A
+            // valid entry therefore charges at most `8 * bytes + bytes` and this bound can
+            // never reject a store that fits in the file.
+            let remaining = self
+                .db_file
+                .get_ref()
+                .metadata()?
+                .len()
+                .saturating_sub(pos_before_read);
+            // At end of file there is nothing left to decode; terminate cleanly without
+            // invoking the deserializer (with a zero limit it would report `SizeLimit`
+            // instead of `UnexpectedEof`, breaking the clean-EOF path below).
+            if remaining == 0 {
+                self.finished = true;
+                return Ok(None);
+            }
+            let limit = remaining.saturating_mul(9);
+            match bincode_options()
+                .with_limit(limit)
+                .deserialize_from(&mut self.db_file)
+            {
                 Ok(changeset) => Ok(Some(changeset)),
                 Err(e) => {
                     self.finished = true;
diff --git a/crates/file_store/tests/test_oversized_entry_len.rs b/crates/file_store/tests/test_oversized_entry_len.rs
new file mode 100644
index 0000000000..76bdda0b4d
--- /dev/null
+++ b/crates/file_store/tests/test_oversized_entry_len.rs
@@ -0,0 +1,43 @@
+use bdk_file_store::Store;
+use std::collections::BTreeSet;
+
+const MAGIC: &[u8] = b"bdk_test_magic";
+
+#[test]
+fn load_returns_error_on_oversized_length_prefix() {
+    let dir = tempfile::tempdir().unwrap();
+    let path = dir.path().join("db");
+
+    let mut bytes = MAGIC.to_vec();
+    bytes.push(1); // BTreeSet length: 1 element
+    bytes.push(253); // bincode varint tag: u64 follows
+    bytes.extend_from_slice(&u64::MAX.to_le_bytes()); // String length: u64::MAX
+    std::fs::write(&path, &bytes).unwrap();
+
+    let result = Store::<BTreeSet<String>>::load(MAGIC, &path);
+    assert!(result.is_err(), "load should fail with an error, not panic");
+}
+
+#[test]
+fn valid_store_still_round_trips() {
+    let dir = tempfile::tempdir().unwrap();
+    let path = dir.path().join("db");
+
+    let mut store = Store::<BTreeSet<String>>::create(MAGIC, &path).unwrap();
+    store
+        .append(&BTreeSet::from(["initial".to_string()]))
+        .unwrap();
+    store
+        .append(&BTreeSet::from(["second".to_string()]))
+        .unwrap();
+    drop(store);
+
+    let (_, recovered) = Store::<BTreeSet<String>>::load(MAGIC, &path).unwrap();
+    assert_eq!(
+        recovered,
+        Some(BTreeSet::from([
+            "initial".to_string(),
+            "second".to_string()
+        ]))
+    );
+}