diff --git a/Cargo.lock b/Cargo.lock
index a41a2363a..de20f4bad 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -1189,9 +1189,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/burner/Cargo.lock b/contracts/burner/Cargo.lock
index ce142df7c..49471a872 100644
--- a/contracts/burner/Cargo.lock
+++ b/contracts/burner/Cargo.lock
@@ -963,9 +963,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/crypto-verify/Cargo.lock b/contracts/crypto-verify/Cargo.lock
index 903284102..9286357bd 100644
--- a/contracts/crypto-verify/Cargo.lock
+++ b/contracts/crypto-verify/Cargo.lock
@@ -998,9 +998,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/cyberpunk/Cargo.lock b/contracts/cyberpunk/Cargo.lock
index c7360e402..0e0b0b3ec 100644
--- a/contracts/cyberpunk/Cargo.lock
+++ b/contracts/cyberpunk/Cargo.lock
@@ -1001,9 +1001,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/floaty/Cargo.lock b/contracts/floaty/Cargo.lock
index e56b6c506..53052a732 100644
--- a/contracts/floaty/Cargo.lock
+++ b/contracts/floaty/Cargo.lock
@@ -973,9 +973,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/hackatom/Cargo.lock b/contracts/hackatom/Cargo.lock
index a1268101b..47fdd8d04 100644
--- a/contracts/hackatom/Cargo.lock
+++ b/contracts/hackatom/Cargo.lock
@@ -974,9 +974,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/ibc-reflect-send/Cargo.lock b/contracts/ibc-reflect-send/Cargo.lock
index d90b797f8..5e84c6683 100644
--- a/contracts/ibc-reflect-send/Cargo.lock
+++ b/contracts/ibc-reflect-send/Cargo.lock
@@ -972,9 +972,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/ibc-reflect/Cargo.lock b/contracts/ibc-reflect/Cargo.lock
index d250860e6..12f9347ca 100644
--- a/contracts/ibc-reflect/Cargo.lock
+++ b/contracts/ibc-reflect/Cargo.lock
@@ -972,9 +972,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/query-queue/Cargo.lock b/contracts/query-queue/Cargo.lock
index d8375d75c..bfd89a158 100644
--- a/contracts/query-queue/Cargo.lock
+++ b/contracts/query-queue/Cargo.lock
@@ -952,9 +952,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/queue/Cargo.lock b/contracts/queue/Cargo.lock
index 3cd51b911..43215f182 100644
--- a/contracts/queue/Cargo.lock
+++ b/contracts/queue/Cargo.lock
@@ -952,9 +952,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/reflect/Cargo.lock b/contracts/reflect/Cargo.lock
index 70e0e09b6..92ee593d7 100644
--- a/contracts/reflect/Cargo.lock
+++ b/contracts/reflect/Cargo.lock
@@ -960,9 +960,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/staking/Cargo.lock b/contracts/staking/Cargo.lock
index 5a1dd13bd..88a851f1f 100644
--- a/contracts/staking/Cargo.lock
+++ b/contracts/staking/Cargo.lock
@@ -966,9 +966,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/contracts/voting-with-uuid/Cargo.lock b/contracts/voting-with-uuid/Cargo.lock
index 296d60a18..c600651e5 100644
--- a/contracts/voting-with-uuid/Cargo.lock
+++ b/contracts/voting-with-uuid/Cargo.lock
@@ -974,9 +974,9 @@ checksum = "624a8340c38c1b80fd549087862da4ba43e08858af025b236e509b6649fc13d5"
 
 [[package]]
 name = "parity-wasm"
-version = "0.42.2"
+version = "0.45.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
-checksum = "be5e13c266502aadf83426d87d81a0f5d1ef45b8027f5a471c360abfe4bfae92"
+checksum = "e1ad0aff30c1da14b1254fcb2af73e1fa9a28670e584a626f53a369d0e157304"
 
 [[package]]
 name = "pin-project-lite"
diff --git a/packages/vm/Cargo.toml b/packages/vm/Cargo.toml
index 247b14e81..fb2725a49 100644
--- a/packages/vm/Cargo.toml
+++ b/packages/vm/Cargo.toml
@@ -44,7 +44,7 @@ clru = "0.4.0"
 cosmwasm-std = { path = "../std", version = "1.1.9+0.8.1", default-features = false }
 cosmwasm-crypto = { path = "../crypto", version = "1.1.9+0.8.1" }
 hex = "0.4"
-parity-wasm = "0.42"
+parity-wasm = { version = "0.45", features = ["sign_ext"] }
 schemars = "0.8.3"
 serde = { version = "1.0.103", default-features = false, features = ["derive", "alloc"] }
 serde_json = "1.0.40"
diff --git a/packages/vm/README.md b/packages/vm/README.md
index 5713d1792..8421c5324 100644
--- a/packages/vm/README.md
+++ b/packages/vm/README.md
@@ -69,6 +69,17 @@ docker run --rm -v "$(pwd)":/code \
   && cp artifacts/floaty.wasm packages/vm/testdata/floaty_1.0.wasm
 ```
 
+The `cyberpunk_rust170.wasm` for
+https://github.com/CosmWasm/cosmwasm/issues/1727 is built as follows
+(non-reproducible):
+
+```sh
+cd contracts/cyberpunk
+rm -r target
+RUSTFLAGS='-C link-arg=-s' cargo build --release --lib --target wasm32-unknown-unknown --locked
+cp target/wasm32-unknown-unknown/release/cyberpunk.wasm ../../packages/vm/testdata/cyberpunk_rust170.wasm
+```
+
 ## Testing
 
 By default, this repository is built and tested with the singlepass backend. You
diff --git a/packages/vm/src/compatibility.rs b/packages/vm/src/compatibility.rs
index 80f74ad59..f281e19bb 100644
--- a/packages/vm/src/compatibility.rs
+++ b/packages/vm/src/compatibility.rs
@@ -257,6 +257,7 @@ mod tests {
     static CONTRACT_0_14: &[u8] = include_bytes!("../testdata/hackatom_0.14.wasm");
     static CONTRACT_0_15: &[u8] = include_bytes!("../testdata/hackatom_0.15.wasm");
     static CONTRACT: &[u8] = include_bytes!("../testdata/hackatom.wasm");
+    static CONTRACT_RUST_170: &[u8] = include_bytes!("../testdata/cyberpunk_rust170.wasm");
 
     fn default_capabilities() -> HashSet<String> {
         ["staking".to_string()].into_iter().collect()
@@ -268,6 +269,12 @@ mod tests {
         check_wasm(CONTRACT, &default_capabilities()).unwrap();
     }
 
+    #[test]
+    fn check_wasm_allows_sign_ext() {
+        // See https://github.com/CosmWasm/cosmwasm/issues/1727
+        check_wasm(CONTRACT_RUST_170, &default_capabilities()).unwrap();
+    }
+
     #[test]
     fn check_wasm_old_contract() {
         match check_wasm(CONTRACT_0_15, &default_capabilities()) {
diff --git a/packages/vm/testdata/cyberpunk_rust170.wasm b/packages/vm/testdata/cyberpunk_rust170.wasm
new file mode 100755
index 000000000..3bd0b471c
Binary files /dev/null and b/packages/vm/testdata/cyberpunk_rust170.wasm differ