diff --git a/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-failed.ts b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-failed.ts
index 2f683c4ed0e..ebfdf1792e9 100644
--- a/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-failed.ts
+++ b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-failed.ts
@@ -3,6 +3,7 @@ import { getStripeOutboundPayment } from "@/lib/stripe/get-stripe-outbound-payme
 import { OUTBOUND_PAYMENT_FAILURE_REASONS } from "@/lib/stripe/stripe-v2-schemas";
 import { pluralize } from "@dub/utils";
 import Stripe from "stripe";
+import { notifyPartnerStablecoinPayoutFailed } from "./utils/notify-partner-stablecoin-payout-failed";
 
 export async function outboundPaymentFailed(event: Stripe.ThinEvent) {
   const { related_object: relatedObject } = event;
@@ -30,8 +31,7 @@ export async function outboundPaymentFailed(event: Stripe.ThinEvent) {
     },
   });
 
-  // TODO:
-  // Send email notification
+  await notifyPartnerStablecoinPayoutFailed(outboundPaymentId);
 
   return `Updated ${updatedPayouts.count} ${pluralize("payout", updatedPayouts.count)} to failed status.`;
 }
diff --git a/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-returned.ts b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-returned.ts
index cf14efa3e00..1d0edb66181 100644
--- a/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-returned.ts
+++ b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/outbound-payment-returned.ts
@@ -3,6 +3,7 @@ import { getStripeOutboundPayment } from "@/lib/stripe/get-stripe-outbound-payme
 import { OUTBOUND_PAYMENT_RETURNED_REASONS } from "@/lib/stripe/stripe-v2-schemas";
 import { pluralize } from "@dub/utils";
 import Stripe from "stripe";
+import { notifyPartnerStablecoinPayoutFailed } from "./utils/notify-partner-stablecoin-payout-failed";
 
 export async function outboundPaymentReturned(event: Stripe.ThinEvent) {
   const { related_object: relatedObject } = event;
@@ -30,8 +31,7 @@ export async function outboundPaymentReturned(event: Stripe.ThinEvent) {
     },
   });
 
-  // TODO:
-  // Send email notification
+  await notifyPartnerStablecoinPayoutFailed(outboundPaymentId);
 
   return `Updated ${updatedPayouts.count} ${pluralize("payout", updatedPayouts.count)} to failed status.`;
 }
diff --git a/apps/web/app/(ee)/api/stripe/connect/v2/webhook/utils/notify-partner-stablecoin-payout-failed.ts b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/utils/notify-partner-stablecoin-payout-failed.ts
new file mode 100644
index 00000000000..9a0e0984fa2
--- /dev/null
+++ b/apps/web/app/(ee)/api/stripe/connect/v2/webhook/utils/notify-partner-stablecoin-payout-failed.ts
@@ -0,0 +1,88 @@
+import { prisma } from "@/lib/prisma";
+import { sendEmail } from "@dub/email";
+import PartnerStablecoinPayoutFailed from "@dub/email/templates/partner-stablecoin-payout-failed";
+import { currencyFormatter, prettyPrint } from "@dub/utils";
+import { PayoutStatus } from "@prisma/client";
+
+function maskCryptoWalletAddress(address: string) {
+  return address.length > 10
+    ? `${address.slice(0, 6)}••••${address.slice(-4)}`
+    : address;
+}
+
+export async function notifyPartnerStablecoinPayoutFailed(
+  outboundPaymentId: string,
+) {
+  const payouts = await prisma.payout.findMany({
+    where: {
+      stripePayoutId: outboundPaymentId,
+      status: PayoutStatus.failed,
+    },
+    include: {
+      partner: {
+        select: {
+          email: true,
+          cryptoWalletAddress: true,
+        },
+      },
+      program: {
+        select: {
+          name: true,
+        },
+      },
+    },
+  });
+
+  if (payouts.length === 0) {
+    console.log(
+      `No payouts found for outbound payment ${outboundPaymentId}. Skipping email send...`,
+    );
+    return;
+  }
+
+  const partner = payouts[0].partner;
+
+  if (!partner.email) {
+    console.log(
+      `Partner email not found for outbound payment ${outboundPaymentId}. Skipping email send...`,
+    );
+    return;
+  }
+
+  const totalAmount = payouts.reduce((acc, payout) => acc + payout.amount, 0);
+  const failureReason = payouts[0].failureReason ?? undefined;
+
+  const programs = [
+    ...new Map(
+      payouts.map((payout) => [payout.program.name, payout.program]),
+    ).values(),
+  ];
+
+  const maskedAddress = partner.cryptoWalletAddress
+    ? maskCryptoWalletAddress(partner.cryptoWalletAddress)
+    : undefined;
+
+  const emailResponse = await sendEmail({
+    variant: "notifications",
+    subject: `Your recent partner payout of ${currencyFormatter(totalAmount)} failed`,
+    to: partner.email,
+    react: PartnerStablecoinPayoutFailed({
+      email: partner.email,
+      programs,
+      payout: {
+        amount: totalAmount,
+        failureReason,
+      },
+      wallet: maskedAddress
+        ? {
+            maskedAddress,
+          }
+        : undefined,
+    }),
+  });
+
+  console.log(
+    `Stablecoin payout failed email sent to partner ${partner.email}:`,
+    prettyPrint(emailResponse),
+  );
+}
diff --git a/packages/email/src/templates/partner-stablecoin-payout-failed.tsx b/packages/email/src/templates/partner-stablecoin-payout-failed.tsx
new file mode 100644
index 00000000000..2c8b3c7bcbf
--- /dev/null
+++ b/packages/email/src/templates/partner-stablecoin-payout-failed.tsx
@@ -0,0 +1,135 @@
+import { currencyFormatter, DUB_WORDMARK } from "@dub/utils";
+import {
+  Body,
+  Container,
+  Head,
+  Heading,
+  Html,
+  Img,
+  Link,
+  Preview,
+  Section,
+  Tailwind,
+  Text,
+} from "@react-email/components";
+import { Footer } from "../components/footer";
+
+// Send this email to the partner when a stablecoin payout fails or is returned
+export default function PartnerStablecoinPayoutFailed({
+  programs = [{ name: "Acme" }],
+  payout = {
+    amount: 530000,
+    failureReason: "The destination wallet address is invalid.",
+  },
+  wallet = {
+    maskedAddress: "0x1234••••5678",
+    network: "ethereum",
+  },
+  email = "panic@thedis.co",
+}: {
+  programs: {
+    name: string;
+  }[];
+  payout: {
+    amount: number; // in cents
+    failureReason?: string;
+  };
+  wallet?: {
+    maskedAddress?: string;
+    network?: string;
+  };
+  email: string;
+}) {
+  const amountFormatted = currencyFormatter(payout.amount);
+  const programNamesFormatted = programs.map((p) => p.name).join(", ");
+
+  return (
+    <Html>
+      <Head />
+      <Preview>Action Required - Your recent stablecoin payout failed</Preview>
+      <Tailwind>
+        <Body className="mx-auto my-auto bg-white font-sans">
+          <Container className="mx-auto my-8 max-w-[600px] px-8 py-8">
+            <Section className="mt-8">
+              <Img src={DUB_WORDMARK} height="32" alt="Dub" />
+            </Section>
+
+            <Heading className="mx-0 my-8 p-0 text-lg font-medium text-black">
+              Your recent payout
+              {programs.length === 1
+                ? ` from ${programNamesFormatted}`
+                : ""}{" "}
+              failed
+            </Heading>
+
+            <Text>
+              We attempted to send your recent payout of{" "}
+              <span className="font-semibold text-purple-600">
+                {amountFormatted}
+              </span>
+              {programs.length > 1 ? (
+                <>
+                  {" "}
+                  from{" "}
+                  <span className="font-semibold text-purple-600">
+                    {programNamesFormatted}
+                  </span>
+                </>
+              ) : null}{" "}
+              to your stablecoin wallet
+              {wallet?.maskedAddress ? (
+                <>
+                  {" "}
+                  (
+                  <span className="font-semibold text-purple-600">
+                    {wallet.maskedAddress}
+                    {wallet.network ? ` · ${wallet.network}` : ""}
+                  </span>
+                  )
+                </>
+              ) : null}
+              , but the transaction failed.
+            </Text>
+
+            {payout.failureReason && (
+              <Text className="text-sm leading-6 text-neutral-600">
+                Reason:{" "}
+                <span className="font-semibold italic text-neutral-800">
+                  {payout.failureReason}
+                </span>
+              </Text>
+            )}
+
+            <Text>
+              Payout failures are usually due to incorrect wallet configuration.
+              Please reconnect your stablecoin wallet at your earliest
+              convenience and retry the payout from your{" "}
+              <Link
+                href="https://partners.dub.co/payouts?settings=true"
+                className="font-medium text-black underline"
+              >
+                Payout settings
+              </Link>
+              .
+            </Text>
+
+            <Section className="my-8">
+              <Link
+                className="rounded-lg bg-neutral-900 px-6 py-3 text-[13px] font-medium text-white no-underline"
+                href="https://partners.dub.co/payouts?settings=true"
+              >
+                Reconnect wallet
+              </Link>
+            </Section>
+
+            <Text className="text-sm leading-6 text-neutral-600">
+              If you have any questions, just reply to this email.
+            </Text>
+
+            <Footer email={email} />
+          </Container>
+        </Body>
+      </Tailwind>
+    </Html>
+  );
+}