diff --git a/Makefile b/Makefile
index 2b06657..aa72709 100644
--- a/Makefile
+++ b/Makefile
@@ -4,7 +4,7 @@ PROJECT_NAME=rollappd
 BRANCH := $(shell git rev-parse --abbrev-ref HEAD)
 COMMIT := $(shell git log -1 --format='%H')
 LEDGER_ENABLED ?= true
-DRS_VERSION = 2
+DRS_VERSION = 3
 
 #ifndef $(CELESTIA_NETWORK)
 #    CELESTIA_NETWORK=mock
diff --git a/app/app.go b/app/app.go
index 5dc703d..4dd4502 100644
--- a/app/app.go
+++ b/app/app.go
@@ -160,6 +160,7 @@ import (
 
 	"github.com/dymensionxyz/rollapp-evm/app/upgrades"
 	drs2 "github.com/dymensionxyz/rollapp-evm/app/upgrades/drs-2"
+	drs3 "github.com/dymensionxyz/rollapp-evm/app/upgrades/drs-3"
 )
 
 const (
@@ -185,7 +186,7 @@ var (
 		erc20types.StoreKey,
 	}
 	// Upgrades contains the upgrade handlers for the application
-	Upgrades = []upgrades.Upgrade{drs2.Upgrade}
+	Upgrades = []upgrades.Upgrade{drs2.Upgrade, drs3.Upgrade}
 )
 
 func getGovProposalHandlers() []govclient.ProposalHandler {
diff --git a/app/upgrades/drs-2/upgrade.go b/app/upgrades/drs-2/upgrade.go
index 7846c35..ad866dd 100644
--- a/app/upgrades/drs-2/upgrade.go
+++ b/app/upgrades/drs-2/upgrade.go
@@ -16,23 +16,35 @@ func CreateUpgradeHandler(
 	configurator module.Configurator,
 ) upgradetypes.UpgradeHandler {
 	return func(ctx sdk.Context, _ upgradetypes.Plan, fromVM module.VersionMap) (module.VersionMap, error) {
-
-		//migrate rollapp params with missing min-gas-prices and updating drs to 2
-		err := rpKeeper.SetVersion(ctx, uint32(2))
-		if err != nil {
-			return nil, err
-		}
-		err = rpKeeper.SetMinGasPrices(ctx, rollappparamstypes.DefaultParams().MinGasPrices)
-		if err != nil {
+		// upgrade drs to 2
+		if err := rpKeeper.SetVersion(ctx, uint32(2)); err != nil {
 			return nil, err
 		}
-		//migrate evm params with missing gasDenom
-		evmParams := evmKeeper.GetParams(ctx)
-		evmParams.GasDenom = evmParams.EvmDenom
-		err = evmKeeper.SetParams(ctx, evmParams)
-		if err != nil {
+
+		if err := HandleUpgrade(ctx, rpKeeper, evmKeeper); err != nil {
 			return nil, err
 		}
 		return mm.RunMigrations(ctx, configurator, fromVM)
 	}
 }
+
+func HandleUpgrade(
+	ctx sdk.Context,
+	rpKeeper rollappparamskeeper.Keeper,
+	evmKeeper *evmkeeper.Keeper,
+) error {
+	// migrate rollapp params with missing min-gas-prices
+	if err := rpKeeper.SetMinGasPrices(ctx, rollappparamstypes.DefaultParams().MinGasPrices); err != nil {
+		return err
+	}
+
+	// migrate evm params with missing gasDenom
+	evmParams := evmKeeper.GetParams(ctx)
+	evmParams.GasDenom = evmParams.EvmDenom
+
+	if err := evmKeeper.SetParams(ctx, evmParams); err != nil {
+		return err
+	}
+
+	return nil
+}
diff --git a/app/upgrades/drs-3/constants.go b/app/upgrades/drs-3/constants.go
new file mode 100644
index 0000000..21af7af
--- /dev/null
+++ b/app/upgrades/drs-3/constants.go
@@ -0,0 +1,17 @@
+package drs3
+
+import (
+	storetypes "github.com/cosmos/cosmos-sdk/store/types"
+
+	"github.com/dymensionxyz/rollapp-evm/app/upgrades"
+)
+
+const (
+	UpgradeName = "drs-3"
+)
+
+var Upgrade = upgrades.Upgrade{
+	Name:          UpgradeName,
+	CreateHandler: CreateUpgradeHandler,
+	StoreUpgrades: storetypes.StoreUpgrades{},
+}
diff --git a/app/upgrades/drs-3/upgrade.go b/app/upgrades/drs-3/upgrade.go
new file mode 100644
index 0000000..6e880e8
--- /dev/null
+++ b/app/upgrades/drs-3/upgrade.go
@@ -0,0 +1,33 @@
+package drs3
+
+import (
+	sdk "github.com/cosmos/cosmos-sdk/types"
+	"github.com/cosmos/cosmos-sdk/types/module"
+	upgradetypes "github.com/cosmos/cosmos-sdk/x/upgrade/types"
+	rollappparamskeeper "github.com/dymensionxyz/dymension-rdk/x/rollappparams/keeper"
+	evmkeeper "github.com/evmos/evmos/v12/x/evm/keeper"
+
+	drs2 "github.com/dymensionxyz/rollapp-evm/app/upgrades/drs-2"
+)
+
+func CreateUpgradeHandler(
+	rpKeeper rollappparamskeeper.Keeper,
+	evmKeeper *evmkeeper.Keeper,
+	mm *module.Manager,
+	configurator module.Configurator,
+) upgradetypes.UpgradeHandler {
+	return func(ctx sdk.Context, plan upgradetypes.Plan, fromVM module.VersionMap) (module.VersionMap, error) {
+		if rpKeeper.GetParams(ctx).DrsVersion == 1 {
+			// first run drs-2 migration
+			if err := drs2.HandleUpgrade(ctx, rpKeeper, evmKeeper); err != nil {
+				return nil, err
+			}
+		}
+		// upgrade drs to 3
+		err := rpKeeper.SetVersion(ctx, uint32(3))
+		if err != nil {
+			return nil, err
+		}
+		return mm.RunMigrations(ctx, configurator, fromVM)
+	}
+}