diff --git a/CHANGELOG.md b/CHANGELOG.md
index 5c7419b4c70..deb62148ced 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -67,6 +67,7 @@ Ref: https://keepachangelog.com/en/1.0.0/
 ### Bug Fixes
 
 (apps/rate-limiting) [\#8767](https://github.com/cosmos/ibc-go/pull/8767) Fix string conflict in rate-limiting prefix iterator
+(apps/callbacks) [\#8856](https://github.com/cosmos/ibc-go/pull/8856) OnTimeoutPacket blocked by UnmarshalPacketData error
 
 ### Testing API
 
diff --git a/modules/apps/callbacks/v2/ibc_middleware.go b/modules/apps/callbacks/v2/ibc_middleware.go
index ebd64bb305c..41376705cc4 100644
--- a/modules/apps/callbacks/v2/ibc_middleware.go
+++ b/modules/apps/callbacks/v2/ibc_middleware.go
@@ -320,8 +320,9 @@ func (im *IBCMiddleware) OnTimeoutPacket(
 	}
 
 	packetData, err := im.app.UnmarshalPacketData(payload)
+	// OnTimeoutPacket is not blocked if the packet does not opt-in to callbacks
 	if err != nil {
-		return err
+		return nil
 	}
 
 	cbData, isCbPacket, err := types.GetCallbackData(