diff --git a/akka-persistence-typed/src/main/mima-filters/2.6.8.backwards.excludes/issue-29401-stack-overflow.excludes b/akka-persistence-typed/src/main/mima-filters/2.6.8.backwards.excludes/issue-29401-stack-overflow.excludes
new file mode 100644
index 0000000000..11be0f31c2
--- /dev/null
+++ b/akka-persistence-typed/src/main/mima-filters/2.6.8.backwards.excludes/issue-29401-stack-overflow.excludes
@@ -0,0 +1,2 @@
+# Internals only
+ProblemFilters.exclude[IncompatibleResultTypeProblem]("akka.persistence.typed.internal.Running#HandlingCommands.applyEffects")
\ No newline at end of file
diff --git a/akka-persistence-typed/src/main/scala/akka/persistence/typed/internal/Running.scala b/akka-persistence-typed/src/main/scala/akka/persistence/typed/internal/Running.scala
index c1f4173801..e9456f9795 100644
--- a/akka-persistence-typed/src/main/scala/akka/persistence/typed/internal/Running.scala
+++ b/akka-persistence-typed/src/main/scala/akka/persistence/typed/internal/Running.scala
@@ -125,7 +125,9 @@ private[akka] object Running {
 
     def onCommand(state: RunningState[S], cmd: C): Behavior[InternalProtocol] = {
       val effect = setup.commandHandler(state.state, cmd)
-      applyEffects(cmd, state, effect.asInstanceOf[EffectImpl[E, S]]) // TODO can we avoid the cast?
+      val (next, doUnstash) = applyEffects(cmd, state, effect.asInstanceOf[EffectImpl[E, S]]) // TODO can we avoid the cast?
+      if (doUnstash) tryUnstashOne(next)
+      else next
     }
 
     // Used by EventSourcedBehaviorTestKit to retrieve the state.
@@ -138,7 +140,7 @@ private[akka] object Running {
         msg: Any,
         state: RunningState[S],
         effect: Effect[E, S],
-        sideEffects: immutable.Seq[SideEffect[S]] = Nil): Behavior[InternalProtocol] = {
+        sideEffects: immutable.Seq[SideEffect[S]] = Nil): (Behavior[InternalProtocol], Boolean) = {
       if (setup.log.isDebugEnabled && !effect.isInstanceOf[CompositeEffect[_, _]])
         setup.log.debugN(
           s"Handled command [{}], resulting effect: [{}], side effects: [{}]",
@@ -165,7 +167,7 @@ private[akka] object Running {
 
           val shouldSnapshotAfterPersist = setup.shouldSnapshot(newState2.state, event, newState2.seqNr)
 
-          persistingEvents(newState2, state, numberOfEvents = 1, shouldSnapshotAfterPersist, sideEffects)
+          (persistingEvents(newState2, state, numberOfEvents = 1, shouldSnapshotAfterPersist, sideEffects), false)
 
         case PersistAll(events) =>
           if (events.nonEmpty) {
@@ -186,25 +188,25 @@ private[akka] object Running {
 
             val newState2 = internalPersistAll(setup.context, msg, newState, eventsToPersist)
 
-            persistingEvents(newState2, state, events.size, shouldSnapshotAfterPersist, sideEffects)
+            (persistingEvents(newState2, state, events.size, shouldSnapshotAfterPersist, sideEffects), false)
 
           } else {
             // run side-effects even when no events are emitted
-            tryUnstashOne(applySideEffects(sideEffects, state))
+            (applySideEffects(sideEffects, state), true)
           }
 
         case _: PersistNothing.type =>
-          tryUnstashOne(applySideEffects(sideEffects, state))
+          (applySideEffects(sideEffects, state), true)
 
         case _: Unhandled.type =>
           import akka.actor.typed.scaladsl.adapter._
           setup.context.system.toClassic.eventStream
             .publish(UnhandledMessage(msg, setup.context.system.toClassic.deadLetters, setup.context.self.toClassic))
-          tryUnstashOne(applySideEffects(sideEffects, state))
+          (applySideEffects(sideEffects, state), true)
 
         case _: Stash.type =>
           stashUser(IncomingCommand(msg))
-          tryUnstashOne(applySideEffects(sideEffects, state))
+          (applySideEffects(sideEffects, state), true)
       }
     }
 
diff --git a/akka-persistence-typed/src/test/scala/akka/persistence/typed/scaladsl/EventSourcedStashOverflowSpec.scala b/akka-persistence-typed/src/test/scala/akka/persistence/typed/scaladsl/EventSourcedStashOverflowSpec.scala
new file mode 100644
index 0000000000..8dc2ca18e9
--- /dev/null
+++ b/akka-persistence-typed/src/test/scala/akka/persistence/typed/scaladsl/EventSourcedStashOverflowSpec.scala
@@ -0,0 +1,89 @@
+/*
+ * Copyright (C) 2020 Lightbend Inc. <https://www.lightbend.com>
+ */
+
+package akka.persistence.typed.scaladsl
+
+import akka.Done
+import akka.actor.testkit.typed.scaladsl.LogCapturing
+import akka.actor.testkit.typed.scaladsl.ScalaTestWithActorTestKit
+import akka.actor.typed.ActorRef
+import akka.actor.typed.Behavior
+import akka.actor.typed.scaladsl.adapter._
+import akka.persistence.journal.SteppingInmemJournal
+import akka.persistence.typed.PersistenceId
+import com.typesafe.config.ConfigFactory
+import org.scalatest.wordspec.AnyWordSpecLike
+
+import scala.concurrent.duration._
+
+// Reproducer for #29401
+object EventSourcedStashOverflowSpec {
+
+  object EventSourcedStringList {
+    trait Command
+    case class DoNothing(replyTo: ActorRef[Done]) extends Command
+
+    def apply(persistenceId: PersistenceId): Behavior[Command] =
+      EventSourcedBehavior[Command, String, List[String]](
+        persistenceId,
+        Nil, { (_, command) =>
+          command match {
+            case DoNothing(replyTo) =>
+              Effect.persist(List.empty[String]).thenRun(_ => replyTo ! Done)
+          }
+        }, { (state, event) =>
+          // original reproducer slept 2 seconds here but a pure application of an event seems unlikely to take that long
+          // so instead we delay recovery using a special journal
+          event :: state
+        })
+  }
+
+  def conf =
+    SteppingInmemJournal.config("EventSourcedStashOverflow").withFallback(ConfigFactory.parseString(s"""
+       akka.persistence {
+         typed {
+           stash-capacity = 1000 # enough to fail on stack size
+           stash-overflow-strategy = "drop"
+         }
+       }
+   """))
+}
+
+class EventSourcedStashOverflowSpec
+    extends ScalaTestWithActorTestKit(EventSourcedStashOverflowSpec.conf)
+    with AnyWordSpecLike
+    with LogCapturing {
+
+  import EventSourcedStashOverflowSpec.EventSourcedStringList
+
+  "Stashing in a busy event sourced behavior" must {
+
+    "not cause stack overflow" in {
+      val es = spawn(EventSourcedStringList(PersistenceId.ofUniqueId("id-1")))
+
+      // wait for journal to start
+      val probe = testKit.createTestProbe[Done]()
+      probe.awaitAssert(SteppingInmemJournal.getRef("EventSourcedStashOverflow"), 3.seconds)
+      val journal = SteppingInmemJournal.getRef("EventSourcedStashOverflow")
+
+      val droppedMessageProbe = testKit.createDroppedMessageProbe()
+      val stashCapacity = testKit.config.getInt("akka.persistence.typed.stash-capacity")
+
+      for (_ <- 0 to (stashCapacity * 2)) {
+        es.tell(EventSourcedStringList.DoNothing(probe.ref))
+      }
+      // capacity + 1 should mean that we get a dropped last message when all stash is filled
+      // while the actor is stuck in replay because journal isn't responding
+      droppedMessageProbe.receiveMessage()
+      implicit val classicSystem = testKit.system.toClassic
+      // we only need to do this one step and recovery completes
+      SteppingInmemJournal.step(journal)
+
+      // exactly how many is racy but at least the first stash buffer full should complete
+      probe.receiveMessages(stashCapacity)
+    }
+
+  }
+
+}