diff --git a/packages/vm/README.md b/packages/vm/README.md
index 7fc48e561f..a50ae52130 100644
--- a/packages/vm/README.md
+++ b/packages/vm/README.md
@@ -75,6 +75,17 @@ docker run --rm -v "$(pwd)":/code \
   && cp artifacts/floaty.wasm packages/vm/testdata/floaty_1.2.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 428d51554f..2c500bdb30 100644
--- a/packages/vm/src/compatibility.rs
+++ b/packages/vm/src/compatibility.rs
@@ -263,6 +263,7 @@ 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()
@@ -274,6 +275,12 @@ 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 0000000000..3bd0b471c0
Binary files /dev/null and b/packages/vm/testdata/cyberpunk_rust170.wasm differ