diff --git a/.changeset/big-windows-lie.md b/.changeset/big-windows-lie.md
new file mode 100644
index 00000000000..aa81a75c6ee
--- /dev/null
+++ b/.changeset/big-windows-lie.md
@@ -0,0 +1,5 @@
+---
+"chainlink": patch
+---
+
+improve handling of postgres connection settings and driver versions #db
diff --git a/.golangci.yml b/.golangci.yml
index 2902503ed20..96a7de282e0 100644
--- a/.golangci.yml
+++ b/.golangci.yml
@@ -89,6 +89,10 @@ linters-settings:
             desc: Use the standard library instead
           - pkg: github.com/gofrs/uuid
             desc: Use github.com/google/uuid instead
+          - pkg: github.com/jackc/pgx3
+            desc: Use github.com/jackc/pgx4 instead
+          - pkg: github.com/jackc/pgx5
+            desc: Use github.com/jackc/pgx4 instead
           - pkg: github.com/satori/go.uuid
             desc: Use github.com/google/uuid instead
           - pkg: github.com/test-go/testify/assert
diff --git a/core/internal/testutils/pgtest/txdb.go b/core/internal/testutils/pgtest/txdb.go
index f4640946ad4..7591054305c 100644
--- a/core/internal/testutils/pgtest/txdb.go
+++ b/core/internal/testutils/pgtest/txdb.go
@@ -89,7 +89,7 @@ func (d *txDriver) Open(dsn string) (driver.Conn, error) {
 	defer d.Unlock()
 	// Open real db connection if its the first call
 	if d.db == nil {
-		db, err := sql.Open("pgx", d.dbURL)
+		db, err := sql.Open(string(dialects.Postgres), d.dbURL)
 		if err != nil {
 			return nil, err
 		}
diff --git a/core/services/pg/connection.go b/core/services/pg/connection.go
index e8b6f3af429..b76c9bc10ed 100644
--- a/core/services/pg/connection.go
+++ b/core/services/pg/connection.go
@@ -7,16 +7,17 @@ import (
 	"os"
 	"time"
 
+	"github.com/XSAM/otelsql"
 	"github.com/google/uuid"
-	_ "github.com/jackc/pgx/v4/stdlib" // need to make sure pgx driver is registered before opening connection
+	"github.com/jackc/pgx/v4"
+	"github.com/jackc/pgx/v4/stdlib"
 	"github.com/jmoiron/sqlx"
 	"github.com/scylladb/go-reflectx"
 	"go.opentelemetry.io/otel"
 	semconv "go.opentelemetry.io/otel/semconv/v1.4.0"
+	"golang.org/x/net/context"
 
 	"github.com/smartcontractkit/chainlink/v2/core/store/dialects"
-
-	"github.com/XSAM/otelsql"
 )
 
 // NOTE: This is the default level in Postgres anyway, we just make it
@@ -48,21 +49,8 @@ type ConnectionConfig interface {
 	MaxIdleConns() int
 }
 
-func NewConnection(uri string, dialect dialects.DialectName, config ConnectionConfig) (db *sqlx.DB, err error) {
-	if dialect == dialects.TransactionWrappedPostgres {
-		// Dbtx uses the uri as a unique identifier for each transaction. Each ORM
-		// should be encapsulated in it's own transaction, and thus needs its own
-		// unique id.
-		//
-		// We can happily throw away the original uri here because if we are using
-		// txdb it should have already been set at the point where we called
-		// txdb.Register
-		uri = uuid.New().String()
-	}
-
-	// Initialize sql/sqlx
-	sqldb, err := otelsql.Open(string(dialect), uri,
-		otelsql.WithAttributes(semconv.DBSystemPostgreSQL),
+func NewConnection(uri string, dialect dialects.DialectName, config ConnectionConfig) (*sqlx.DB, error) {
+	opts := []otelsql.Option{otelsql.WithAttributes(semconv.DBSystemPostgreSQL),
 		otelsql.WithTracerProvider(otel.GetTracerProvider()),
 		otelsql.WithSQLCommenter(true),
 		otelsql.WithSpanOptions(otelsql.SpanOptions{
@@ -71,22 +59,52 @@ func NewConnection(uri string, dialect dialects.DialectName, config ConnectionCo
 			OmitRows:             true,
 			OmitConnectorConnect: true,
 			OmitConnQuery:        false,
-		}),
-	)
-	if err != nil {
-		return nil, err
-	}
-	db = sqlx.NewDb(sqldb, string(dialect))
-	db.MapperFunc(reflectx.CamelToSnakeASCII)
+		})}
 
 	// Set default connection options
 	lockTimeout := config.DefaultLockTimeout().Milliseconds()
 	idleInTxSessionTimeout := config.DefaultIdleInTxSessionTimeout().Milliseconds()
-	stmt := fmt.Sprintf(`SET TIME ZONE 'UTC'; SET lock_timeout = %d; SET idle_in_transaction_session_timeout = %d; SET default_transaction_isolation = %q`,
+	connParams := fmt.Sprintf(`SET TIME ZONE 'UTC'; SET lock_timeout = %d; SET idle_in_transaction_session_timeout = %d; SET default_transaction_isolation = %q`,
 		lockTimeout, idleInTxSessionTimeout, defaultIsolation.String())
-	if _, err = db.Exec(stmt); err != nil {
-		return nil, err
+
+	var sqldb *sql.DB
+	if dialect == dialects.TransactionWrappedPostgres {
+		// Dbtx uses the uri as a unique identifier for each transaction. Each ORM
+		// should be encapsulated in it's own transaction, and thus needs its own
+		// unique id.
+		//
+		// We can happily throw away the original uri here because if we are using
+		// txdb it should have already been set at the point where we called
+		// txdb.Register
+		var err error
+		sqldb, err = otelsql.Open(string(dialect), uuid.New().String(), opts...)
+		if err != nil {
+			return nil, fmt.Errorf("failed to open txdb: %w", err)
+		}
+		_, err = sqldb.Exec(connParams)
+		if err != nil {
+			return nil, fmt.Errorf("failed to set options: %w", err)
+		}
+	} else {
+		// Set sane defaults for every new database connection.
+		// Those can be overridden with Txn options or SET statements in individual connections.
+		// The default values are the same for Txns.
+		connConfig, err := pgx.ParseConfig(uri)
+		if err != nil {
+			return nil, fmt.Errorf("database: failed to parse config: %w", err)
+		}
+
+		connector := stdlib.GetConnector(*connConfig, stdlib.OptionAfterConnect(func(ctx context.Context, c *pgx.Conn) (err error) {
+			_, err = c.Exec(ctx, connParams)
+			return
+		}))
+
+		// Initialize sql/sqlx
+		sqldb = otelsql.OpenDB(connector, opts...)
 	}
+	db := sqlx.NewDb(sqldb, string(dialect))
+	db.MapperFunc(reflectx.CamelToSnakeASCII)
+
 	setMaxConns(db, config)
 
 	if os.Getenv("SKIP_PG_VERSION_CHECK") != "true" {
diff --git a/go.mod b/go.mod
index 4250c0fef43..f46e4b78333 100644
--- a/go.mod
+++ b/go.mod
@@ -101,6 +101,7 @@ require (
 	golang.org/x/crypto v0.22.0
 	golang.org/x/exp v0.0.0-20240213143201-ec583247a57a
 	golang.org/x/mod v0.15.0
+	golang.org/x/net v0.24.0
 	golang.org/x/sync v0.6.0
 	golang.org/x/term v0.19.0
 	golang.org/x/text v0.14.0
@@ -111,6 +112,7 @@ require (
 	google.golang.org/protobuf v1.33.0
 	gopkg.in/guregu/null.v4 v4.0.0
 	gopkg.in/natefinch/lumberjack.v2 v2.2.1
+	sigs.k8s.io/yaml v1.4.0
 )
 
 require (
@@ -324,7 +326,6 @@ require (
 	go.opentelemetry.io/proto/otlp v1.0.0 // indirect
 	go.uber.org/ratelimit v0.3.0 // indirect
 	golang.org/x/arch v0.7.0 // indirect
-	golang.org/x/net v0.24.0 // indirect
 	golang.org/x/sys v0.19.0 // indirect
 	google.golang.org/api v0.149.0 // indirect
 	google.golang.org/genproto v0.0.0-20231030173426-d783a09b4405 // indirect
@@ -336,7 +337,6 @@ require (
 	gopkg.in/yaml.v3 v3.0.1 // indirect
 	pgregory.net/rapid v0.5.5 // indirect
 	rsc.io/tmplfunc v0.0.3 // indirect
-	sigs.k8s.io/yaml v1.4.0
 )
 
 replace (