diff --git a/src/PrizeVault.sol b/src/PrizeVault.sol
index 0f2c18c..b27068e 100644
--- a/src/PrizeVault.sol
+++ b/src/PrizeVault.sol
@@ -686,6 +686,7 @@ contract PrizeVault is TwabERC20, Claimable, IERC4626, ILiquidationSource, Ownab
     /// @dev Supports the liquidation of either assets or prize vault shares.
     function liquidatableBalanceOf(address _tokenOut) external view returns (uint256) {
         uint256 _totalDebt = totalDebt();
+        uint256 _yieldFeePercentage = yieldFeePercentage;
         uint256 _maxAmountOut;
         if (_tokenOut == address(this)) {
             // Liquidation of vault shares is capped to the mint limit.
@@ -693,6 +694,14 @@ contract PrizeVault is TwabERC20, Claimable, IERC4626, ILiquidationSource, Ownab
         } else if (_tokenOut == address(_asset)) {
             // Liquidation of yield assets is capped at the max yield vault withdraw plus any latent balance.
             _maxAmountOut = _maxYieldVaultWithdraw() + _asset.balanceOf(address(this));
+
+            // If a yield fee will be minted, then the liquidation will also be capped based on the remaining mint limit.
+            if (_yieldFeePercentage != 0) {
+                uint256 _maxAmountBasedOnFeeMintLimit = _mintLimit(_totalDebt).mulDiv(FEE_PRECISION, _yieldFeePercentage);
+                if (_maxAmountBasedOnFeeMintLimit < _maxAmountOut) {
+                    _maxAmountOut = _maxAmountBasedOnFeeMintLimit;
+                }
+            }
         } else {
             return 0;
         }
@@ -705,7 +714,7 @@ contract PrizeVault is TwabERC20, Claimable, IERC4626, ILiquidationSource, Ownab
         // The final balance is computed by taking the liquid yield and multiplying it by
         // (1 - yieldFeePercentage), rounding down, to ensure that enough yield is left for
         // the yield fee.
-        return _liquidYield.mulDiv(FEE_PRECISION - yieldFeePercentage, FEE_PRECISION);
+        return _liquidYield.mulDiv(FEE_PRECISION - _yieldFeePercentage, FEE_PRECISION);
     }
 
     /// @inheritdoc ILiquidationSource
diff --git a/test/unit/PrizeVault/Liquidate.t.sol b/test/unit/PrizeVault/Liquidate.t.sol
index 4de013e..4e43890 100644
--- a/test/unit/PrizeVault/Liquidate.t.sol
+++ b/test/unit/PrizeVault/Liquidate.t.sol
@@ -123,6 +123,50 @@ contract PrizeVaultLiquidationTest is UnitBaseSetup {
         vault.claimYieldFeeShares(supplyCapLeft - amountOut);
     }
 
+    function testLiquidatableBalanceOf_hasBalanceAtShareLimitWhenNoFee() public {
+        vault.setYieldFeePercentage(0); // no fee
+
+        // make a large deposit to use all of the shares:
+        underlyingAsset.mint(address(alice), type(uint96).max);
+        vm.startPrank(alice);
+        underlyingAsset.approve(address(vault), type(uint96).max);
+        vault.deposit(type(uint96).max, alice);
+        vm.stopPrank();
+
+        underlyingAsset.mint(address(vault), 1e18);
+        uint256 availableYield = vault.availableYieldBalance();
+        assertApproxEqAbs(availableYield, 1e18 - vault.yieldBuffer(), 1);
+
+        assertEq(vault.liquidatableBalanceOf(address(underlyingAsset)), availableYield); // can still liquidate
+    }
+
+    function testLiquidatableBalanceOf_respectsFeeShareLimitWithAssetBalance() public {
+        vault.setYieldFeePercentage(1e8); // 10% fee
+
+        uint256 supplyCapLeft = 100; // this means that with a 10% fee, we should be able to liquidate 900 assets so that the yield fee is minted up to the supply cap, but no further
+
+        // make a large deposit to use most of the shares:
+        underlyingAsset.mint(address(alice), type(uint96).max);
+        vm.startPrank(alice);
+        underlyingAsset.approve(address(vault), type(uint96).max - supplyCapLeft);
+        vault.deposit(type(uint96).max - supplyCapLeft, alice);
+        vm.stopPrank();
+
+        underlyingAsset.mint(address(vault), 1e18);
+        uint256 availableYield = vault.availableYieldBalance();
+        assertApproxEqAbs(availableYield, 1e18 - vault.yieldBuffer(), 1);
+
+        assertGt(availableYield, 900);
+
+        assertEq(vault.liquidatableBalanceOf(address(underlyingAsset)), 900); // capped at 900 since that results in our max 100 yield fee mint
+
+        // ensure a liquidation can occur at the max:
+        vault.setLiquidationPair(address(this));
+        vm.expectEmit();
+        emit TransferYieldOut(address(this), address(underlyingAsset), alice, 900, 100);
+        vault.transferTokensOut(address(0), alice, address(underlyingAsset), 900);
+    }
+
     /* ============ transferTokensOut ============ */
 
     function testTransferTokensOut_noFee() public {