diff --git a/blockchain/reactor.go b/blockchain/reactor.go
index 4543f22ac..f5fbffee1 100644
--- a/blockchain/reactor.go
+++ b/blockchain/reactor.go
@@ -236,6 +236,7 @@ FOR_LOOP:
 				} else {
 					bcR.pool.PopRequest()
 					// TODO: use ApplyBlock instead of Exec/Commit/SetAppHash/Save
+					// TODO: should we be firing events? need to fire NewBlock events manually ...
 					err := bcR.state.ExecBlock(bcR.evsw, bcR.proxyAppConn, first, firstPartsHeader)
 					if err != nil {
 						// TODO This is bad, are we zombie?
diff --git a/blockchain/store.go b/blockchain/store.go
index 565e131a7..3b4226429 100644
--- a/blockchain/store.go
+++ b/blockchain/store.go
@@ -163,6 +163,7 @@ func (bs *BlockStore) SaveBlock(block *types.Block, blockParts *types.PartSet, s
 	bs.db.Set(calcBlockCommitKey(height-1), blockCommitBytes)
 
 	// Save seen commit (seen +2/3 precommits for block)
+	// NOTE: we can delete this at a later height
 	seenCommitBytes := wire.BinaryBytes(seenCommit)
 	bs.db.Set(calcSeenCommitKey(height), seenCommitBytes)
 
diff --git a/consensus/state.go b/consensus/state.go
index 78a9b4f52..185ad658e 100644
--- a/consensus/state.go
+++ b/consensus/state.go
@@ -1263,6 +1263,8 @@ func (cs *ConsensusState) finalizeCommit(height int) {
 
 	// Save to blockStore.
 	if cs.blockStore.Height() < block.Height {
+		// NOTE: the seenCommit is local justification to commit this block,
+		// but may differ from the LastCommit included in the next block
 		precommits := cs.Votes.Precommits(cs.CommitRound)
 		seenCommit := precommits.MakeCommit()
 		cs.blockStore.SaveBlock(block, blockParts, seenCommit)
diff --git a/state/execution.go b/state/execution.go
index 2b8461bed..bc02174a4 100644
--- a/state/execution.go
+++ b/state/execution.go
@@ -8,6 +8,7 @@ import (
 
 	. "github.com/tendermint/go-common"
 	cfg "github.com/tendermint/go-config"
+	"github.com/tendermint/go-crypto"
 	"github.com/tendermint/tendermint/proxy"
 	"github.com/tendermint/tendermint/types"
 	tmsp "github.com/tendermint/tmsp/types"
@@ -21,28 +22,32 @@ import (
 func (s *State) ExecBlock(eventCache types.Fireable, proxyAppConn proxy.AppConnConsensus, block *types.Block, blockPartsHeader types.PartSetHeader) error {
 
 	// Validate the block.
-	err := s.validateBlock(block)
-	if err != nil {
+	if err := s.validateBlock(block); err != nil {
 		return ErrInvalidBlock(err)
 	}
 
-	// Update the validator set
-	valSet := s.Validators.Copy()
-	// Update valSet with signatures from block.
+	// compute bitarray of validators that signed
 	signed := commitBitArrayFromBlock(block)
-	_ = signed // TODO
+	_ = signed // TODO send on begin block
 
-	// TODO: Update the validator set (e.g. block.Data.ValidatorUpdates?)
+	// copy the valset
+	valSet := s.Validators.Copy()
 	nextValSet := valSet.Copy()
 
 	// Execute the block txs
-	err = s.execBlockOnProxyApp(eventCache, proxyAppConn, block)
+	changedValidators, err := execBlockOnProxyApp(eventCache, proxyAppConn, block)
 	if err != nil {
 		// There was some error in proxyApp
 		// TODO Report error and wait for proxyApp to be available.
 		return ErrProxyAppConn(err)
 	}
 
+	// update the validator set
+	if err := updateValidators(nextValSet, changedValidators); err != nil {
+		log.Warn("Error changing validator set", "error", err)
+		// TODO: err or carry on?
+	}
+
 	// All good!
 	// Update validator accums and set state variables
 	nextValSet.IncrementAccum(1)
@@ -56,8 +61,9 @@ func (s *State) ExecBlock(eventCache types.Fireable, proxyAppConn proxy.AppConnC
 }
 
 // Executes block's transactions on proxyAppConn.
+// Returns a list of updates to the validator set
 // TODO: Generate a bitmap or otherwise store tx validity in state.
-func (s *State) execBlockOnProxyApp(eventCache types.Fireable, proxyAppConn proxy.AppConnConsensus, block *types.Block) error {
+func execBlockOnProxyApp(eventCache types.Fireable, proxyAppConn proxy.AppConnConsensus, block *types.Block) ([]*tmsp.Validator, error) {
 
 	var validTxs, invalidTxs = 0, 0
 
@@ -96,7 +102,7 @@ func (s *State) execBlockOnProxyApp(eventCache types.Fireable, proxyAppConn prox
 	err := proxyAppConn.BeginBlockSync(block.Hash(), types.TM2PB.Header(block.Header))
 	if err != nil {
 		log.Warn("Error in proxyAppConn.BeginBlock", "error", err)
-		return err
+		return nil, err
 	}
 
 	fail.Fail() // XXX
@@ -106,7 +112,7 @@ func (s *State) execBlockOnProxyApp(eventCache types.Fireable, proxyAppConn prox
 		fail.FailRand(len(block.Txs)) // XXX
 		proxyAppConn.AppendTxAsync(tx)
 		if err := proxyAppConn.Error(); err != nil {
-			return err
+			return nil, err
 		}
 	}
 
@@ -116,15 +122,53 @@ func (s *State) execBlockOnProxyApp(eventCache types.Fireable, proxyAppConn prox
 	changedValidators, err := proxyAppConn.EndBlockSync(uint64(block.Height))
 	if err != nil {
 		log.Warn("Error in proxyAppConn.EndBlock", "error", err)
-		return err
+		return nil, err
 	}
 
 	fail.Fail() // XXX
 
-	// TODO: Do something with changedValidators
-	log.Debug("TODO: Do something with changedValidators", "changedValidators", changedValidators)
-
 	log.Info(Fmt("ExecBlock got %v valid txs and %v invalid txs", validTxs, invalidTxs))
+	return changedValidators, nil
+}
+
+func updateValidators(validators *types.ValidatorSet, changedValidators []*tmsp.Validator) error {
+	// TODO: prevent change of 1/3+ at once
+
+	for _, v := range changedValidators {
+		pubkey, err := crypto.PubKeyFromBytes(v.PubKey) // NOTE: expects go-wire encoded pubkey
+		if err != nil {
+			return err
+		}
+
+		address := pubkey.Address()
+		power := int64(v.Power)
+		// mind the overflow from uint64
+		if power < 0 {
+			return errors.New(Fmt("Power (%d) overflows int64", v.Power))
+		}
+
+		_, val := validators.GetByAddress(address)
+		if val == nil {
+			// add val
+			added := validators.Add(types.NewValidator(pubkey, power))
+			if !added {
+				return errors.New(Fmt("Failed to add new validator %X with voting power %d", address, power))
+			}
+		} else if v.Power == 0 {
+			// remove val
+			_, removed := validators.Remove(address)
+			if !removed {
+				return errors.New(Fmt("Failed to remove validator %X)"))
+			}
+		} else {
+			// update val
+			val.VotingPower = power
+			updated := validators.Update(val)
+			if !updated {
+				return errors.New(Fmt("Failed to update validator %X with voting power %d", address, power))
+			}
+		}
+	}
 	return nil
 }
 
diff --git a/state/state.go b/state/state.go
index 4a54dfe6d..969df9ff8 100644
--- a/state/state.go
+++ b/state/state.go
@@ -34,7 +34,7 @@ type State struct {
 	LastBlockID     types.BlockID
 	LastBlockTime   time.Time
 	Validators      *types.ValidatorSet
-	LastValidators  *types.ValidatorSet
+	LastValidators  *types.ValidatorSet // block.LastCommit validated against this
 
 	// AppHash is updated after Commit;
 	// it's stale after ExecBlock and before Commit
diff --git a/types/block.go b/types/block.go
index 80a59f8a3..5b145a19b 100644
--- a/types/block.go
+++ b/types/block.go
@@ -154,10 +154,10 @@ type Header struct {
 	Time           time.Time `json:"time"`
 	NumTxs         int       `json:"num_txs"`
 	LastBlockID    BlockID   `json:"last_block_id"`
-	LastCommitHash []byte    `json:"last_commit_hash"`
-	DataHash       []byte    `json:"data_hash"`
-	ValidatorsHash []byte    `json:"validators_hash"`
-	AppHash        []byte    `json:"app_hash"` // state merkle root of txs from the previous block
+	LastCommitHash []byte    `json:"last_commit_hash"` // commit from validators from the last block
+	ValidatorsHash []byte    `json:"validators_hash"`  // validators for the current block
+	DataHash       []byte    `json:"data_hash"`        // transactions
+	AppHash        []byte    `json:"app_hash"`         // state after txs from the previous block
 }
 
 // NOTE: hash is nil if required fields are missing.
diff --git a/types/validator.go b/types/validator.go
index 7adb64dbb..ae297112b 100644
--- a/types/validator.go
+++ b/types/validator.go
@@ -20,6 +20,15 @@ type Validator struct {
 	Accum       int64         `json:"accum"`
 }
 
+func NewValidator(pubKey crypto.PubKey, votingPower int64) *Validator {
+	return &Validator{
+		Address:     pubKey.Address(),
+		PubKey:      pubKey,
+		VotingPower: votingPower,
+		Accum:       0,
+	}
+}
+
 // Creates a new copy of the validator so we can mutate accum.
 // Panics if the validator is nil.
 func (v *Validator) Copy() *Validator {