diff --git a/Cargo.lock b/Cargo.lock
index 453647cf5e..f0d4e603be 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -692,7 +692,7 @@ dependencies = [
 [[package]]
 name = "bhyve_api"
 version = "0.0.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "bhyve_api_sys",
  "libc",
@@ -702,7 +702,7 @@ dependencies = [
 [[package]]
 name = "bhyve_api_sys"
 version = "0.0.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "libc",
  "strum",
@@ -7421,7 +7421,7 @@ dependencies = [
  "pq-sys",
  "pretty_assertions",
  "progenitor-client 0.10.0",
- "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689)",
+ "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9)",
  "qorb",
  "rand 0.8.5",
  "range-requests",
@@ -7786,7 +7786,7 @@ dependencies = [
  "oximeter-producer",
  "oxnet",
  "pretty_assertions",
- "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689)",
+ "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9)",
  "propolis-mock-server",
  "propolis_api_types",
  "rand 0.8.5",
@@ -9790,7 +9790,7 @@ dependencies = [
 [[package]]
 name = "propolis-client"
 version = "0.1.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "async-trait",
  "base64 0.21.7",
@@ -9835,7 +9835,7 @@ dependencies = [
 [[package]]
 name = "propolis-mock-server"
 version = "0.0.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "anyhow",
  "atty",
@@ -9879,7 +9879,7 @@ dependencies = [
 [[package]]
 name = "propolis_api_types"
 version = "0.0.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "crucible-client-types",
  "propolis_types",
@@ -9892,7 +9892,7 @@ dependencies = [
 [[package]]
 name = "propolis_types"
 version = "0.0.0"
-source = "git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689#71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source = "git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9#e3988414bd68ecf806078fb898120e1194451ee9"
 dependencies = [
  "schemars",
  "serde",
@@ -11586,7 +11586,7 @@ dependencies = [
  "omicron-workspace-hack",
  "oxnet",
  "progenitor 0.10.0",
- "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689)",
+ "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9)",
  "regress",
  "reqwest",
  "schemars",
@@ -11655,7 +11655,7 @@ dependencies = [
  "omicron-uuid-kinds",
  "omicron-workspace-hack",
  "oxnet",
- "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=71dd30f454f35c1d33cd8ea0198116f680ac1689)",
+ "propolis-client 0.1.0 (git+https://github.com/oxidecomputer/propolis?rev=e3988414bd68ecf806078fb898120e1194451ee9)",
  "rcgen",
  "schemars",
  "serde",
diff --git a/Cargo.toml b/Cargo.toml
index f8c8df4c1e..a6af50834e 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -606,10 +606,10 @@ progenitor-client = "0.10.0"
 # NOTE: if you change the pinned revision of the `bhyve_api` and propolis
 # dependencies, you must also update the references in package-manifest.toml to
 # match the new revision.
-bhyve_api = { git = "https://github.com/oxidecomputer/propolis", rev = "71dd30f454f35c1d33cd8ea0198116f680ac1689" }
-propolis_api_types = { git = "https://github.com/oxidecomputer/propolis", rev = "71dd30f454f35c1d33cd8ea0198116f680ac1689" }
-propolis-client = { git = "https://github.com/oxidecomputer/propolis", rev = "71dd30f454f35c1d33cd8ea0198116f680ac1689" }
-propolis-mock-server = { git = "https://github.com/oxidecomputer/propolis", rev = "71dd30f454f35c1d33cd8ea0198116f680ac1689" }
+bhyve_api = { git = "https://github.com/oxidecomputer/propolis", rev = "e3988414bd68ecf806078fb898120e1194451ee9" }
+propolis_api_types = { git = "https://github.com/oxidecomputer/propolis", rev = "e3988414bd68ecf806078fb898120e1194451ee9" }
+propolis-client = { git = "https://github.com/oxidecomputer/propolis", rev = "e3988414bd68ecf806078fb898120e1194451ee9" }
+propolis-mock-server = { git = "https://github.com/oxidecomputer/propolis", rev = "e3988414bd68ecf806078fb898120e1194451ee9" }
 # NOTE: see above!
 proptest = "1.6.0"
 qorb = "0.3.1"
diff --git a/nexus/src/app/mod.rs b/nexus/src/app/mod.rs
index 1291f369c7..7fe39d578d 100644
--- a/nexus/src/app/mod.rs
+++ b/nexus/src/app/mod.rs
@@ -127,7 +127,22 @@ pub(crate) const MAX_EPHEMERAL_IPS_PER_INSTANCE: usize = 1;
 pub const MAX_VCPU_PER_INSTANCE: u16 = 64;
 
 pub const MIN_MEMORY_BYTES_PER_INSTANCE: u32 = 1 << 30; // 1 GiB
-pub const MAX_MEMORY_BYTES_PER_INSTANCE: u64 = 256 * (1 << 30); // 256 GiB
+// This is larger than total memory (let alone reservoir) on some sleds; it is
+// not to guard against overallocation, but to keep instance memory sizes in
+// ranges that we've tested. It is bounded only by the intersection of
+// large-memory hardware configurations and tested instance sizes.
+//
+// Propolis has a similar limit in MAX_PHYSMEM. There, we would like to remove
+// the limit entirely. Here, we may want to make the max size operator
+// configurable as it may have implications on migratability for racks with
+// mixed sled configurations.
+//
+// Before raising or removing this limit, testing has been valuable. See:
+// * illumos bug #17403
+// * Propolis issue #903
+// There are known issues setting this above 1028 GiB. See:
+// * Propolis issue #907
+pub const MAX_MEMORY_BYTES_PER_INSTANCE: u64 = 1024 * (1 << 30); // 1 TiB
 
 pub const MIN_DISK_SIZE_BYTES: u32 = 1 << 30; // 1 GiB
 pub const MAX_DISK_SIZE_BYTES: u64 = 1023 * (1 << 30); // 1023 GiB
diff --git a/package-manifest.toml b/package-manifest.toml
index 0e26e7c4b1..35d762b281 100644
--- a/package-manifest.toml
+++ b/package-manifest.toml
@@ -622,10 +622,10 @@ service_name = "propolis-server"
 only_for_targets.image = "standard"
 source.type = "prebuilt"
 source.repo = "propolis"
-source.commit = "71dd30f454f35c1d33cd8ea0198116f680ac1689"
+source.commit = "e3988414bd68ecf806078fb898120e1194451ee9"
 # The SHA256 digest is automatically posted to:
 # https://buildomat.eng.oxide.computer/public/file/oxidecomputer/propolis/image/<commit>/propolis-server.sha256.txt
-source.sha256 = "e1fe40e66b92c84503613f83de2693c8446b3b05c8e5bad914299d2ab7d7fb00"
+source.sha256 = "a858fe9db8db262b402a44598e991c6298f92531421029f7728b3fdd45fe621b"
 output.type = "zone"
 
 [package.mg-ddm-gz]