diff --git a/hadoop-hdds/common/src/main/java/org/apache/hadoop/hdds/scm/ScmConfigKeys.java b/hadoop-hdds/common/src/main/java/org/apache/hadoop/hdds/scm/ScmConfigKeys.java
index cedcc43cbb..b748d69d5f 100644
--- a/hadoop-hdds/common/src/main/java/org/apache/hadoop/hdds/scm/ScmConfigKeys.java
+++ b/hadoop-hdds/common/src/main/java/org/apache/hadoop/hdds/scm/ScmConfigKeys.java
@@ -74,7 +74,7 @@ public final class ScmConfigKeys {
   public static final String DFS_CONTAINER_RATIS_SEGMENT_SIZE_KEY =
       "dfs.container.ratis.segment.size";
   public static final int DFS_CONTAINER_RATIS_SEGMENT_SIZE_DEFAULT =
-      1 * 1024 * 1024 * 1024;
+      16 * 1024;
   public static final String DFS_CONTAINER_RATIS_SEGMENT_PREALLOCATED_SIZE_KEY =
       "dfs.container.ratis.segment.preallocated.size";
   public static final int
diff --git a/hadoop-hdds/common/src/main/resources/ozone-default.xml b/hadoop-hdds/common/src/main/resources/ozone-default.xml
index 54bffd5723..e94e7e14eb 100644
--- a/hadoop-hdds/common/src/main/resources/ozone-default.xml
+++ b/hadoop-hdds/common/src/main/resources/ozone-default.xml
@@ -175,10 +175,10 @@
   </property>
   <property>
     <name>dfs.container.ratis.segment.size</name>
-    <value>1073741824</value>
+    <value>16384</value>
     <tag>OZONE, RATIS, PERFORMANCE</tag>
     <description>The size of the raft segment used by Apache Ratis on datanodes.
-      (1 GB by default)
+      (16 KB by default)
     </description>
   </property>
   <property>
diff --git a/hadoop-hdds/container-service/src/main/java/org/apache/hadoop/ozone/container/common/transport/server/ratis/ContainerStateMachine.java b/hadoop-hdds/container-service/src/main/java/org/apache/hadoop/ozone/container/common/transport/server/ratis/ContainerStateMachine.java
index 3899bdec78..a3b496a7e8 100644
--- a/hadoop-hdds/container-service/src/main/java/org/apache/hadoop/ozone/container/common/transport/server/ratis/ContainerStateMachine.java
+++ b/hadoop-hdds/container-service/src/main/java/org/apache/hadoop/ozone/container/common/transport/server/ratis/ContainerStateMachine.java
@@ -120,7 +120,8 @@ public class ContainerStateMachine extends BaseStateMachine {
       createContainerFutureMap;
   private ExecutorService[] executors;
   private final int numExecutors;
-  private final Map<Long, Long> containerCommandCompletionMap;
+  private final Map<Long, Long> applyTransactionCompletionMap;
+  private long lastIndex;
   /**
    * CSM metrics.
    */
@@ -138,7 +139,8 @@ public ContainerStateMachine(RaftGroupId gid, ContainerDispatcher dispatcher,
     this.executors = executors.toArray(new ExecutorService[numExecutors]);
     this.writeChunkFutureMap = new ConcurrentHashMap<>();
     this.createContainerFutureMap = new ConcurrentHashMap<>();
-    containerCommandCompletionMap = new ConcurrentHashMap<>();
+    applyTransactionCompletionMap = new ConcurrentHashMap<>();
+    this.lastIndex = RaftServerConstants.INVALID_LOG_INDEX;
   }
 
   @Override
@@ -162,10 +164,12 @@ public void initialize(
 
   private long loadSnapshot(SingleFileSnapshotInfo snapshot) {
     if (snapshot == null) {
-      TermIndex empty = TermIndex.newTermIndex(0, 0);
+      TermIndex empty = TermIndex.newTermIndex(0,
+          RaftServerConstants.INVALID_LOG_INDEX);
       LOG.info("The snapshot info is null." +
           "Setting the last applied index to:" + empty);
       setLastAppliedTermIndex(empty);
+      lastIndex = RaftServerConstants.INVALID_LOG_INDEX;
       return RaftServerConstants.INVALID_LOG_INDEX;
     }
 
@@ -174,6 +178,7 @@ private long loadSnapshot(SingleFileSnapshotInfo snapshot) {
             snapshot.getFile().getPath().toFile());
     LOG.info("Setting the last applied index to " + last);
     setLastAppliedTermIndex(last);
+    lastIndex = last.getIndex();
     return last.getIndex();
   }
 
@@ -471,7 +476,7 @@ private void updateLastApplied() {
     Long appliedTerm = null;
     long appliedIndex = -1;
     for(long i = getLastAppliedTermIndex().getIndex() + 1;; i++) {
-      final Long removed = containerCommandCompletionMap.remove(i);
+      final Long removed = applyTransactionCompletionMap.remove(i);
       if (removed == null) {
         break;
       }
@@ -479,7 +484,7 @@ private void updateLastApplied() {
       appliedIndex = i;
     }
     if (appliedTerm != null) {
-      updateLastAppliedTermIndex(appliedIndex, appliedTerm);
+      updateLastAppliedTermIndex(appliedTerm, appliedIndex);
     }
   }
 
@@ -489,6 +494,15 @@ private void updateLastApplied() {
   @Override
   public CompletableFuture<Message> applyTransaction(TransactionContext trx) {
     long index = trx.getLogEntry().getIndex();
+
+    // ApplyTransaction call can come with an entryIndex much greater than
+    // lastIndex updated because in between entries in the raft log can be
+    // appended because raft config persistence. Just add a dummy entry
+    // for those.
+    for (long i = lastIndex + 1; i < index; i++) {
+      LOG.info("Gap in indexes at:{} detected, adding dummy entries ", i);
+      applyTransactionCompletionMap.put(i, trx.getLogEntry().getTerm());
+    }
     try {
       metrics.incNumApplyTransactionsOps();
       ContainerCommandRequestProto requestProto =
@@ -553,9 +567,10 @@ public CompletableFuture<Message> applyTransaction(TransactionContext trx) {
             });
       }
 
+      lastIndex = index;
       future.thenAccept(m -> {
         final Long previous =
-            containerCommandCompletionMap
+            applyTransactionCompletionMap
                 .put(index, trx.getLogEntry().getTerm());
         Preconditions.checkState(previous == null);
         updateLastApplied();