diff --git a/.changeset/rare-carpets-cry.md b/.changeset/rare-carpets-cry.md
new file mode 100644
index 00000000000..f096d31885c
--- /dev/null
+++ b/.changeset/rare-carpets-cry.md
@@ -0,0 +1,5 @@
+---
+"chainlink": minor
+---
+
+#internal capability dispatcher threading and context usage
diff --git a/core/capabilities/remote/dispatcher.go b/core/capabilities/remote/dispatcher.go
index 63b0fad7e98..b91211b5bf5 100644
--- a/core/capabilities/remote/dispatcher.go
+++ b/core/capabilities/remote/dispatcher.go
@@ -6,6 +6,8 @@ import (
 	sync "sync"
 	"time"
 
+	"github.com/prometheus/client_golang/prometheus"
+	"github.com/prometheus/client_golang/prometheus/promauto"
 	"google.golang.org/protobuf/proto"
 
 	"github.com/smartcontractkit/chainlink-common/pkg/services"
@@ -24,7 +26,7 @@ type dispatcher struct {
 	peerID      p2ptypes.PeerID
 	signer      p2ptypes.Signer
 	registry    core.CapabilitiesRegistry
-	receivers   map[key]remotetypes.Receiver
+	receivers   map[key]*receiver
 	mu          sync.RWMutex
 	stopCh      services.StopChan
 	wg          sync.WaitGroup
@@ -45,7 +47,7 @@ func NewDispatcher(peerWrapper p2ptypes.PeerWrapper, signer p2ptypes.Signer, reg
 		peerWrapper: peerWrapper,
 		signer:      signer,
 		registry:    registry,
-		receivers:   make(map[key]remotetypes.Receiver),
+		receivers:   make(map[key]*receiver),
 		stopCh:      make(services.StopChan),
 		lggr:        lggr.Named("Dispatcher"),
 	}
@@ -58,12 +60,35 @@ func (d *dispatcher) Start(ctx context.Context) error {
 		return fmt.Errorf("peer is not initialized")
 	}
 	d.wg.Add(1)
-	go d.receive()
+	go func() {
+		defer d.wg.Done()
+		d.receive()
+	}()
+
 	d.lggr.Info("dispatcher started")
 	return nil
 }
 
-func (d *dispatcher) SetReceiver(capabilityId string, donId string, receiver remotetypes.Receiver) error {
+func (d *dispatcher) Close() error {
+	close(d.stopCh)
+	d.wg.Wait()
+	d.lggr.Info("dispatcher closed")
+	return nil
+}
+
+var capReceiveChannelUsage = promauto.NewGaugeVec(prometheus.GaugeOpts{
+	Name: "capability_receive_channel_usage",
+	Help: "The usage of the receive channel for each capability, 0 indicates empty, 1 indicates full.",
+}, []string{"capabilityId", "donId"})
+
+const receiverBufferSize = 10000
+
+type receiver struct {
+	cancel context.CancelFunc
+	ch     chan *remotetypes.MessageBody
+}
+
+func (d *dispatcher) SetReceiver(capabilityId string, donId string, rec remotetypes.Receiver) error {
 	d.mu.Lock()
 	defer d.mu.Unlock()
 	k := key{capabilityId, donId}
@@ -71,7 +96,29 @@ func (d *dispatcher) SetReceiver(capabilityId string, donId string, receiver rem
 	if ok {
 		return fmt.Errorf("receiver already exists for capability %s and don %s", capabilityId, donId)
 	}
-	d.receivers[k] = receiver
+
+	receiverCh := make(chan *remotetypes.MessageBody, receiverBufferSize)
+
+	ctx, cancelCtx := d.stopCh.NewCtx()
+	d.wg.Add(1)
+	go func() {
+		defer cancelCtx()
+		defer d.wg.Done()
+		for {
+			select {
+			case <-ctx.Done():
+				return
+			case msg := <-receiverCh:
+				rec.Receive(ctx, msg)
+			}
+		}
+	}()
+
+	d.receivers[k] = &receiver{
+		cancel: cancelCtx,
+		ch:     receiverCh,
+	}
+
 	d.lggr.Debugw("receiver set", "capabilityId", capabilityId, "donId", donId)
 	return nil
 }
@@ -79,8 +126,13 @@ func (d *dispatcher) SetReceiver(capabilityId string, donId string, receiver rem
 func (d *dispatcher) RemoveReceiver(capabilityId string, donId string) {
 	d.mu.Lock()
 	defer d.mu.Unlock()
-	delete(d.receivers, key{capabilityId, donId})
-	d.lggr.Debugw("receiver removed", "capabilityId", capabilityId, "donId", donId)
+
+	receiverKey := key{capabilityId, donId}
+	if receiver, ok := d.receivers[receiverKey]; ok {
+		receiver.cancel()
+		delete(d.receivers, receiverKey)
+		d.lggr.Debugw("receiver removed", "capabilityId", capabilityId, "donId", donId)
+	}
 }
 
 func (d *dispatcher) Send(peerID p2ptypes.PeerID, msgBody *remotetypes.MessageBody) error {
@@ -105,7 +157,6 @@ func (d *dispatcher) Send(peerID p2ptypes.PeerID, msgBody *remotetypes.MessageBo
 }
 
 func (d *dispatcher) receive() {
-	defer d.wg.Done()
 	recvCh := d.peer.Receive()
 	for {
 		select {
@@ -128,7 +179,14 @@ func (d *dispatcher) receive() {
 				d.tryRespondWithError(msg.Sender, body, types.Error_CAPABILITY_NOT_FOUND)
 				continue
 			}
-			receiver.Receive(body)
+
+			receiverQueueUsage := float64(len(receiver.ch)) / receiverBufferSize
+			capReceiveChannelUsage.WithLabelValues(k.capId, k.donId).Set(receiverQueueUsage)
+			select {
+			case receiver.ch <- body:
+			default:
+				d.lggr.Warnw("receiver channel full, dropping message", "capabilityId", k.capId, "donId", k.donId)
+			}
 		}
 	}
 }
@@ -150,13 +208,6 @@ func (d *dispatcher) tryRespondWithError(peerID p2ptypes.PeerID, body *remotetyp
 	}
 }
 
-func (d *dispatcher) Close() error {
-	close(d.stopCh)
-	d.wg.Wait()
-	d.lggr.Info("dispatcher closed")
-	return nil
-}
-
 func (d *dispatcher) Ready() error {
 	return nil
 }
diff --git a/core/capabilities/remote/dispatcher_test.go b/core/capabilities/remote/dispatcher_test.go
index b6ba31aa8f2..040ee849e08 100644
--- a/core/capabilities/remote/dispatcher_test.go
+++ b/core/capabilities/remote/dispatcher_test.go
@@ -1,6 +1,7 @@
 package remote_test
 
 import (
+	"context"
 	"errors"
 	"testing"
 
@@ -26,7 +27,7 @@ func newReceiver() *testReceiver {
 	}
 }
 
-func (r *testReceiver) Receive(msg *remotetypes.MessageBody) {
+func (r *testReceiver) Receive(_ context.Context, msg *remotetypes.MessageBody) {
 	r.ch <- msg
 }
 
diff --git a/core/capabilities/remote/target/client.go b/core/capabilities/remote/target/client.go
index 281e7ac5fc1..dbb7c2f8bd8 100644
--- a/core/capabilities/remote/target/client.go
+++ b/core/capabilities/remote/target/client.go
@@ -134,11 +134,7 @@ func (c *client) Execute(ctx context.Context, capReq commoncap.CapabilityRequest
 		return nil, fmt.Errorf("request for message ID %s already exists", messageID)
 	}
 
-	// TODO confirm reasons for below workaround and see if can be resolved
-	// The context passed in by the workflow engine is cancelled prior to the results being read from the response channel
-	// The wrapping of the context with 'WithoutCancel' is a workaround for that behaviour.
-	requestCtx := context.WithoutCancel(ctx)
-	req, err := request.NewClientRequest(requestCtx, c.lggr, capReq, messageID, c.remoteCapabilityInfo, c.localDONInfo, c.dispatcher,
+	req, err := request.NewClientRequest(ctx, c.lggr, capReq, messageID, c.remoteCapabilityInfo, c.localDONInfo, c.dispatcher,
 		c.requestTimeout)
 	if err != nil {
 		return nil, fmt.Errorf("failed to create client request: %w", err)
@@ -149,10 +145,9 @@ func (c *client) Execute(ctx context.Context, capReq commoncap.CapabilityRequest
 	return req.ResponseChan(), nil
 }
 
-func (c *client) Receive(msg *types.MessageBody) {
+func (c *client) Receive(ctx context.Context, msg *types.MessageBody) {
 	c.mutex.Lock()
 	defer c.mutex.Unlock()
-	ctx, _ := c.stopCh.NewCtx()
 
 	messageID := GetMessageID(msg)
 
diff --git a/core/capabilities/remote/target/client_test.go b/core/capabilities/remote/target/client_test.go
index a00ec6dda6c..64b824d74d4 100644
--- a/core/capabilities/remote/target/client_test.go
+++ b/core/capabilities/remote/target/client_test.go
@@ -152,7 +152,7 @@ func testClient(ctx context.Context, t *testing.T, numWorkflowPeers int, workflo
 		ID:      "workflow-don",
 	}
 
-	broker := newTestAsyncMessageBroker(100)
+	broker := newTestAsyncMessageBroker(t, 100)
 
 	receivers := make([]remotetypes.Receiver, numCapabilityPeers)
 	for i := 0; i < numCapabilityPeers; i++ {
@@ -229,7 +229,7 @@ func newTestServer(peerID p2ptypes.PeerID, dispatcher remotetypes.Dispatcher, wo
 	}
 }
 
-func (t *clientTestServer) Receive(msg *remotetypes.MessageBody) {
+func (t *clientTestServer) Receive(_ context.Context, msg *remotetypes.MessageBody) {
 	t.mux.Lock()
 	defer t.mux.Unlock()
 
@@ -297,7 +297,7 @@ func NewTestDispatcher() *TestDispatcher {
 }
 
 func (t *TestDispatcher) SendToReceiver(msgBody *remotetypes.MessageBody) {
-	t.receiver.Receive(msgBody)
+	t.receiver.Receive(context.Background(), msgBody)
 }
 
 func (t *TestDispatcher) SetReceiver(capabilityId string, donId string, receiver remotetypes.Receiver) error {
diff --git a/core/capabilities/remote/target/endtoend_test.go b/core/capabilities/remote/target/endtoend_test.go
index 5c9dc191878..d5305afeb32 100644
--- a/core/capabilities/remote/target/endtoend_test.go
+++ b/core/capabilities/remote/target/endtoend_test.go
@@ -16,6 +16,7 @@ import (
 	commoncap "github.com/smartcontractkit/chainlink-common/pkg/capabilities"
 	"github.com/smartcontractkit/chainlink-common/pkg/services"
 	"github.com/smartcontractkit/chainlink-common/pkg/services/servicetest"
+	"github.com/smartcontractkit/chainlink-common/pkg/utils/tests"
 	"github.com/smartcontractkit/chainlink-common/pkg/values"
 	"github.com/smartcontractkit/chainlink/v2/core/capabilities/remote/target"
 	remotetypes "github.com/smartcontractkit/chainlink/v2/core/capabilities/remote/types"
@@ -215,7 +216,7 @@ func testRemoteTarget(ctx context.Context, t *testing.T, underlying commoncap.Ta
 		F:       workflowDonF,
 	}
 
-	broker := newTestAsyncMessageBroker(1000)
+	broker := newTestAsyncMessageBroker(t, 1000)
 
 	workflowDONs := map[string]commoncap.DON{
 		workflowDonInfo.ID: workflowDonInfo,
@@ -276,6 +277,8 @@ func testRemoteTarget(ctx context.Context, t *testing.T, underlying commoncap.Ta
 
 type testAsyncMessageBroker struct {
 	services.StateMachine
+	t *testing.T
+
 	nodes map[p2ptypes.PeerID]remotetypes.Receiver
 
 	sendCh chan *remotetypes.MessageBody
@@ -292,8 +295,9 @@ func (a *testAsyncMessageBroker) Name() string {
 	return "testAsyncMessageBroker"
 }
 
-func newTestAsyncMessageBroker(sendChBufferSize int) *testAsyncMessageBroker {
+func newTestAsyncMessageBroker(t *testing.T, sendChBufferSize int) *testAsyncMessageBroker {
 	return &testAsyncMessageBroker{
+		t:      t,
 		nodes:  make(map[p2ptypes.PeerID]remotetypes.Receiver),
 		stopCh: make(services.StopChan),
 		sendCh: make(chan *remotetypes.MessageBody, sendChBufferSize),
@@ -318,7 +322,7 @@ func (a *testAsyncMessageBroker) Start(ctx context.Context) error {
 						panic("server not found for peer id")
 					}
 
-					receiver.Receive(msg)
+					receiver.Receive(tests.Context(a.t), msg)
 				}
 			}
 		}()
diff --git a/core/capabilities/remote/target/server.go b/core/capabilities/remote/target/server.go
index 9a578eebd3e..a918dd91700 100644
--- a/core/capabilities/remote/target/server.go
+++ b/core/capabilities/remote/target/server.go
@@ -106,8 +106,7 @@ func (r *server) expireRequests() {
 	}
 }
 
-// Receive handles incoming messages from remote nodes and dispatches them to the corresponding request.
-func (r *server) Receive(msg *types.MessageBody) {
+func (r *server) Receive(ctx context.Context, msg *types.MessageBody) {
 	r.receiveLock.Lock()
 	defer r.receiveLock.Unlock()
 
@@ -135,9 +134,6 @@ func (r *server) Receive(msg *types.MessageBody) {
 
 	req := r.requestIDToRequest[requestID]
 
-	// TODO context should be received from the dispatcher here - pending KS-296
-	ctx, cancel := r.stopCh.NewCtx()
-	defer cancel()
 	err := req.OnMessage(ctx, msg)
 	if err != nil {
 		r.lggr.Errorw("request failed to OnMessage new message", "request", req, "err", err)
diff --git a/core/capabilities/remote/target/server_test.go b/core/capabilities/remote/target/server_test.go
index 507612c143c..3c12ce813d9 100644
--- a/core/capabilities/remote/target/server_test.go
+++ b/core/capabilities/remote/target/server_test.go
@@ -136,7 +136,7 @@ func testRemoteTargetServer(ctx context.Context, t *testing.T,
 	}
 
 	var srvcs []services.Service
-	broker := newTestAsyncMessageBroker(1000)
+	broker := newTestAsyncMessageBroker(t, 1000)
 	err := broker.Start(context.Background())
 	require.NoError(t, err)
 	srvcs = append(srvcs, broker)
@@ -183,7 +183,7 @@ type serverTestClient struct {
 	callerDonID       string
 }
 
-func (r *serverTestClient) Receive(msg *remotetypes.MessageBody) {
+func (r *serverTestClient) Receive(_ context.Context, msg *remotetypes.MessageBody) {
 	r.receivedMessages <- msg
 }
 
diff --git a/core/capabilities/remote/trigger_publisher.go b/core/capabilities/remote/trigger_publisher.go
index 9710d102d49..9e7fc893525 100644
--- a/core/capabilities/remote/trigger_publisher.go
+++ b/core/capabilities/remote/trigger_publisher.go
@@ -71,7 +71,7 @@ func (p *triggerPublisher) Start(ctx context.Context) error {
 	return nil
 }
 
-func (p *triggerPublisher) Receive(msg *types.MessageBody) {
+func (p *triggerPublisher) Receive(_ context.Context, msg *types.MessageBody) {
 	sender := ToPeerID(msg.Sender)
 	if msg.Method == types.MethodRegisterTrigger {
 		req, err := pb.UnmarshalCapabilityRequest(msg.Payload)
diff --git a/core/capabilities/remote/trigger_publisher_test.go b/core/capabilities/remote/trigger_publisher_test.go
index ff7c1cde3c7..db792fb5061 100644
--- a/core/capabilities/remote/trigger_publisher_test.go
+++ b/core/capabilities/remote/trigger_publisher_test.go
@@ -70,7 +70,7 @@ func TestTriggerPublisher_Register(t *testing.T) {
 		CallerDonId: workflowDonInfo.ID,
 		Payload:     marshaled,
 	}
-	publisher.Receive(regEvent)
+	publisher.Receive(ctx, regEvent)
 	forwarded := <-underlying.registrationsCh
 	require.Equal(t, capRequest.Metadata.WorkflowID, forwarded.Metadata.WorkflowID)
 
diff --git a/core/capabilities/remote/trigger_subscriber.go b/core/capabilities/remote/trigger_subscriber.go
index a16725af49a..b20adc36974 100644
--- a/core/capabilities/remote/trigger_subscriber.go
+++ b/core/capabilities/remote/trigger_subscriber.go
@@ -168,7 +168,7 @@ func (s *triggerSubscriber) UnregisterTrigger(ctx context.Context, request commo
 	return nil
 }
 
-func (s *triggerSubscriber) Receive(msg *types.MessageBody) {
+func (s *triggerSubscriber) Receive(_ context.Context, msg *types.MessageBody) {
 	sender := ToPeerID(msg.Sender)
 	if _, found := s.capDonMembers[sender]; !found {
 		s.lggr.Errorw("received message from unexpected node", "capabilityId", s.capInfo.ID, "sender", sender)
diff --git a/core/capabilities/remote/trigger_subscriber_test.go b/core/capabilities/remote/trigger_subscriber_test.go
index f8c5e6ff6e9..3b819f9f3cc 100644
--- a/core/capabilities/remote/trigger_subscriber_test.go
+++ b/core/capabilities/remote/trigger_subscriber_test.go
@@ -95,7 +95,7 @@ func TestTriggerSubscriber_RegisterAndReceive(t *testing.T) {
 		},
 		Payload: marshaled,
 	}
-	subscriber.Receive(triggerEvent)
+	subscriber.Receive(ctx, triggerEvent)
 	response := <-triggerEventCallbackCh
 	require.Equal(t, response.Value, triggerEventValue)
 
diff --git a/core/capabilities/remote/types/mocks/receiver.go b/core/capabilities/remote/types/mocks/receiver.go
index bc41baa5496..b2329123537 100644
--- a/core/capabilities/remote/types/mocks/receiver.go
+++ b/core/capabilities/remote/types/mocks/receiver.go
@@ -3,6 +3,8 @@
 package mocks
 
 import (
+	context "context"
+
 	types "github.com/smartcontractkit/chainlink/v2/core/capabilities/remote/types"
 	mock "github.com/stretchr/testify/mock"
 )
@@ -12,9 +14,9 @@ type Receiver struct {
 	mock.Mock
 }
 
-// Receive provides a mock function with given fields: msg
-func (_m *Receiver) Receive(msg *types.MessageBody) {
-	_m.Called(msg)
+// Receive provides a mock function with given fields: ctx, msg
+func (_m *Receiver) Receive(ctx context.Context, msg *types.MessageBody) {
+	_m.Called(ctx, msg)
 }
 
 // NewReceiver creates a new instance of Receiver. It also registers a testing interface on the mock and a cleanup function to assert the mocks expectations.
diff --git a/core/capabilities/remote/types/types.go b/core/capabilities/remote/types/types.go
index 37d05174dfb..9c9cf67aa15 100644
--- a/core/capabilities/remote/types/types.go
+++ b/core/capabilities/remote/types/types.go
@@ -5,6 +5,8 @@
 package types
 
 import (
+	"context"
+
 	commoncap "github.com/smartcontractkit/chainlink-common/pkg/capabilities"
 	p2ptypes "github.com/smartcontractkit/chainlink/v2/core/services/p2p/types"
 )
@@ -25,7 +27,7 @@ type Dispatcher interface {
 
 //go:generate mockery --quiet --name Receiver --output ./mocks/ --case=underscore
 type Receiver interface {
-	Receive(msg *MessageBody)
+	Receive(ctx context.Context, msg *MessageBody)
 }
 
 type Aggregator interface {