diff --git a/simapp/app.go b/simapp/app.go
index a85cb4a6d5a5..7a445888aa1c 100644
--- a/simapp/app.go
+++ b/simapp/app.go
@@ -275,7 +275,7 @@ func NewSimApp(
 		stakingtypes.NewMultiStakingHooks(app.DistrKeeper.Hooks(), app.SlashingKeeper.Hooks()),
 	)
 
-	app.AuthzKeeper = authzkeeper.NewKeeper(keys[authzkeeper.StoreKey], appCodec, app.BaseApp.MsgServiceRouter())
+	app.AuthzKeeper = authzkeeper.NewKeeper(keys[authzkeeper.StoreKey], appCodec, app.BaseApp.MsgServiceRouter(), app.AccountKeeper)
 
 	// register the proposal types
 	govRouter := govtypes.NewRouter()
diff --git a/x/authz/keeper/keeper.go b/x/authz/keeper/keeper.go
index 6273dd198fea..b7178535fd1a 100644
--- a/x/authz/keeper/keeper.go
+++ b/x/authz/keeper/keeper.go
@@ -14,21 +14,24 @@ import (
 	codectypes "github.com/cosmos/cosmos-sdk/codec/types"
 	sdk "github.com/cosmos/cosmos-sdk/types"
 	sdkerrors "github.com/cosmos/cosmos-sdk/types/errors"
+	authkeeper "github.com/cosmos/cosmos-sdk/x/auth/keeper"
 	"github.com/cosmos/cosmos-sdk/x/authz"
 )
 
 type Keeper struct {
-	storeKey sdk.StoreKey
-	cdc      codec.BinaryCodec
-	router   *baseapp.MsgServiceRouter
+	storeKey   sdk.StoreKey
+	cdc        codec.BinaryCodec
+	router     *baseapp.MsgServiceRouter
+	authKeeper authkeeper.AccountKeeper
 }
 
 // NewKeeper constructs a message authorization Keeper
-func NewKeeper(storeKey sdk.StoreKey, cdc codec.BinaryCodec, router *baseapp.MsgServiceRouter) Keeper {
+func NewKeeper(storeKey sdk.StoreKey, cdc codec.BinaryCodec, router *baseapp.MsgServiceRouter, ak authkeeper.AccountKeeper) Keeper {
 	return Keeper{
-		storeKey: storeKey,
-		cdc:      cdc,
-		router:   router,
+		storeKey:   storeKey,
+		cdc:        cdc,
+		router:     router,
+		authKeeper: ak,
 	}
 }
 
diff --git a/x/authz/keeper/msg_server.go b/x/authz/keeper/msg_server.go
index 192ac72d22db..86e829862445 100644
--- a/x/authz/keeper/msg_server.go
+++ b/x/authz/keeper/msg_server.go
@@ -23,6 +23,13 @@ func (k Keeper) Grant(goCtx context.Context, msg *authz.MsgGrant) (*authz.MsgGra
 		return nil, err
 	}
 
+	// create the account if it is not in account state
+	granteeAcc := k.authKeeper.GetAccount(ctx, grantee)
+	if granteeAcc == nil {
+		granteeAcc = k.authKeeper.NewAccountWithAddress(ctx, grantee)
+		k.authKeeper.SetAccount(ctx, granteeAcc)
+	}
+
 	authorization := msg.GetAuthorization()
 	if authorization == nil {
 		return nil, sdkerrors.ErrUnpackAny.Wrap("Authorization is not present in the msg")