diff --git a/plutus-core/plutus-core.cabal b/plutus-core/plutus-core.cabal
index dc4b4d7997f..5cbdd4fe325 100644
--- a/plutus-core/plutus-core.cabal
+++ b/plutus-core/plutus-core.cabal
@@ -538,6 +538,7 @@ library plutus-ir
     PlutusIR.Transform.Rename
     PlutusIR.Transform.RewriteRules
     PlutusIR.Transform.RewriteRules.CommuteFnWithConst
+    PlutusIR.Transform.RewriteRules.RemoveTrace
     PlutusIR.Transform.StrictifyBindings
     PlutusIR.Transform.Substitute
     PlutusIR.Transform.ThunkRecursions
diff --git a/plutus-core/plutus-ir/src/PlutusIR/Transform/RewriteRules/RemoveTrace.hs b/plutus-core/plutus-ir/src/PlutusIR/Transform/RewriteRules/RemoveTrace.hs
new file mode 100644
index 00000000000..2ce86849eec
--- /dev/null
+++ b/plutus-core/plutus-ir/src/PlutusIR/Transform/RewriteRules/RemoveTrace.hs
@@ -0,0 +1,17 @@
+{-# LANGUAGE BlockArguments  #-}
+{-# LANGUAGE LambdaCase      #-}
+{-# LANGUAGE PatternSynonyms #-}
+
+module PlutusIR.Transform.RewriteRules.RemoveTrace
+  ( rewriteRuleRemoveTrace
+  ) where
+
+import PlutusCore.Default (DefaultFun)
+import PlutusCore.Default.Builtins qualified as Builtin
+import PlutusIR.Transform.RewriteRules.Common (pattern A, pattern B, pattern I)
+import PlutusIR.Transform.RewriteRules.Internal (RewriteRules (..))
+
+rewriteRuleRemoveTrace :: RewriteRules uni DefaultFun
+rewriteRuleRemoveTrace = RewriteRules \_varsInfo -> \case
+  B Builtin.Trace `I` _ty `A` _msg `A` arg -> pure arg
+  term -> pure term
diff --git a/plutus-tx-plugin/src/PlutusTx/Compiler/Builtins.hs b/plutus-tx-plugin/src/PlutusTx/Compiler/Builtins.hs
index 103111167d7..077f99932eb 100644
--- a/plutus-tx-plugin/src/PlutusTx/Compiler/Builtins.hs
+++ b/plutus-tx-plugin/src/PlutusTx/Compiler/Builtins.hs
@@ -46,7 +46,7 @@ import GHC.Types.TyThing qualified as GHC
 
 import Language.Haskell.TH.Syntax qualified as TH
 
-import Control.Monad.Reader (ask, asks)
+import Control.Monad.Reader (asks)
 
 import Data.ByteString qualified as BS
 import Data.Foldable (for_)
@@ -301,8 +301,6 @@ defineBuiltinType name ty = do
 -- | Add definitions for all the builtin terms to the environment.
 defineBuiltinTerms :: CompilingDefault uni fun m ann => m ()
 defineBuiltinTerms = do
-    CompileContext {ccOpts=compileOpts} <- ask
-
     -- Error
     -- See Note [Delaying error]
     func <- delayedErrorFunc
@@ -380,28 +378,7 @@ defineBuiltinTerms = do
             PLC.EqualsInteger -> defineBuiltinInl 'Builtins.equalsInteger
 
             -- Tracing
-            -- When `remove-trace` is specified, we define `trace` as `\_ a -> a` instead of the
-            -- version.
-            PLC.Trace -> do
-                (traceTerm, ann) <-
-                    if coRemoveTrace compileOpts
-                        then liftQuote $ do
-                            ta <- freshTyName "a"
-                            t <- freshName "t"
-                            a <- freshName "a"
-                            pure
-                                ( PIR.tyAbs annMayInline ta (PLC.Type annMayInline) $
-                                    PIR.mkIterLamAbs
-                                        [ PIR.VarDecl annMayInline t $
-                                            PIR.mkTyBuiltin @_ @Text annMayInline
-                                        , PIR.VarDecl annMayInline a $
-                                            PLC.TyVar annMayInline ta
-                                        ]
-                                        $ PIR.Var annMayInline a
-                                , annMayInline
-                                )
-                        else pure (mkBuiltin PLC.Trace, annMayInline)
-                defineBuiltinTerm ann 'Builtins.trace traceTerm
+            PLC.Trace -> defineBuiltinInl 'Builtins.trace
 
             -- Pairs
             PLC.FstPair -> defineBuiltinInl 'Builtins.fst
diff --git a/plutus-tx-plugin/src/PlutusTx/Plugin.hs b/plutus-tx-plugin/src/PlutusTx/Plugin.hs
index 38370932e28..e04b53f6311 100644
--- a/plutus-tx-plugin/src/PlutusTx/Plugin.hs
+++ b/plutus-tx-plugin/src/PlutusTx/Plugin.hs
@@ -79,13 +79,16 @@ import Data.ByteString qualified as BS
 import Data.ByteString.Unsafe qualified as BSUnsafe
 import Data.Either.Validation
 import Data.Map qualified as Map
+import Data.Monoid.Extra (mwhen)
 import Data.Set qualified as Set
 import Data.Type.Bool qualified as PlutusTx.Bool
 import GHC.Num.Integer qualified
+import PlutusCore.Default (DefaultFun, DefaultUni)
 import PlutusIR.Analysis.Builtins
 import PlutusIR.Compiler.Provenance (noProvenance, original)
 import PlutusIR.Compiler.Types qualified as PIR
 import PlutusIR.Transform.RewriteRules
+import PlutusIR.Transform.RewriteRules.RemoveTrace (rewriteRuleRemoveTrace)
 import Prettyprinter qualified as PP
 import System.IO (openTempFile)
 import System.IO.Unsafe (unsafePerformIO)
@@ -423,7 +426,7 @@ compileMarkedExpr locStr codeTy origE = do
             ccBuiltinsInfo = def,
             ccBuiltinCostModel = def,
             ccDebugTraceOn = _posDumpCompilationTrace opts,
-            ccRewriteRules = def
+            ccRewriteRules = makeRewriteRules opts
             }
         st = CompileState 0 mempty
     -- See Note [Occurrence analysis]
@@ -482,6 +485,9 @@ runCompiler moduleName opts expr = do
             PIR.DatatypeComponent PIR.Destructor _ -> True
             _                                      ->
                 AlwaysInline `elem` fmap annInline (toList ann)
+
+    rewriteRules <- asks ccRewriteRules
+
     -- Compilation configuration
     -- pir's tc-config is based on plc tcconfig
     let pirTcConfig = PIR.PirTCConfig plcTcConfig PIR.YesEscape
@@ -524,6 +530,7 @@ runCompiler moduleName opts expr = do
                  -- TODO: ensure the same as the one used in the plugin
                  & set PIR.ccBuiltinsInfo def
                  & set PIR.ccBuiltinCostModel def
+                 & set PIR.ccRewriteRules rewriteRules
         plcOpts = PLC.defaultCompilationOpts
             & set (PLC.coSimplifyOpts . UPLC.soMaxSimplifierIterations)
                 (opts ^. posMaxSimplifierIterationsUPlc)
@@ -642,3 +649,10 @@ makePrimitiveNameInfo names = do
         thing <- lift . lift $ GHC.lookupThing ghcName
         pure (name, thing)
     pure $ Map.fromList infos
+
+makeRewriteRules :: PluginOptions -> RewriteRules DefaultUni DefaultFun
+makeRewriteRules options =
+  fold
+    [ mwhen (options ^. posRemoveTrace) rewriteRuleRemoveTrace
+    , defaultUniRewriteRules
+    ]