diff --git a/README.md b/README.md
index 9e002e19..6bd9cfdd 100644
--- a/README.md
+++ b/README.md
@@ -90,6 +90,32 @@ puts(file.id)
 
 Note that you can also pass a raw `IO` descriptor, but this disables retries, as the library can't be sure if the descriptor is a file or pipe (which cannot be rewound).
 
+### Webhook verification
+
+Verifying webhook signatures is _optional but encouraged_.
+
+For more information about webhooks, see [the API docs](https://increase.com/documentation/webhooks#events-and-webhooks).
+
+### Parsing webhook payloads
+
+For most use cases, you will likely want to verify the webhook and parse the payload at the same time. To achieve this, we provide the method `Increase::Webhooks.unwrap`, which parses a webhook request and verifies that it was sent by Increase. This method will raise an error if the signature is invalid.
+
+Note that the `body` parameter must be the raw JSON string sent from the server (do not parse it first). The `.unwrap()` method will parse this JSON for you into an event object after verifying the webhook was sent from Increase.
+
+```ruby
+require 'sinatra'
+
+post '/webhook' do
+  request.body.rewind
+
+  event = Increase::Webhooks.unwrap(
+    request.body.read,
+    request.get_header('Increase-Webhook-Signature'),
+    "your webhook secret"
+  )
+end
+```
+
 ### Handling errors
 
 When the library is unable to connect to the API, or if the API returns a non-success status code (i.e., 4xx or 5xx response), a subclass of `Increase::Errors::APIError` will be thrown:
diff --git a/lib/increase.rb b/lib/increase.rb
index 15fbd4de..26ffd7e1 100644
--- a/lib/increase.rb
+++ b/lib/increase.rb
@@ -49,6 +49,7 @@
 require_relative "increase/request_options"
 require_relative "increase/file_part"
 require_relative "increase/errors"
+require_relative "increase/webhooks"
 require_relative "increase/internal/transport/base_client"
 require_relative "increase/internal/transport/pooled_net_requester"
 require_relative "increase/client"
diff --git a/lib/increase/webhooks.rb b/lib/increase/webhooks.rb
new file mode 100644
index 00000000..910631a5
--- /dev/null
+++ b/lib/increase/webhooks.rb
@@ -0,0 +1,44 @@
+# frozen_string_literal: true
+
+module Increase
+  module Webhooks
+    class << self
+      def unwrap(payload, signature, secret = nil)
+        if secret
+          verify_signature(payload, signature, secret)
+        end
+
+        JSON.parse(payload)
+      end
+
+      def verify_signature(payload, signature, secret = nil)
+        begin
+          parsed_signature = parse_kv_pairs(signature)
+        rescue StandardError
+          raise "Unable to parse webhook signature."
+        end
+
+        timestamp = parsed_signature["t"]
+        signature = parsed_signature["v1"]
+
+        expected_signature = OpenSSL::HMAC.hexdigest(
+          OpenSSL::Digest.new("sha256"),
+          secret,
+          "#{timestamp}.#{payload}"
+        )
+
+        unless OpenSSL.secure_compare(expected_signature, signature)
+          raise "None of the given webhook signatures match the expected signature."
+        end
+
+        nil
+      end
+
+      private
+
+      def parse_kv_pairs(text, item_sep: ",", value_sep: "=")
+        Hash[*text.split(item_sep).map { |t| t.split(value_sep) }.flatten]
+      end
+    end
+  end
+end
diff --git a/test/increase/webhooks_test.rb b/test/increase/webhooks_test.rb
new file mode 100644
index 00000000..d3e1562e
--- /dev/null
+++ b/test/increase/webhooks_test.rb
@@ -0,0 +1,52 @@
+# frozen_string_literal: true
+
+require_relative "test_helper"
+
+class Increase::Test::WebhooksTest < Minitest::Test
+  def setup
+    @timestamp = Time.now.utc.iso8601
+    @secret = "whsec_test_secret"
+    @payload = "{\"type\":\"event\",\"id\":\"event_123abc\",\"created_at\":\"2020-01-31T23:59:59Z\"}"
+    @signed_payload = OpenSSL::HMAC.hexdigest(
+      OpenSSL::Digest.new("sha256"),
+      @secret,
+      "#{@timestamp}.#{@payload}"
+    )
+    @signature = "t=#{@timestamp},v1=#{@signed_payload}"
+  end
+
+  def test_unwrap
+    unwrapped = Increase::Webhooks.unwrap(@payload, @signature, @secret)
+    assert_equal(unwrapped, JSON.parse(@payload))
+
+    assert_raises(StandardError, "None of the given webhook signatures match the expected signature.") do
+      Increase::Webhooks.unwrap(@payload, @signature, "wrong_secret")
+    end
+  end
+
+  def test_verify_signature_valid
+    assert_nil(Increase::Webhooks.verify_signature(@payload, @signature, @secret))
+  end
+
+  def test_verify_signature_invalid_secret
+    assert_raises(StandardError, "None of the given webhook signatures match the expected signature.") do
+      Increase::Webhooks.verify_signature(@payload, @signature, "wrong_secret")
+    end
+  end
+
+  def test_verify_signature_invalid_payload
+    wrong_payload = "{\"type\":\"event\",\"id\":\"event_different\"}"
+
+    assert_raises(StandardError, "None of the given webhook signatures match the expected signature.") do
+      Increase::Webhooks.verify_signature(wrong_payload, @signature, @secret)
+    end
+  end
+
+  def test_verify_signature_invalid_signature_format
+    invalid_signature = "???"
+
+    assert_raises(StandardError, "Unable to parse webhook signature.") do
+      Increase::Webhooks.verify_signature(@payload, invalid_signature, @secret)
+    end
+  end
+end