diff --git a/azurelinuxagent/common/osutil/default.py b/azurelinuxagent/common/osutil/default.py
index 9fb97f157f..4087b7cc8d 100644
--- a/azurelinuxagent/common/osutil/default.py
+++ b/azurelinuxagent/common/osutil/default.py
@@ -1154,12 +1154,15 @@ def set_hostname(self, hostname):
         self._run_command_without_raising(["hostname", hostname], log_error=False)
 
     def set_dhcp_hostname(self, hostname):
+        # ensure localhost is not sent to the dhcp server
+        if hostname.lower() == "localhost" or hostname.lower() == "localhost.localdomain":
+            hostname = ""
         autosend = r'^[^#]*?send\s*host-name.*?(<hostname>|gethostname[(,)])'
         dhclient_files = ['/etc/dhcp/dhclient.conf', '/etc/dhcp3/dhclient.conf', '/etc/dhclient.conf']
         for conf_file in dhclient_files:
             if not os.path.isfile(conf_file):
                 continue
-            if fileutil.findre_in_file(conf_file, autosend):
+            if hostname != "" and fileutil.findre_in_file(conf_file, autosend):
                 # Return if auto send host-name is configured
                 return
             fileutil.update_conf_file(conf_file,
diff --git a/azurelinuxagent/common/osutil/redhat.py b/azurelinuxagent/common/osutil/redhat.py
index 312dd16084..7a595ebeb4 100644
--- a/azurelinuxagent/common/osutil/redhat.py
+++ b/azurelinuxagent/common/osutil/redhat.py
@@ -84,6 +84,9 @@ def set_hostname(self, hostname):
         self._run_command_without_raising(["hostname", hostname], log_error=False)
 
     def set_dhcp_hostname(self, hostname):
+        # ensure localhost is not sent to the dhcp server
+        if hostname.lower() == "localhost" or hostname.lower() == "localhost.localdomain":
+            hostname = ""
         ifname = self.get_if_name()
         filepath = "/etc/sysconfig/network-scripts/ifcfg-{0}".format(ifname)
         fileutil.update_conf_file(filepath,
diff --git a/azurelinuxagent/common/osutil/suse.py b/azurelinuxagent/common/osutil/suse.py
index 52fd3ce565..886e9f9de4 100644
--- a/azurelinuxagent/common/osutil/suse.py
+++ b/azurelinuxagent/common/osutil/suse.py
@@ -104,6 +104,12 @@ def set_hostname(self, hostname):
         )
 
     def set_dhcp_hostname(self, hostname):
+        # ensure localhost is not sent to the dhcp server
+        if hostname.lower() == "localhost" or hostname.lower() == "localhost.localdomain":
+            # if the DHCLIENT_HOSTNAME_OPTION is empty it will not send a hostname to the dhcp server
+            # reference: https://manpages.opensuse.org/Tumbleweed/wicked/ifcfg-dhcp.5.en.html
+            hostname = ""
+        
         dhcp_config_file_path = '/etc/sysconfig/network/dhcp'
         hostname_send_setting = fileutil.get_line_startingwith(
             'DHCLIENT_HOSTNAME_OPTION', dhcp_config_file_path