diff --git a/README.md b/README.md
index dc8414b0c..175b50980 100644
--- a/README.md
+++ b/README.md
@@ -460,12 +460,6 @@ If you want most of your virtual hosts to use a default single `location` block
 #### Per-VIRTUAL_HOST `server_tokens` configuration
 Per virtual-host `servers_tokens` directive can be configured by passing appropriate value to the `SERVER_TOKENS` environment variable. Please see the [nginx http_core module configuration](https://nginx.org/en/docs/http/ngx_http_core_module.html#server_tokens) for more details.
 
-### Unhashed vs SHA1 upstream names
-
-By default the nginx configuration `upstream` blocks will use this block's corresponding hostname as a predictable name. However, this can cause issues in some setups (see [this issue](https://github.com/nginx-proxy/nginx-proxy/issues/1162)). In those cases you might want to switch to SHA1 names for the `upstream` blocks by setting the `SHA1_UPSTREAM_NAME` environment variable to `true` on the nginx-proxy container.
-
-Please note that using regular expressions in `VIRTUAL_HOST` will always result in a corresponding `upstream` block with an SHA1 name.
-
 ### Troubleshooting
 
 In case you can't access your VIRTUAL_HOST, set `DEBUG=true` in the client container's environment and have a look at the generated nginx configuration file `/etc/nginx/conf.d/default.conf`:
diff --git a/nginx.tmpl b/nginx.tmpl
index 9e52abb4a..09d3c74d0 100644
--- a/nginx.tmpl
+++ b/nginx.tmpl
@@ -4,7 +4,6 @@
 {{ $external_http_port := coalesce $.Env.HTTP_PORT "80" }}
 {{ $external_https_port := coalesce $.Env.HTTPS_PORT "443" }}
 {{ $debug_all := $.Env.DEBUG }}
-{{ $sha1_upstream_name := parseBool (coalesce $.Env.SHA1_UPSTREAM_NAME "false") }}
 {{ $default_root_response := coalesce $.Env.DEFAULT_ROOT "404" }}
 
 {{ define "ssl_policy" }}
@@ -252,11 +251,11 @@ server {
 }
 {{ end }}
 
-{{ range $host, $containers := groupByMulti $ "Env.VIRTUAL_HOST" "," }}
+{{- /* Keep track of created upstreams to avoid creating redundant upstreams. */}}
+{{- $upstream_names := "" }}
 
+{{ range $host, $containers := groupByMulti $ "Env.VIRTUAL_HOST" "," }}
 {{ $host := trim $host }}
-{{ $is_regexp := hasPrefix "~" $host }}
-{{ $upstream_name := when (or $is_regexp $sha1_upstream_name) (sha1 $host) $host }}
 
 {{ $paths := groupBy $containers "Env.VIRTUAL_PATH" }}
 {{ $nPaths := len $paths }}
@@ -264,15 +263,29 @@ server {
 	{{ $paths = dict "/" $containers }}
 {{ end }}
 
-{{ range $path, $containers := $paths }}
-	{{ $upstream := $upstream_name }}
-	{{ if gt $nPaths 0 }}
-		{{ $sum := sha1 $path }}
-		{{ $upstream = printf "%s-%s" $upstream $sum }}
-	{{ end }}
-# {{ $host }}{{ $path }}
-	{{ template "upstream" (dict "Upstream" $upstream "Containers" $containers "Networks" $CurrentContainer.Networks "Debug" $debug_all) }}
-{{ end }}
+{{- range $path, $containers := $paths }}
+  {{- /*
+       * Create the upstream name by joining the container names with tidle ("~"). nginx-proxy does
+       * not support more than one upstream server per container, so the collection of containers
+       * sufficiently characterizes an upstream.
+       *
+       * Tilde is used because it is in the URI unreserved character set (no percent escaping
+       * required), and it is not permitted in Docker container names (according to
+       * https://github.com/moby/moby/blob/v20.10.14/daemon/names/names.go). Thus, joining multiple
+       * container names with "~" should yield a name that is both a valid NGINX upstream name and a
+       * name that can never collide with a Docker container name.
+       */}}
+  {{- /* TODO: Replace the next few lines with a call to `join` once nginx-proxy has a version of
+         docker-gen that includes https://github.com/nginx-proxy/docker-gen/pull/418. */}}
+  {{- $upstream_name := "" }}
+  {{- range $container := sortObjectsByKeysAsc $containers "Name" }}
+    {{- $upstream_name = printf "%s%s%s" $upstream_name (and $upstream_name "~") $container.Name }}
+  {{- end }}
+  {{- if eq (len (where (split $upstream_names " ") "" $upstream_name)) 0 }}
+    {{- template "upstream" (dict "Upstream" $upstream_name "Containers" $containers "Networks" $CurrentContainer.Networks "Debug" $debug_all) }}
+    {{- $upstream_names = printf "%s %s" $upstream_names $upstream_name }}
+  {{- end }}
+{{- end }}
 
 {{ $default_host := or ($.Env.DEFAULT_HOST) "" }}
 {{ $default_server := index (dict $host "" $default_host "default_server") $host }}
@@ -389,14 +402,20 @@ server {
 
 		{{/* Get the NETWORK_ACCESS defined by containers w/ the same vhost, falling back to "external" */}}
 		{{ $network_tag := or (first (groupByKeys $containers "Env.NETWORK_ACCESS")) "external" }}
-		{{ $upstream := $upstream_name }}
+
+		{{- /* TODO: Replace the next few lines with a call to `join` once nginx-proxy has a version of
+		       docker-gen that includes https://github.com/nginx-proxy/docker-gen/pull/418. */}}
+		{{ $upstream_name := "" }}
+		{{ range $container := sortObjectsByKeysAsc $containers "Name" }}
+			{{ $upstream_name = printf "%s%s%s" $upstream_name (and $upstream_name "~") $container.Name }}
+		{{ end }}
+
 		{{ $dest := "" }}
 		{{ if gt $nPaths 0 }}
-			{{ $sum := sha1 $path }}
-			{{ $upstream = printf "%s-%s" $upstream $sum }}
 			{{ $dest = (or (first (groupByKeys $containers "Env.VIRTUAL_DEST")) "") }}
 		{{ end }}
-		{{ template "location" (dict "Path" $path "Proto" $proto "Upstream" $upstream "Host" $host "VhostRoot" $vhost_root "Dest" $dest "NetworkTag" $network_tag) }}
+
+		{{ template "location" (dict "Path" $path "Proto" $proto "Upstream" $upstream_name "Host" $host "VhostRoot" $vhost_root "Dest" $dest "NetworkTag" $network_tag) }}
 	{{ end }}
 	{{ if (not (contains $paths "/")) }}
 	location / {
@@ -432,14 +451,20 @@ server {
 
 		{{/* Get the NETWORK_ACCESS defined by containers w/ the same vhost, falling back to "external" */}}
 		{{ $network_tag := or (first (groupByKeys $containers "Env.NETWORK_ACCESS")) "external" }}
-		{{ $upstream := $upstream_name }}
+
+		{{- /* TODO: Replace the next few lines with a call to `join` once nginx-proxy has a version of
+		       docker-gen that includes https://github.com/nginx-proxy/docker-gen/pull/418. */}}
+		{{ $upstream_name := "" }}
+		{{ range $container := sortObjectsByKeysAsc $containers "Name" }}
+			{{ $upstream_name = printf "%s%s%s" $upstream_name (and $upstream_name "~") $container.Name }}
+		{{ end }}
+
 		{{ $dest := "" }}
 		{{ if gt $nPaths 0 }}
-			{{ $sum := sha1 $path }}
-			{{ $upstream = printf "%s-%s" $upstream $sum }}
 			{{ $dest = (or (first (groupByKeys $containers "Env.VIRTUAL_DEST")) "") }}
 		{{ end }}
-		{{ template "location" (dict "Path" $path "Proto" $proto "Upstream" $upstream "Host" $host "VhostRoot" $vhost_root "Dest" $dest "NetworkTag" $network_tag) }}
+
+		{{ template "location" (dict "Path" $path "Proto" $proto "Upstream" $upstream_name "Host" $host "VhostRoot" $vhost_root "Dest" $dest "NetworkTag" $network_tag) }}
 	{{ end }}
 	{{ if (not (contains $paths "/")) }}
 	location / {
diff --git a/test/test_upstream-name.py b/test/test_upstream-name.py
new file mode 100644
index 000000000..7862cf1bb
--- /dev/null
+++ b/test/test_upstream-name.py
@@ -0,0 +1,15 @@
+import pytest
+import re
+
+
+def test_single_container_in_upstream(docker_compose, nginxproxy):
+    conf = nginxproxy.get_conf().decode('ASCII')
+    assert re.search(r"upstream web1 \{", conf)
+
+def test_multiple_containers_in_upstream(docker_compose, nginxproxy):
+    conf = nginxproxy.get_conf().decode('ASCII')
+    assert re.search(r"upstream web2~web3 \{", conf)
+
+def test_no_redundant_upstreams(docker_compose, nginxproxy):
+    conf = nginxproxy.get_conf().decode('ASCII')
+    assert len(re.findall(r"upstream web4 \{", conf)) == 1
diff --git a/test/test_upstream-name.yml b/test/test_upstream-name.yml
new file mode 100644
index 000000000..82e70f24b
--- /dev/null
+++ b/test/test_upstream-name.yml
@@ -0,0 +1,40 @@
+version: '2'
+
+services:
+  web1:
+    container_name: web1
+    image: web
+    expose:
+      - "80"
+    environment:
+      WEB_PORTS: 80
+      VIRTUAL_HOST: web1.nginx-proxy.tld
+  web2:
+    container_name: web2
+    image: web
+    expose:
+      - "80"
+    environment:
+      WEB_PORTS: 80
+      VIRTUAL_HOST: web23.nginx-proxy.tld
+  web3:
+    container_name: web3
+    image: web
+    expose:
+      - "80"
+    environment:
+      WEB_PORTS: 80
+      VIRTUAL_HOST: web23.nginx-proxy.tld
+  web4:
+    container_name: web4
+    image: web
+    expose:
+      - "80"
+    environment:
+      WEB_PORTS: 80
+      VIRTUAL_HOST: web4a.nginx-proxy.tld,web4b.nginx-proxy.tld
+
+  sut:
+    image: nginxproxy/nginx-proxy:test
+    volumes:
+      - /var/run/docker.sock:/tmp/docker.sock:ro
diff --git a/test/test_upstream-name/test_predictable-name.py b/test/test_upstream-name/test_predictable-name.py
deleted file mode 100644
index 7e196461e..000000000
--- a/test/test_upstream-name/test_predictable-name.py
+++ /dev/null
@@ -1,7 +0,0 @@
-import pytest
-import re
-
-
-def test_predictable_upstream_is_present_in_nginx_generated_conf(docker_compose, nginxproxy):
-    conf = nginxproxy.get_conf().decode('ASCII')
-    assert re.search(r"upstream web\.nginx-proxy\.tld \{", conf)
diff --git a/test/test_upstream-name/test_predictable-name.yml b/test/test_upstream-name/test_predictable-name.yml
deleted file mode 100644
index cd8d25080..000000000
--- a/test/test_upstream-name/test_predictable-name.yml
+++ /dev/null
@@ -1,15 +0,0 @@
-version: '2'
-
-services:
-  web:
-    image: web
-    expose:
-      - "80"
-    environment:
-      WEB_PORTS: 80
-      VIRTUAL_HOST: web.nginx-proxy.tld
-
-  sut:
-    image: nginxproxy/nginx-proxy:test
-    volumes:
-      - /var/run/docker.sock:/tmp/docker.sock:ro
diff --git a/test/test_upstream-name/test_sha1-name.py b/test/test_upstream-name/test_sha1-name.py
deleted file mode 100644
index 663ca28b5..000000000
--- a/test/test_upstream-name/test_sha1-name.py
+++ /dev/null
@@ -1,12 +0,0 @@
-import pytest
-import re
-
-
-def test_sha1_upstream_is_present_in_nginx_generated_conf(docker_compose, nginxproxy):
-    conf = nginxproxy.get_conf().decode('ASCII')
-    assert re.search(r"upstream 3e837201a6255962094cd6d8f61e22b07d3cc8ed \{", conf)
-
-def test_sha1_upstream_forwards_correctly(docker_compose, nginxproxy):
-    r = nginxproxy.get("http://web.nginx-proxy.tld/port")
-    assert r.status_code == 200   
-    assert r.text == "answer from port 80\n"
diff --git a/test/test_upstream-name/test_sha1-name.yml b/test/test_upstream-name/test_sha1-name.yml
deleted file mode 100644
index 54989ae44..000000000
--- a/test/test_upstream-name/test_sha1-name.yml
+++ /dev/null
@@ -1,17 +0,0 @@
-version: '2'
-
-services:
-  web:
-    image: web
-    expose:
-      - "80"
-    environment:
-      WEB_PORTS: 80
-      VIRTUAL_HOST: web.nginx-proxy.tld
-
-  sut:
-    image: nginxproxy/nginx-proxy:test
-    volumes:
-      - /var/run/docker.sock:/tmp/docker.sock:ro
-    environment:
-      SHA1_UPSTREAM_NAME: "true"