diff --git a/cmd/static-server/main.go b/cmd/static-server/main.go
index 7db2b3fa..a6de7951 100644
--- a/cmd/static-server/main.go
+++ b/cmd/static-server/main.go
@@ -69,6 +69,7 @@ func loadStaticNMState(fsys fs.FS, env *env.EnvInputs, nmstateDir string, imageS
 		if err != nil {
 			return errors.WithMessagef(err, "problem reading %s", path.Join(nmstateDir, f.Name()))
 		}
+		hostname := strings.TrimSuffix(f.Name(), path.Ext(f.Name()))
 		igBuilder, err := ignition.New(b, registries,
 			env.IronicBaseURL,
 			env.IronicAgentImage,
@@ -78,6 +79,7 @@ func loadStaticNMState(fsys fs.FS, env *env.EnvInputs, nmstateDir string, imageS
 			env.HttpProxy,
 			env.HttpsProxy,
 			env.NoProxy,
+			hostname,
 		)
 		if err != nil {
 			return errors.WithMessage(err, "failed to configure ignition")
diff --git a/pkg/ignition/builder.go b/pkg/ignition/builder.go
index 549a789b..791a70f7 100644
--- a/pkg/ignition/builder.go
+++ b/pkg/ignition/builder.go
@@ -3,6 +3,7 @@ package ignition
 import (
 	"encoding/json"
 	"errors"
+	"fmt"
 	"os/exec"
 	"strings"
 
@@ -30,9 +31,10 @@ type ignitionBuilder struct {
 	httpProxy             string
 	httpsProxy            string
 	noProxy               string
+	hostname              string
 }
 
-func New(nmStateData, registriesConf []byte, ironicBaseURL, ironicAgentImage, ironicAgentPullSecret, ironicRAMDiskSSHKey, ipOptions, httpProxy, httpsProxy, noProxy string) (*ignitionBuilder, error) {
+func New(nmStateData, registriesConf []byte, ironicBaseURL, ironicAgentImage, ironicAgentPullSecret, ironicRAMDiskSSHKey, ipOptions string, httpProxy, httpsProxy, noProxy string, hostname string) (*ignitionBuilder, error) {
 	if ironicBaseURL == "" {
 		return nil, errors.New("ironicBaseURL is required")
 	}
@@ -51,6 +53,7 @@ func New(nmStateData, registriesConf []byte, ironicBaseURL, ironicAgentImage, ir
 		httpProxy:             httpProxy,
 		httpsProxy:            httpsProxy,
 		noProxy:               noProxy,
+		hostname:              hostname,
 	}, nil
 }
 
@@ -99,10 +102,15 @@ func (b *ignitionBuilder) Generate() ([]byte, error) {
 		"/etc/NetworkManager/conf.d/clientid.conf",
 		0644, false,
 		[]byte("[connection]\nipv6.dhcp-duid=ll\nipv6.dhcp-iaid=mac")))
+
+	update_hostname := fmt.Sprintf(`
+	[[ "$DHCP6_FQDN_FQDN" =~ "." ]] && hostnamectl set-hostname --static --transient $DHCP6_FQDN_FQDN 
+	[[ "$(< /proc/sys/kernel/hostname)" =~ (localhost|localhost.localdomain) ]] && hostnamectl set-hostname --transient %s`, b.hostname)
+
 	config.Storage.Files = append(config.Storage.Files, ignitionFileEmbed(
 		"/etc/NetworkManager/dispatcher.d/01-hostname",
 		0744, false,
-		[]byte("[[ \"$DHCP6_FQDN_FQDN\" =~ \".\" ]] && hostnamectl set-hostname --static --transient $DHCP6_FQDN_FQDN")))
+		[]byte(update_hostname)))
 
 	if len(b.registriesConf) > 0 {
 		registriesFile := ignitionFileEmbed("/etc/containers/registries.conf",
diff --git a/pkg/ignition/builder_test.go b/pkg/ignition/builder_test.go
index 203d147c..d8e47b30 100644
--- a/pkg/ignition/builder_test.go
+++ b/pkg/ignition/builder_test.go
@@ -18,7 +18,7 @@ func TestGenerateRegistries(t *testing.T) {
 	builder, err := New([]byte{}, []byte(registries),
 		"http://ironic.example.com",
 		"quay.io/openshift-release-dev/ironic-ipa-image",
-		"", "", "", "", "", "")
+		"", "", "", "", "", "", "virthost")
 	if err != nil {
 		t.Fatalf("Unexpected error %v", err)
 	}
diff --git a/pkg/imageprovider/rhcos.go b/pkg/imageprovider/rhcos.go
index 058413a4..4ac089c5 100644
--- a/pkg/imageprovider/rhcos.go
+++ b/pkg/imageprovider/rhcos.go
@@ -45,7 +45,7 @@ func (ip *rhcosImageProvider) SupportsFormat(format metal3.ImageFormat) bool {
 	}
 }
 
-func (ip *rhcosImageProvider) buildIgnitionConfig(networkData imageprovider.NetworkData) ([]byte, error) {
+func (ip *rhcosImageProvider) buildIgnitionConfig(networkData imageprovider.NetworkData, hostname string) ([]byte, error) {
 	nmstateData := networkData["nmstate"]
 
 	builder, err := ignition.New(nmstateData, ip.RegistriesConf,
@@ -57,6 +57,7 @@ func (ip *rhcosImageProvider) buildIgnitionConfig(networkData imageprovider.Netw
 		ip.EnvInputs.HttpProxy,
 		ip.EnvInputs.HttpsProxy,
 		ip.EnvInputs.NoProxy,
+		hostname,
 	)
 	if err != nil {
 		return nil, imageprovider.BuildInvalidError(err)
@@ -84,7 +85,7 @@ func imageKey(data imageprovider.ImageData) string {
 }
 
 func (ip *rhcosImageProvider) BuildImage(data imageprovider.ImageData, networkData imageprovider.NetworkData, log logr.Logger) (string, error) {
-	ignitionConfig, err := ip.buildIgnitionConfig(networkData)
+	ignitionConfig, err := ip.buildIgnitionConfig(networkData, data.ImageMetadata.Name)
 	if err != nil {
 		return "", err
 	}