diff --git a/endpoint/endpoint.go b/endpoint/endpoint.go
index 95461a5aa..68f82378a 100644
--- a/endpoint/endpoint.go
+++ b/endpoint/endpoint.go
@@ -19,6 +19,7 @@ package endpoint
 import (
 	"fmt"
 	"net/netip"
+	"slices"
 	"sort"
 	"strconv"
 	"strings"
@@ -353,7 +354,21 @@ func (e *Endpoint) String() string {
 	return fmt.Sprintf("%s %d IN %s %s %s %s", e.DNSName, e.RecordTTL, e.RecordType, e.SetIdentifier, e.Targets, e.ProviderSpecific)
 }
 
-// Apply filter to slice of endpoints and return new filtered slice that includes
+// UniqueOrderedTargets removes duplicate targets from the Endpoint and sorts them in lexicographical order.
+func (e *Endpoint) UniqueOrderedTargets() {
+	result := make([]string, 0, len(e.Targets))
+	existing := make(map[string]bool)
+	for _, target := range e.Targets {
+		if _, ok := existing[target]; !ok {
+			result = append(result, target)
+			existing[target] = true
+		}
+	}
+	slices.Sort(result)
+	e.Targets = result
+}
+
+// FilterEndpointsByOwnerID Apply filter to slice of endpoints and return new filtered slice that includes
 // only endpoints that match.
 func FilterEndpointsByOwnerID(ownerID string, eps []*Endpoint) []*Endpoint {
 	filtered := []*Endpoint{}
diff --git a/endpoint/endpoint_test.go b/endpoint/endpoint_test.go
index 0c2a3cbb9..d87aaab3c 100644
--- a/endpoint/endpoint_test.go
+++ b/endpoint/endpoint_test.go
@@ -925,3 +925,46 @@ func TestCheckEndpoint(t *testing.T) {
 		})
 	}
 }
+
+func TestEndpoint_UniqueOrderedTargets(t *testing.T) {
+	tests := []struct {
+		name     string
+		targets  []string
+		expected Targets
+		want     bool
+	}{
+		{
+			name:     "no duplicates",
+			targets:  []string{"b.example.com", "a.example.com"},
+			expected: Targets{"a.example.com", "b.example.com"},
+		},
+		{
+			name:     "with duplicates",
+			targets:  []string{"a.example.com", "b.example.com", "a.example.com"},
+			expected: Targets{"a.example.com", "b.example.com"},
+		},
+		{
+			name:     "already sorted",
+			targets:  []string{"a.example.com", "b.example.com"},
+			expected: Targets{"a.example.com", "b.example.com"},
+		},
+		{
+			name:     "all duplicates",
+			targets:  []string{"a.example.com", "a.example.com", "a.example.com"},
+			expected: Targets{"a.example.com"},
+		},
+		{
+			name:     "empty",
+			targets:  []string{},
+			expected: Targets{},
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			ep := &Endpoint{Targets: tt.targets}
+			ep.UniqueOrderedTargets()
+			assert.Equal(t, tt.expected, ep.Targets)
+		})
+	}
+}
diff --git a/source/service.go b/source/service.go
index 91cd113d8..2606c0d8f 100644
--- a/source/service.go
+++ b/source/service.go
@@ -251,6 +251,29 @@ func (sc *serviceSource) Endpoints(_ context.Context) ([]*endpoint.Endpoint, err
 		sort.Slice(endpoints, func(i, j int) bool {
 			return endpoints[i].Labels[endpoint.ResourceLabelKey] < endpoints[j].Labels[endpoint.ResourceLabelKey]
 		})
+		mergedEndpoints := make(map[endpoint.EndpointKey][]*endpoint.Endpoint)
+		for _, ep := range endpoints {
+			key := ep.Key()
+			if existing, ok := mergedEndpoints[key]; ok {
+				if existing[0].RecordType == endpoint.RecordTypeCNAME {
+					log.Debugf("CNAME %s with multiple targets found", ep.DNSName)
+					mergedEndpoints[key] = append(existing, ep)
+					continue
+				}
+				existing[0].Targets = append(existing[0].Targets, ep.Targets...)
+				existing[0].UniqueOrderedTargets()
+				mergedEndpoints[key] = existing
+			} else {
+				ep.UniqueOrderedTargets()
+				mergedEndpoints[key] = []*endpoint.Endpoint{ep}
+			}
+		}
+		processed := make([]*endpoint.Endpoint, 0, len(mergedEndpoints))
+		for _, ep := range mergedEndpoints {
+			processed = append(processed, ep...)
+		}
+		endpoints = processed
+
 		// Use stable sort to not disrupt the order of services
 		sort.SliceStable(endpoints, func(i, j int) bool {
 			if endpoints[i].DNSName != endpoints[j].DNSName {
@@ -258,31 +281,6 @@ func (sc *serviceSource) Endpoints(_ context.Context) ([]*endpoint.Endpoint, err
 			}
 			return endpoints[i].RecordType < endpoints[j].RecordType
 		})
-		mergedEndpoints := []*endpoint.Endpoint{}
-		mergedEndpoints = append(mergedEndpoints, endpoints[0])
-		for i := 1; i < len(endpoints); i++ {
-			lastMergedEndpoint := len(mergedEndpoints) - 1
-			if mergedEndpoints[lastMergedEndpoint].DNSName == endpoints[i].DNSName &&
-				mergedEndpoints[lastMergedEndpoint].RecordType == endpoints[i].RecordType &&
-				mergedEndpoints[lastMergedEndpoint].RecordType != endpoint.RecordTypeCNAME && // It is against RFC-1034 for CNAME records to have multiple targets, so skip merging
-				mergedEndpoints[lastMergedEndpoint].SetIdentifier == endpoints[i].SetIdentifier &&
-				mergedEndpoints[lastMergedEndpoint].RecordTTL == endpoints[i].RecordTTL {
-				mergedEndpoints[lastMergedEndpoint].Targets = append(mergedEndpoints[lastMergedEndpoint].Targets, endpoints[i].Targets[0])
-			} else {
-				mergedEndpoints = append(mergedEndpoints, endpoints[i])
-			}
-
-			if mergedEndpoints[lastMergedEndpoint].DNSName == endpoints[i].DNSName &&
-				mergedEndpoints[lastMergedEndpoint].RecordType == endpoints[i].RecordType &&
-				mergedEndpoints[lastMergedEndpoint].RecordType == endpoint.RecordTypeCNAME {
-				log.Debugf("CNAME %s with multiple targets found", endpoints[i].DNSName)
-			}
-		}
-		endpoints = mergedEndpoints
-	}
-
-	for _, ep := range endpoints {
-		sort.Sort(ep.Targets)
 	}
 
 	return endpoints, nil
diff --git a/source/service_test.go b/source/service_test.go
index 885af6959..406bdbc43 100644
--- a/source/service_test.go
+++ b/source/service_test.go
@@ -30,10 +30,12 @@ import (
 	"github.com/stretchr/testify/assert"
 	"github.com/stretchr/testify/require"
 	"github.com/stretchr/testify/suite"
+	appsv1 "k8s.io/api/apps/v1"
 	v1 "k8s.io/api/core/v1"
 	discoveryv1 "k8s.io/api/discovery/v1"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/labels"
+	"k8s.io/apimachinery/pkg/util/intstr"
 	"k8s.io/client-go/kubernetes/fake"
 
 	"sigs.k8s.io/external-dns/endpoint"
@@ -3089,7 +3091,7 @@ func TestHeadlessServices(t *testing.T) {
 			t.Parallel()
 
 			// Create a Kubernetes testing client
-			kubernetes := fake.NewSimpleClientset()
+			kubernetes := fake.NewClientset()
 
 			service := &v1.Service{
 				Spec: v1.ServiceSpec{
@@ -3196,6 +3198,378 @@ func TestHeadlessServices(t *testing.T) {
 	}
 }
 
+func TestMultipleHeadlessServicesPointingToPodsOnTheSameNode(t *testing.T) {
+	kubernetes := fake.NewClientset()
+
+	headless := []*v1.Service{
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app": "kafka",
+				},
+				Annotations: map[string]string{
+					annotations.HostnameKey: "example.org",
+				},
+			},
+			Spec: v1.ServiceSpec{
+				Type:                  v1.ServiceTypeClusterIP,
+				ClusterIP:             v1.ClusterIPNone,
+				ClusterIPs:            []string{v1.ClusterIPNone},
+				InternalTrafficPolicy: testutils.ToPtr(v1.ServiceInternalTrafficPolicyCluster),
+				IPFamilies:            []v1.IPFamily{v1.IPv4Protocol},
+				IPFamilyPolicy:        testutils.ToPtr(v1.IPFamilyPolicySingleStack),
+				Ports: []v1.ServicePort{
+					{
+						Name:       "web",
+						Port:       80,
+						Protocol:   v1.ProtocolTCP,
+						TargetPort: intstr.FromInt32(80),
+					},
+				},
+				Selector: map[string]string{
+					"app": "kafka",
+				},
+				SessionAffinity: v1.ServiceAffinityNone,
+			},
+			Status: v1.ServiceStatus{
+				LoadBalancer: v1.LoadBalancerStatus{},
+			},
+		},
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-2",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app": "kafka",
+				},
+				Annotations: map[string]string{
+					annotations.HostnameKey: "example.org",
+				},
+			},
+			Spec: v1.ServiceSpec{
+				Type:                  v1.ServiceTypeClusterIP,
+				ClusterIP:             v1.ClusterIPNone,
+				ClusterIPs:            []string{v1.ClusterIPNone},
+				InternalTrafficPolicy: testutils.ToPtr(v1.ServiceInternalTrafficPolicyCluster),
+				IPFamilies:            []v1.IPFamily{v1.IPv4Protocol},
+				IPFamilyPolicy:        testutils.ToPtr(v1.IPFamilyPolicySingleStack),
+				Ports: []v1.ServicePort{
+					{
+						Name:       "web",
+						Port:       80,
+						Protocol:   v1.ProtocolTCP,
+						TargetPort: intstr.FromInt32(80),
+					},
+				},
+				Selector: map[string]string{
+					"app": "kafka",
+				},
+				SessionAffinity: v1.ServiceAffinityNone,
+			},
+			Status: v1.ServiceStatus{
+				LoadBalancer: v1.LoadBalancerStatus{},
+			},
+		},
+	}
+
+	assert.NotNil(t, headless)
+
+	pods := []*v1.Pod{
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-0",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app":                                 "kafka",
+					appsv1.PodIndexLabel:                  "0",
+					appsv1.ControllerRevisionHashLabelKey: "kafka-b8d79cdb6",
+					appsv1.StatefulSetPodNameLabel:        "kafka-0",
+				},
+				OwnerReferences: []metav1.OwnerReference{
+					{
+						APIVersion: "apps/v1",
+						Kind:       "StatefulSet",
+						Name:       "kafka",
+					},
+				},
+			},
+			Spec: v1.PodSpec{
+				Hostname:  "kafka-0",
+				Subdomain: "kafka",
+				NodeName:  "local-dev-worker",
+				Containers: []v1.Container{
+					{
+						Name: "nginx",
+						Ports: []v1.ContainerPort{
+							{Name: "web", ContainerPort: 80, Protocol: v1.ProtocolTCP},
+						},
+					},
+				},
+			},
+			Status: v1.PodStatus{
+				Phase:   v1.PodRunning,
+				PodIP:   "10.244.1.2",
+				PodIPs:  []v1.PodIP{{IP: "10.244.1.2"}},
+				HostIP:  "172.18.0.2",
+				HostIPs: []v1.HostIP{{IP: "172.18.0.2"}},
+			},
+		},
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-1",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app":                                 "kafka",
+					appsv1.PodIndexLabel:                  "1",
+					appsv1.ControllerRevisionHashLabelKey: "kafka-b8d79cdb6",
+					appsv1.StatefulSetPodNameLabel:        "kafka-1",
+				},
+				OwnerReferences: []metav1.OwnerReference{
+					{
+						APIVersion: "apps/v1",
+						Kind:       "StatefulSet",
+						Name:       "kafka",
+					},
+				},
+			},
+			Spec: v1.PodSpec{
+				Hostname:  "kafka-1",
+				Subdomain: "kafka",
+				NodeName:  "local-dev-worker",
+				Containers: []v1.Container{
+					{
+						Name: "nginx",
+						Ports: []v1.ContainerPort{
+							{Name: "web", ContainerPort: 80, Protocol: v1.ProtocolTCP},
+						},
+					},
+				},
+			},
+			Status: v1.PodStatus{
+				Phase:   v1.PodRunning,
+				PodIP:   "10.244.1.3",
+				PodIPs:  []v1.PodIP{{IP: "10.244.1.3"}},
+				HostIP:  "172.18.0.2",
+				HostIPs: []v1.HostIP{{IP: "172.18.0.2"}},
+			},
+		},
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-2",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app":                                 "kafka",
+					appsv1.PodIndexLabel:                  "2",
+					appsv1.ControllerRevisionHashLabelKey: "kafka-b8d79cdb6",
+					appsv1.StatefulSetPodNameLabel:        "kafka-2",
+				},
+				OwnerReferences: []metav1.OwnerReference{
+					{
+						APIVersion: "apps/v1",
+						Kind:       "StatefulSet",
+						Name:       "kafka",
+					},
+				},
+			},
+			Spec: v1.PodSpec{
+				Hostname:  "kafka-2",
+				Subdomain: "kafka",
+				NodeName:  "local-dev-worker",
+				Containers: []v1.Container{
+					{
+						Name: "nginx",
+						Ports: []v1.ContainerPort{
+							{Name: "web", ContainerPort: 80, Protocol: v1.ProtocolTCP},
+						},
+					},
+				},
+			},
+			Status: v1.PodStatus{
+				Phase:   v1.PodRunning,
+				PodIP:   "10.244.1.4",
+				PodIPs:  []v1.PodIP{{IP: "10.244.1.4"}},
+				HostIP:  "172.18.0.2",
+				HostIPs: []v1.HostIP{{IP: "172.18.0.2"}},
+			},
+		},
+	}
+	assert.Len(t, pods, 3)
+
+	endpoints := []*discoveryv1.EndpointSlice{
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-xhrc9",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app":                        "kafka",
+					discoveryv1.LabelServiceName: "kafka",
+					discoveryv1.LabelManagedBy:   "endpointslice-controller.k8s.io",
+					v1.IsHeadlessService:         "",
+				},
+			},
+			AddressType: discoveryv1.AddressTypeIPv4,
+			Endpoints: []discoveryv1.Endpoint{
+				{
+					Addresses: []string{"10.244.1.2"},
+					Hostname:  testutils.ToPtr("kafka-0"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-0",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+				{
+					Addresses: []string{"10.244.1.3"},
+					Hostname:  testutils.ToPtr("kafka-1"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-1",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+				{
+					Addresses: []string{"10.244.1.4"},
+					Hostname:  testutils.ToPtr("kafka-2"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-2",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+			},
+		},
+		{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "kafka-2-svwsg",
+				Namespace: "default",
+				Labels: map[string]string{
+					"app":                        "kafka",
+					discoveryv1.LabelServiceName: "kafka-2",
+					discoveryv1.LabelManagedBy:   "endpointslice-controller.k8s.io",
+					v1.IsHeadlessService:         "",
+				},
+			},
+			AddressType: discoveryv1.AddressTypeIPv4,
+			Endpoints: []discoveryv1.Endpoint{
+				{
+					Addresses: []string{"10.244.1.2"},
+					Hostname:  testutils.ToPtr("kafka-0"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-0",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+				{
+					Addresses: []string{"10.244.1.3"},
+					Hostname:  testutils.ToPtr("kafka-1"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-1",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+				{
+					Addresses: []string{"10.244.1.4"},
+					Hostname:  testutils.ToPtr("kafka-2"),
+					NodeName:  testutils.ToPtr("local-dev-worker"),
+					TargetRef: &v1.ObjectReference{
+						Kind:      "Pod",
+						Name:      "kafka-2",
+						Namespace: "default",
+					},
+					Conditions: discoveryv1.EndpointConditions{
+						Ready:       testutils.ToPtr(true),
+						Serving:     testutils.ToPtr(true),
+						Terminating: testutils.ToPtr(false),
+					},
+				},
+			},
+		},
+	}
+
+	for _, svc := range headless {
+		_, err := kubernetes.CoreV1().Services(svc.Namespace).Create(context.Background(), svc, metav1.CreateOptions{})
+		require.NoError(t, err)
+	}
+
+	for _, pod := range pods {
+		_, err := kubernetes.CoreV1().Pods(pod.Namespace).Create(context.Background(), pod, metav1.CreateOptions{})
+		require.NoError(t, err)
+	}
+
+	for _, ep := range endpoints {
+		_, err := kubernetes.DiscoveryV1().EndpointSlices(ep.Namespace).Create(context.Background(), ep, metav1.CreateOptions{})
+		require.NoError(t, err)
+	}
+
+	src, err := NewServiceSource(
+		t.Context(),
+		kubernetes,
+		v1.NamespaceAll,
+		"",
+		"",
+		false,
+		"",
+		false,
+		false,
+		false,
+		[]string{},
+		false,
+		labels.Everything(),
+		false,
+		false,
+		false,
+	)
+	require.NoError(t, err)
+	assert.NotNil(t, src)
+
+	got, err := src.Endpoints(context.Background())
+	require.NoError(t, err)
+
+	want := []*endpoint.Endpoint{
+		// TODO: root domain records should not be created. Address them in a follow-up PR.
+		{DNSName: "example.org", RecordType: endpoint.RecordTypeA, Targets: endpoint.Targets{"10.244.1.2", "10.244.1.3", "10.244.1.4"}},
+		{DNSName: "kafka-0.example.org", RecordType: endpoint.RecordTypeA, Targets: endpoint.Targets{"10.244.1.2"}},
+		{DNSName: "kafka-1.example.org", RecordType: endpoint.RecordTypeA, Targets: endpoint.Targets{"10.244.1.3"}},
+		{DNSName: "kafka-2.example.org", RecordType: endpoint.RecordTypeA, Targets: endpoint.Targets{"10.244.1.4"}},
+	}
+
+	validateEndpoints(t, got, want)
+}
+
 // TestHeadlessServices tests that headless services generate the correct endpoints.
 func TestHeadlessServicesHostIP(t *testing.T) {
 	t.Parallel()