diff --git a/internal/app/networkd/pkg/address/dhcp.go b/internal/app/networkd/pkg/address/dhcp.go
index bbfa9ff54..f9160138b 100644
--- a/internal/app/networkd/pkg/address/dhcp.go
+++ b/internal/app/networkd/pkg/address/dhcp.go
@@ -135,6 +135,10 @@ func (d *DHCP) Hostname() string {
 		return fmt.Sprintf("%s.%s", shortHostname, d.Ack.DomainName())
 	}
 
+	if d.Ack.HostName() == "" {
+		return fmt.Sprintf("%s-%s", "talos", strings.ReplaceAll(d.Address().IP.String(), ".", "-"))
+	}
+
 	return d.Ack.HostName()
 }
 
diff --git a/internal/app/networkd/pkg/networkd/networkd_test.go b/internal/app/networkd/pkg/networkd/networkd_test.go
index d35d50450..8a196900c 100644
--- a/internal/app/networkd/pkg/networkd/networkd_test.go
+++ b/internal/app/networkd/pkg/networkd/networkd_test.go
@@ -8,8 +8,10 @@ import (
 	"net"
 	"testing"
 
+	"github.com/insomniacslk/dhcp/dhcpv4"
 	"github.com/stretchr/testify/suite"
 
+	"github.com/talos-systems/talos/internal/app/networkd/pkg/address"
 	"github.com/talos-systems/talos/internal/pkg/runtime"
 	"github.com/talos-systems/talos/pkg/config/machine"
 	"github.com/talos-systems/talos/pkg/config/types/v1alpha1"
@@ -39,7 +41,7 @@ func (suite *NetworkdSuite) TestNetworkd() {
 
 func (suite *NetworkdSuite) TestHostname() {
 	var (
-		address      net.IP
+		addr         net.IP
 		domainname   string
 		err          error
 		hostname     string
@@ -50,31 +52,37 @@ func (suite *NetworkdSuite) TestHostname() {
 	nwd, err = New(nil)
 	suite.Require().NoError(err)
 
-	hostname, _, address, err = nwd.decideHostname()
+	// Default test
+	hostname, _, addr, err = nwd.decideHostname()
 	suite.Require().NoError(err)
 	suite.Assert().Equal("talos-127-0-1-1", hostname)
-	suite.Assert().Equal(address, net.ParseIP("127.0.1.1"))
+	suite.Assert().Equal(addr, net.ParseIP("127.0.1.1"))
 
+	// Static addressing tests
+
+	// Static with hostname
 	sampleConfig = sampleConfigFile()
 
 	nwd, err = New(sampleConfig)
 	suite.Require().NoError(err)
 
-	hostname, _, address, err = nwd.decideHostname()
+	hostname, _, addr, err = nwd.decideHostname()
 	suite.Require().NoError(err)
 	suite.Assert().Equal("myhostname", hostname)
-	suite.Assert().Equal(address, net.ParseIP("192.168.0.10"))
+	suite.Assert().Equal(addr, net.ParseIP("192.168.0.10"))
 
+	// Static for computed hostname ( talos-ip )
 	sampleConfig.Machine().Network().SetHostname("")
 
 	nwd, err = New(sampleConfig)
 	suite.Require().NoError(err)
 
-	hostname, _, address, err = nwd.decideHostname()
+	hostname, _, addr, err = nwd.decideHostname()
 	suite.Require().NoError(err)
 	suite.Assert().Equal("talos-192-168-0-10", hostname)
-	suite.Assert().Equal(address, net.ParseIP("192.168.0.10"))
+	suite.Assert().Equal(addr, net.ParseIP("192.168.0.10"))
 
+	// Static for hostname too long
 	sampleConfig.Machine().Network().SetHostname("somereallyreallyreallylongstringthathasmorethan63charactersbecauseweneedtotestit")
 
 	nwd, err = New(sampleConfig)
@@ -84,6 +92,7 @@ func (suite *NetworkdSuite) TestHostname() {
 	_, _, _, err = nwd.decideHostname()
 	suite.Require().Error(err)
 
+	// Static for hostname vs domain name
 	sampleConfig.Machine().Network().SetHostname("dadjokes.biz.dev.com.org.io")
 
 	nwd, err = New(sampleConfig)
@@ -93,6 +102,49 @@ func (suite *NetworkdSuite) TestHostname() {
 	suite.Require().NoError(err)
 	suite.Assert().Equal("dadjokes", hostname)
 	suite.Assert().Equal("biz.dev.com.org.io", domainname)
+
+	// DHCP addressing tests
+
+	// DHCP with OptionHostName
+	nwd, err = New(dhcpConfigFile())
+	suite.Require().NoError(err)
+
+	nwd.Interfaces["eth0"].AddressMethod = []address.Addressing{
+		&address.DHCP{
+			Ack: &dhcpv4.DHCPv4{
+				YourIPAddr: net.ParseIP("192.168.0.11"),
+				Options: dhcpv4.Options{
+					uint8(dhcpv4.OptionHostName):   []byte("evenbetterdadjokes"),
+					uint8(dhcpv4.OptionSubnetMask): []byte{255, 255, 255, 0},
+				},
+			},
+		},
+	}
+
+	hostname, _, addr, err = nwd.decideHostname()
+	suite.Require().NoError(err)
+	suite.Assert().Equal("evenbetterdadjokes", hostname)
+	suite.Assert().Equal(addr, net.ParseIP("192.168.0.11"))
+
+	// DHCP without OptionHostNAme
+	nwd, err = New(dhcpConfigFile())
+	suite.Require().NoError(err)
+
+	nwd.Interfaces["eth0"].AddressMethod = []address.Addressing{
+		&address.DHCP{
+			Ack: &dhcpv4.DHCPv4{
+				YourIPAddr: net.ParseIP("192.168.0.11"),
+				Options: dhcpv4.Options{
+					uint8(dhcpv4.OptionSubnetMask): []byte{255, 255, 255, 0},
+				},
+			},
+		},
+	}
+
+	hostname, _, addr, err = nwd.decideHostname()
+	suite.Require().NoError(err)
+	suite.Assert().Equal("talos-192-168-0-11", hostname)
+	suite.Assert().Equal(addr, net.ParseIP("192.168.0.11"))
 }
 
 func sampleConfigFile() runtime.Configurator {
@@ -120,3 +172,17 @@ func sampleConfigFile() runtime.Configurator {
 		},
 	}
 }
+
+func dhcpConfigFile() runtime.Configurator {
+	return &v1alpha1.Config{
+		MachineConfig: &v1alpha1.MachineConfig{
+			MachineNetwork: &v1alpha1.NetworkConfig{
+				NetworkInterfaces: []machine.Device{
+					{
+						Interface: "eth0",
+					},
+				},
+			},
+		},
+	}
+}