diff --git a/CHANGELOG.md b/CHANGELOG.md
index bbade74d26..4a287c4bf1 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -6,7 +6,8 @@ FEATURES:
 
 IMPROVEMENTS:
 * Control Plane
-  * Bump `consul-k8s-control-plane` UBI images for OpenShift to use base image `ubi-minimal:8.5`: [[GH-922](https://github.com/hashicorp/consul-k8s/pull/922)]
+  * Bump `consul-k8s-control-plane` UBI images for OpenShift to use base image `ubi-minimal:8.5`. [[GH-922](https://github.com/hashicorp/consul-k8s/pull/922)]
+  * Support the value `$POD_NAME` for the annotation `consul.hashicorp.com/service-tags` that will now be interpolated and set to the pod name. [[GH-931](https://github.com/hashicorp/consul-k8s/pull/931)]
  
 
 ## 0.38.0 (December 08, 2021)
diff --git a/control-plane/connect-inject/endpoints_controller.go b/control-plane/connect-inject/endpoints_controller.go
index 78b1748d4b..1712967308 100644
--- a/control-plane/connect-inject/endpoints_controller.go
+++ b/control-plane/connect-inject/endpoints_controller.go
@@ -416,15 +416,7 @@ func (r *EndpointsController) createServiceRegistrations(pod corev1.Pod, service
 			meta[strings.TrimPrefix(k, annotationMeta)] = v
 		}
 	}
-
-	var tags []string
-	if raw, ok := pod.Annotations[annotationTags]; ok && raw != "" {
-		tags = strings.Split(raw, ",")
-	}
-	// Get the tags from the deprecated tags annotation and combine.
-	if raw, ok := pod.Annotations[annotationConnectTags]; ok && raw != "" {
-		tags = append(tags, strings.Split(raw, ",")...)
-	}
+	tags := consulTags(pod)
 
 	service := &api.AgentServiceRegistration{
 		ID:        serviceID,
@@ -433,9 +425,7 @@ func (r *EndpointsController) createServiceRegistrations(pod corev1.Pod, service
 		Address:   pod.Status.PodIP,
 		Meta:      meta,
 		Namespace: r.consulNamespace(pod.Namespace),
-	}
-	if len(tags) > 0 {
-		service.Tags = tags
+		Tags:      tags,
 	}
 
 	proxyServiceName := getProxyServiceName(pod, serviceEndpoints)
@@ -496,9 +486,7 @@ func (r *EndpointsController) createServiceRegistrations(pod corev1.Pod, service
 				AliasService: serviceID,
 			},
 		},
-	}
-	if len(tags) > 0 {
-		proxyService.Tags = tags
+		Tags: tags,
 	}
 
 	// A user can enable/disable tproxy for an entire namespace.
@@ -1034,3 +1022,29 @@ func isLabeledIgnore(labels map[string]string) bool {
 
 	return shouldIgnore && labelExists && err == nil
 }
+
+// consulTags returns tags that should be added to the Consul service and proxy registrations.
+func consulTags(pod corev1.Pod) []string {
+	var tags []string
+	if raw, ok := pod.Annotations[annotationTags]; ok && raw != "" {
+		tags = strings.Split(raw, ",")
+	}
+	// Get the tags from the deprecated tags annotation and combine.
+	if raw, ok := pod.Annotations[annotationConnectTags]; ok && raw != "" {
+		tags = append(tags, strings.Split(raw, ",")...)
+	}
+
+	var interpolatedTags []string
+	for _, t := range tags {
+		// Support light interpolation to preserve backwards compatibility where tags could
+		// be environment variables.
+		// Right now the only string we interpolate is $POD_NAME since that's all
+		// users have asked for as of now. More can be added here in the future.
+		if t == "$POD_NAME" {
+			t = pod.Name
+		}
+		interpolatedTags = append(interpolatedTags, t)
+	}
+
+	return interpolatedTags
+}
diff --git a/control-plane/connect-inject/endpoints_controller_test.go b/control-plane/connect-inject/endpoints_controller_test.go
index de021ec198..846c1c434e 100644
--- a/control-plane/connect-inject/endpoints_controller_test.go
+++ b/control-plane/connect-inject/endpoints_controller_test.go
@@ -886,8 +886,8 @@ func TestReconcileCreateEndpoint(t *testing.T) {
 				pod1.Annotations[annotationService] = "different-consul-svc-name"
 				pod1.Annotations[fmt.Sprintf("%sname", annotationMeta)] = "abc"
 				pod1.Annotations[fmt.Sprintf("%sversion", annotationMeta)] = "2"
-				pod1.Annotations[annotationTags] = "abc,123"
-				pod1.Annotations[annotationConnectTags] = "def,456"
+				pod1.Annotations[annotationTags] = "abc,123,$POD_NAME"
+				pod1.Annotations[annotationConnectTags] = "def,456,$POD_NAME"
 				pod1.Annotations[annotationUpstreams] = "upstream1:1234"
 				pod1.Annotations[annotationEnableMetrics] = "true"
 				pod1.Annotations[annotationPrometheusScrapePort] = "12345"
@@ -930,7 +930,7 @@ func TestReconcileCreateEndpoint(t *testing.T) {
 						MetaKeyKubeNS:          "default",
 						MetaKeyManagedBy:       managedByValue,
 					},
-					ServiceTags: []string{"abc", "123", "def", "456"},
+					ServiceTags: []string{"abc", "123", "pod1", "def", "456", "pod1"},
 				},
 			},
 			expectedProxySvcInstances: []*api.CatalogService{
@@ -963,7 +963,7 @@ func TestReconcileCreateEndpoint(t *testing.T) {
 						MetaKeyKubeNS:          "default",
 						MetaKeyManagedBy:       managedByValue,
 					},
-					ServiceTags: []string{"abc", "123", "def", "456"},
+					ServiceTags: []string{"abc", "123", "pod1", "def", "456", "pod1"},
 				},
 			},
 			expectedAgentHealthChecks: []*api.AgentCheck{