diff --git a/files/image_config/hostname/hostname-config.sh b/files/image_config/hostname/hostname-config.sh
index eec7c2f732dc..6cb8f73cf4af 100755
--- a/files/image_config/hostname/hostname-config.sh
+++ b/files/image_config/hostname/hostname-config.sh
@@ -6,6 +6,11 @@ HOSTNAME=`sonic-cfggen -d -v DEVICE_METADATA[\'localhost\'][\'hostname\']`
 echo $HOSTNAME > /etc/hostname
 hostname -F /etc/hostname
 
-sed -i "/\s$CURRENT_HOSTNAME$/d" /etc/hosts
+# Remove the old hostname entry from hosts file.
+# But, 'localhost' entry is used by multiple applications. Don't remove it altogether.
+if [ $CURRENT_HOSTNAME  != "localhost" ] || [ $CURRENT_HOSTNAME == $HOSTNAME ] ;  then
+ sed -i "/\s$CURRENT_HOSTNAME$/d" /etc/hosts
+fi
+
 echo "127.0.0.1 $HOSTNAME" >> /etc/hosts