diff --git a/internal/gatewayapi/backend.go b/internal/gatewayapi/backend.go
index ec61e89ffc..bd5aedc67a 100644
--- a/internal/gatewayapi/backend.go
+++ b/internal/gatewayapi/backend.go
@@ -17,7 +17,6 @@ import (
 
 	egv1a1 "github.com/envoyproxy/gateway/api/v1alpha1"
 	"github.com/envoyproxy/gateway/internal/gatewayapi/status"
-	"github.com/envoyproxy/gateway/internal/utils/net"
 )
 
 func (t *Translator) ProcessBackends(backends []*egv1a1.Backend, backendTLSPolicies []*gwapiv1.BackendTLSPolicy) []*egv1a1.Backend {
@@ -69,17 +68,9 @@ func validateBackend(backend *egv1a1.Backend, backendTLSPolicies []*gwapiv1.Back
 				return routeErr
 			}
 		} else if ep.IP != nil {
-			ip, err := netip.ParseAddr(ep.IP.Address)
-			if err != nil {
-				return status.NewRouteStatusError(
-					fmt.Errorf("IP address %s is invalid", ep.IP.Address),
-					status.RouteReasonInvalidAddress,
-				)
-			} else if ip.IsLoopback() && !runningOnHost {
-				return status.NewRouteStatusError(
-					fmt.Errorf("IP address %s in the loopback range is only supported when using the Host infrastructure", ep.IP.Address),
-					status.RouteReasonInvalidAddress,
-				)
+			routeErr := validateIP(ep.IP, runningOnHost)
+			if routeErr != nil {
+				return routeErr
 			}
 		}
 	}
@@ -170,7 +161,7 @@ func validateBackendTLSSettings(backend *egv1a1.Backend, backendTLSPolicies []*g
 	return nil
 }
 
-func validateHostname(hostname, typeName string, allowLocalhost bool) *status.RouteStatusError {
+func validateHostname(hostname, typeName string, runningOnHost bool) *status.RouteStatusError {
 	// must be a valid hostname
 	if errs := validation.IsDNS1123Subdomain(hostname); errs != nil {
 		return status.NewRouteStatusError(
@@ -178,8 +169,9 @@ func validateHostname(hostname, typeName string, allowLocalhost bool) *status.Ro
 			status.RouteReasonInvalidAddress,
 		)
 	}
-	isLocalHostname := allowLocalhost && hostname == net.DefaultLocalAddress
-	if !isLocalHostname && len(strings.Split(hostname, ".")) < 2 {
+	// Host mode is a dev configuration, so we do not enforce domain rules.
+	// Doing so would interfere with docker hostnames (e.g. "jaeger") or literal IPs.
+	if !runningOnHost && len(strings.Split(hostname, ".")) < 2 {
 		return status.NewRouteStatusError(
 			fmt.Errorf("hostname %s should be a domain with at least two segments separated by dots", hostname),
 			status.RouteReasonInvalidAddress,
@@ -195,3 +187,19 @@ func validateHostname(hostname, typeName string, allowLocalhost bool) *status.Ro
 
 	return nil
 }
+
+func validateIP(epIP *egv1a1.IPEndpoint, runningOnHost bool) status.Error {
+	ip, err := netip.ParseAddr(epIP.Address)
+	if err != nil {
+		return status.NewRouteStatusError(
+			fmt.Errorf("IP address %s is invalid", epIP.Address),
+			status.RouteReasonInvalidAddress,
+		)
+	} else if ip.IsLoopback() && !runningOnHost {
+		return status.NewRouteStatusError(
+			fmt.Errorf("IP address %s in the loopback range is only supported when using the Host infrastructure", epIP.Address),
+			status.RouteReasonInvalidAddress,
+		)
+	}
+	return nil
+}
diff --git a/internal/gatewayapi/backend_test.go b/internal/gatewayapi/backend_test.go
new file mode 100644
index 0000000000..3f81402be0
--- /dev/null
+++ b/internal/gatewayapi/backend_test.go
@@ -0,0 +1,100 @@
+// Copyright Envoy Gateway Authors
+// SPDX-License-Identifier: Apache-2.0
+// The full text of the Apache license is available in the LICENSE file at
+// the root of the repo.
+
+package gatewayapi
+
+import (
+	"testing"
+
+	"github.com/stretchr/testify/require"
+
+	egv1a1 "github.com/envoyproxy/gateway/api/v1alpha1"
+)
+
+func TestValidateHostnameRunningOnHost(t *testing.T) {
+	cases := []struct {
+		name          string
+		hostname      string
+		runningOnHost bool
+		expectedErr   string
+	}{
+		{
+			name:          "domain ok in any case",
+			hostname:      "httpbin.org",
+			runningOnHost: false,
+		},
+		{
+			name:          "single label not ok when in k8s",
+			hostname:      "otel-tui",
+			runningOnHost: false,
+			expectedErr:   "hostname otel-tui should be a domain with at least two segments separated by dots",
+		},
+		{
+			name:          "single label ok when running on host",
+			hostname:      "otel-tui",
+			runningOnHost: true,
+		},
+		{
+			name:          "IP not ok in any case",
+			hostname:      "127.0.0.1",
+			runningOnHost: true,
+			expectedErr:   "hostname 127.0.0.1 is an IP address",
+		},
+	}
+
+	for _, tc := range cases {
+		t.Run(tc.name, func(t *testing.T) {
+			err := validateHostname(tc.hostname, "hostname", tc.runningOnHost)
+			if tc.expectedErr == "" {
+				require.Nil(t, err)
+				return
+			}
+			require.EqualError(t, err, tc.expectedErr)
+		})
+	}
+}
+
+func TestValidateIPRunningOnHost(t *testing.T) {
+	cases := []struct {
+		name          string
+		address       string
+		runningOnHost bool
+		expectedErr   string
+	}{
+		{
+			name:          "address ok in any case",
+			address:       "10.0.0.1",
+			runningOnHost: false,
+		},
+		{
+			name:          "loopback not ok when in k8s",
+			address:       "127.0.0.1",
+			runningOnHost: false,
+			expectedErr:   "IP address 127.0.0.1 in the loopback range is only supported when using the Host infrastructure",
+		},
+		{
+			name:          "loopback ok when running on host",
+			address:       "127.0.0.1",
+			runningOnHost: true,
+		},
+		{
+			name:          "invalid IP not ok in any case",
+			address:       "300.0.0.1",
+			runningOnHost: true,
+			expectedErr:   "IP address 300.0.0.1 is invalid",
+		},
+	}
+
+	for _, tc := range cases {
+		t.Run(tc.name, func(t *testing.T) {
+			err := validateIP(&egv1a1.IPEndpoint{Address: tc.address}, tc.runningOnHost)
+			if tc.expectedErr == "" {
+				require.Nil(t, err)
+				return
+			}
+			require.EqualError(t, err, tc.expectedErr)
+		})
+	}
+}
diff --git a/release-notes/current.yaml b/release-notes/current.yaml
index 3271a4f907..792dc71653 100644
--- a/release-notes/current.yaml
+++ b/release-notes/current.yaml
@@ -10,6 +10,7 @@ security updates: |
 new features: |
 
 bug fixes: |
+  Allowed single-label backend hostnames when running with the Host infrastructure, enabling Docker Compose service names for telemetry backends.
 
 # Enhancements that improve performance.
 performance improvements: |