diff --git a/nova/api/metadata/base.py b/nova/api/metadata/base.py
index d9c3bb250f24..e3e25fe54115 100644
--- a/nova/api/metadata/base.py
+++ b/nova/api/metadata/base.py
@@ -528,9 +528,10 @@ class InstanceMetadata(object):
         return self._check_version(required, requested, OPENSTACK_VERSIONS)
 
     def _get_hostname(self):
-        return "%s%s%s" % (self.instance.hostname,
-                           '.' if CONF.dhcp_domain else '',
-                           CONF.dhcp_domain)
+        if CONF.dhcp_domain:
+            return '.'.join([self.instance.hostname, CONF.dhcp_domain])
+
+        return self.instance.hostname
 
     def lookup(self, path):
         if path == "" or path[0] != "/":
diff --git a/nova/tests/functional/test_metadata.py b/nova/tests/functional/test_metadata.py
index d1d664c07329..187d3cca7d5e 100644
--- a/nova/tests/functional/test_metadata.py
+++ b/nova/tests/functional/test_metadata.py
@@ -59,7 +59,7 @@ class MetadataTest(test.TestCase):
                 projects=[])
         instance = objects.Instance(ctxt, flavor=flavor, vcpus=1,
                                     memory_mb=256, root_gb=0, ephemeral_gb=0,
-                                    project_id='fake')
+                                    project_id='fake', hostname='test')
         instance.create()
 
         # NOTE(mikal): We could create a network and a fixed IP here, but it
@@ -100,6 +100,9 @@ class MetadataTest(test.TestCase):
         url = '%sopenstack/latest/meta_data.json' % self.md_url
         res = requests.request('GET', url, timeout=5)
         self.assertEqual(200, res.status_code)
+        j = jsonutils.loads(res.text)
+        self.assertIn('hostname', j)
+        self.assertEqual('test.novalocal', j['hostname'])
 
     def test_lookup_external_service(self):
         self.flags(
diff --git a/nova/tests/unit/test_metadata.py b/nova/tests/unit/test_metadata.py
index 43fa5473bd25..d8fe32395601 100644
--- a/nova/tests/unit/test_metadata.py
+++ b/nova/tests/unit/test_metadata.py
@@ -85,7 +85,7 @@ def fake_inst_obj(context):
         vcpus=1,
         fixed_ips=[],
         root_device_name='/dev/sda1',
-        hostname='test.novadomain',
+        hostname='test',
         display_name='my_displayname',
         metadata={},
         device_metadata=fake_metadata_objects(),
@@ -310,11 +310,19 @@ class MetadataTestCase(test.TestCase):
         self.flags(use_neutron=True)
         self._test_security_groups()
 
-    def test_local_hostname_fqdn(self):
+    def test_local_hostname(self):
+        self.flags(dhcp_domain=None)
         md = fake_InstanceMetadata(self, self.instance.obj_clone())
         data = md.get_ec2_metadata(version='2009-04-04')
         self.assertEqual(data['meta-data']['local-hostname'],
-            "%s.%s" % (self.instance['hostname'], CONF.dhcp_domain))
+            self.instance['hostname'])
+
+    def test_local_hostname_fqdn(self):
+        self.flags(dhcp_domain='fakedomain')
+        md = fake_InstanceMetadata(self, self.instance.obj_clone())
+        data = md.get_ec2_metadata(version='2009-04-04')
+        self.assertEqual('%s.fakedomain' % self.instance['hostname'],
+                         data['meta-data']['local-hostname'])
 
     def test_format_instance_mapping(self):
         # Make sure that _format_instance_mappings works.
diff --git a/releasenotes/notes/bug-1824813-4441265dc805e792.yaml b/releasenotes/notes/bug-1824813-4441265dc805e792.yaml
new file mode 100644
index 000000000000..2f7de43e52b7
--- /dev/null
+++ b/releasenotes/notes/bug-1824813-4441265dc805e792.yaml
@@ -0,0 +1,6 @@
+---
+fixes:
+  - |
+    Unsetting '[DEFAULT] dhcp_domain' will now correctly result in the metadata
+    service/config drive providing an instance hostname of '${hostname}' instead
+    of '${hostname}None', as was previously seen.