diff --git a/lxc_template.go b/lxc_template.go
index 8e6c6ef1ea..a8e11967d1 100644
--- a/lxc_template.go
+++ b/lxc_template.go
@@ -6,13 +6,6 @@ import (
 )
 
 const LxcTemplate = `
-# hostname
-{{if .Config.Hostname}}
-lxc.utsname = {{.Config.Hostname}}
-{{else}}
-lxc.utsname = {{.Id}}
-{{end}}
-
 {{if .Config.NetworkDisabled}}
 # network is disabled (-n=false)
 lxc.network.type = empty
diff --git a/lxc_template_unit_test.go b/lxc_template_unit_test.go
index ccdfec8890..f71f1dd6f5 100644
--- a/lxc_template_unit_test.go
+++ b/lxc_template_unit_test.go
@@ -29,7 +29,6 @@ func TestLXCConfig(t *testing.T) {
 	container := &Container{
 		root: root,
 		Config: &Config{
-			Hostname:        "foobar",
 			Memory:          int64(mem),
 			CpuShares:       int64(cpu),
 			NetworkDisabled: true,
@@ -41,7 +40,6 @@ func TestLXCConfig(t *testing.T) {
 	if err := container.generateLXCConfig(); err != nil {
 		t.Fatal(err)
 	}
-	grepFile(t, container.lxcConfigPath(), "lxc.utsname = foobar")
 	grepFile(t, container.lxcConfigPath(),
 		fmt.Sprintf("lxc.cgroup.memory.limit_in_bytes = %d", mem))
 	grepFile(t, container.lxcConfigPath(),
diff --git a/sysinit/sysinit.go b/sysinit/sysinit.go
index 220f446d62..d6ba3a5d83 100644
--- a/sysinit/sysinit.go
+++ b/sysinit/sysinit.go
@@ -26,6 +26,14 @@ type DockerInitArgs struct {
 	args       []string
 }
 
+func setupHostname(args *DockerInitArgs) error {
+	hostname := getEnv(args, "HOSTNAME")
+	if hostname == "" {
+		return nil
+	}
+	return syscall.Sethostname([]byte(hostname))
+}
+
 // Setup networking
 func setupNetworking(args *DockerInitArgs) error {
 	if args.gateway == "" {
@@ -132,9 +140,23 @@ func setupEnv(args *DockerInitArgs) {
 	}
 }
 
+func getEnv(args *DockerInitArgs, key string) string {
+	for _, kv := range args.env {
+		parts := strings.SplitN(kv, "=", 2)
+		if parts[0] == key && len(parts) == 2 {
+			return parts[1]
+		}
+	}
+	return ""
+}
+
 func executeProgram(args *DockerInitArgs) error {
 	setupEnv(args)
 
+	if err := setupHostname(args); err != nil {
+		return err
+	}
+
 	if err := setupNetworking(args); err != nil {
 		return err
 	}