diff --git a/internal/gatewayapi/listener.go b/internal/gatewayapi/listener.go
index 4d6fe26680..3ede5ae988 100644
--- a/internal/gatewayapi/listener.go
+++ b/internal/gatewayapi/listener.go
@@ -9,6 +9,7 @@ import (
 	"errors"
 	"fmt"
 	"math"
+	"net"
 	"strings"
 
 	"github.com/google/cel-go/cel"
@@ -24,7 +25,7 @@ import (
 	"github.com/envoyproxy/gateway/internal/ir"
 	"github.com/envoyproxy/gateway/internal/utils"
 	"github.com/envoyproxy/gateway/internal/utils/naming"
-	"github.com/envoyproxy/gateway/internal/utils/net"
+	netutils "github.com/envoyproxy/gateway/internal/utils/net"
 	"github.com/envoyproxy/gateway/internal/xds/bootstrap"
 )
 
@@ -105,10 +106,10 @@ func (t *Translator) ProcessListeners(gateways []*GatewayContext, xdsIR resource
 				continue
 			}
 
-			address := net.IPv4ListenerAddress
+			address := netutils.IPv4ListenerAddress
 			ipFamily := getEnvoyIPFamily(gateway.envoyProxy)
 			if ipFamily != nil && (*ipFamily == egv1a1.IPv6 || *ipFamily == egv1a1.DualStack) {
-				address = net.IPv6ListenerAddress
+				address = netutils.IPv6ListenerAddress
 			}
 
 			// Add the listener to the Xds IR
@@ -434,14 +435,14 @@ func buildListenerMetadata(listener *ListenerContext, gateway *GatewayContext) *
 func (t *Translator) processProxyReadyListener(xdsIR *ir.Xds, envoyProxy *egv1a1.EnvoyProxy) {
 	var (
 		ipFamily = egv1a1.IPv4
-		address  = net.IPv4ListenerAddress
+		address  = netutils.IPv4ListenerAddress
 	)
 
 	if envoyProxy != nil && envoyProxy.Spec.IPFamily != nil {
 		ipFamily = *envoyProxy.Spec.IPFamily
 	}
 	if ipFamily == egv1a1.IPv6 || ipFamily == egv1a1.DualStack {
-		address = net.IPv6ListenerAddress
+		address = netutils.IPv6ListenerAddress
 	}
 
 	xdsIR.ReadyListener = &ir.ReadyListener{
@@ -835,12 +836,19 @@ func (t *Translator) processBackendRefs(name string, backendCluster egv1a1.Backe
 }
 
 func destinationSettingFromHostAndPort(name, host string, port uint32) []*ir.DestinationSetting {
+	// check if host is an IP address or a hostname
+	addressType := ir.FQDN
+	if net.ParseIP(host) != nil {
+		addressType = ir.IP
+	}
+
 	return []*ir.DestinationSetting{
 		{
-			Name:      name,
-			Weight:    ptr.To[uint32](1),
-			Protocol:  ir.GRPC,
-			Endpoints: []*ir.DestinationEndpoint{ir.NewDestEndpoint(host, port, false, nil)},
+			Name:        name,
+			Weight:      ptr.To[uint32](1),
+			Protocol:    ir.GRPC,
+			AddressType: ptr.To(addressType),
+			Endpoints:   []*ir.DestinationEndpoint{ir.NewDestEndpoint(host, port, false, nil)},
 		},
 	}
 }
diff --git a/internal/gatewayapi/testdata/envoyproxy-accesslog-cel.out.yaml b/internal/gatewayapi/testdata/envoyproxy-accesslog-cel.out.yaml
index 477102c91c..078d94a6ce 100644
--- a/internal/gatewayapi/testdata/envoyproxy-accesslog-cel.out.yaml
+++ b/internal/gatewayapi/testdata/envoyproxy-accesslog-cel.out.yaml
@@ -179,7 +179,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_0_1
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_0_1/backend/-1
diff --git a/internal/gatewayapi/testdata/envoyproxy-accesslog-types.out.yaml b/internal/gatewayapi/testdata/envoyproxy-accesslog-types.out.yaml
index 1172d476eb..a3f6cc0073 100644
--- a/internal/gatewayapi/testdata/envoyproxy-accesslog-types.out.yaml
+++ b/internal/gatewayapi/testdata/envoyproxy-accesslog-types.out.yaml
@@ -445,7 +445,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_2_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_2_3/backend/-1
@@ -464,7 +465,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_3_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_3_3/backend/-1
@@ -483,7 +485,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_4_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_4_3/backend/-1
diff --git a/internal/gatewayapi/testdata/envoyproxy-accesslog-with-traffic.out.yaml b/internal/gatewayapi/testdata/envoyproxy-accesslog-with-traffic.out.yaml
index 79f5dc4310..e457ac11ee 100644
--- a/internal/gatewayapi/testdata/envoyproxy-accesslog-with-traffic.out.yaml
+++ b/internal/gatewayapi/testdata/envoyproxy-accesslog-with-traffic.out.yaml
@@ -299,7 +299,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_0_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_0_3/backend/-1
diff --git a/internal/gatewayapi/testdata/envoyproxy-accesslog-without-format.out.yaml b/internal/gatewayapi/testdata/envoyproxy-accesslog-without-format.out.yaml
index 596392106b..53e836c775 100644
--- a/internal/gatewayapi/testdata/envoyproxy-accesslog-without-format.out.yaml
+++ b/internal/gatewayapi/testdata/envoyproxy-accesslog-without-format.out.yaml
@@ -214,7 +214,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_0_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_0_3/backend/-1
diff --git a/internal/gatewayapi/testdata/envoyproxy-accesslog.out.yaml b/internal/gatewayapi/testdata/envoyproxy-accesslog.out.yaml
index a1a806236d..33e103ae05 100644
--- a/internal/gatewayapi/testdata/envoyproxy-accesslog.out.yaml
+++ b/internal/gatewayapi/testdata/envoyproxy-accesslog.out.yaml
@@ -220,7 +220,8 @@ xdsIR:
             namespace: envoy-gateway-system
           name: accesslog_otel_0_3
           settings:
-          - endpoints:
+          - addressType: FQDN
+            endpoints:
             - host: otel-collector.monitoring.svc.cluster.local
               port: 4317
             name: accesslog_otel_0_3/backend/-1
diff --git a/internal/gatewayapi/testdata/gateway-with-infrastructure-parametersref.out.yaml b/internal/gatewayapi/testdata/gateway-with-infrastructure-parametersref.out.yaml
index 97ef903057..ed7c237730 100644
--- a/internal/gatewayapi/testdata/gateway-with-infrastructure-parametersref.out.yaml
+++ b/internal/gatewayapi/testdata/gateway-with-infrastructure-parametersref.out.yaml
@@ -185,7 +185,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1
diff --git a/internal/gatewayapi/testdata/gateway-with-invalid-infrastructure-parametersref-fallback.out.yaml b/internal/gatewayapi/testdata/gateway-with-invalid-infrastructure-parametersref-fallback.out.yaml
index d87d3b9131..68ae922686 100644
--- a/internal/gatewayapi/testdata/gateway-with-invalid-infrastructure-parametersref-fallback.out.yaml
+++ b/internal/gatewayapi/testdata/gateway-with-invalid-infrastructure-parametersref-fallback.out.yaml
@@ -185,7 +185,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1
diff --git a/internal/gatewayapi/testdata/tracing-merged-multiple-routes.out.yaml b/internal/gatewayapi/testdata/tracing-merged-multiple-routes.out.yaml
index b5b61d01f0..b307872bb3 100644
--- a/internal/gatewayapi/testdata/tracing-merged-multiple-routes.out.yaml
+++ b/internal/gatewayapi/testdata/tracing-merged-multiple-routes.out.yaml
@@ -350,7 +350,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1
diff --git a/internal/gatewayapi/testdata/tracing-multiple-routes.out.yaml b/internal/gatewayapi/testdata/tracing-multiple-routes.out.yaml
index f1c54f8ac1..805cbdb432 100644
--- a/internal/gatewayapi/testdata/tracing-multiple-routes.out.yaml
+++ b/internal/gatewayapi/testdata/tracing-multiple-routes.out.yaml
@@ -321,7 +321,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1
@@ -410,7 +411,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1
diff --git a/internal/gatewayapi/testdata/tracing-sampling-fraction.out.yaml b/internal/gatewayapi/testdata/tracing-sampling-fraction.out.yaml
index 062584d68a..5124564f80 100644
--- a/internal/gatewayapi/testdata/tracing-sampling-fraction.out.yaml
+++ b/internal/gatewayapi/testdata/tracing-sampling-fraction.out.yaml
@@ -352,7 +352,8 @@ xdsIR:
           namespace: envoy-gateway
         name: tracing
         settings:
-        - endpoints:
+        - addressType: FQDN
+          endpoints:
           - host: otel-collector.monitoring.svc.cluster.local
             port: 4317
           name: tracing/backend/-1