diff --git a/.changelog/16339.txt b/.changelog/16339.txt
new file mode 100644
index 000000000..cf44f010a
--- /dev/null
+++ b/.changelog/16339.txt
@@ -0,0 +1,3 @@
+```release-note:bug
+peering: Fix bug where services were incorrectly imported as connect-enabled.
+```
diff --git a/agent/consul/state/catalog.go b/agent/consul/state/catalog.go
index 4d6450136..39a40d9ca 100644
--- a/agent/consul/state/catalog.go
+++ b/agent/consul/state/catalog.go
@@ -900,12 +900,17 @@ func ensureServiceTxn(tx WriteTxn, idx uint64, node string, preserveIndexes bool
 			return fmt.Errorf("failed updating gateway mapping: %s", err)
 		}
 
+		if svc.PeerName == "" && sn.Name != "" {
+			if err := upsertKindServiceName(tx, idx, structs.ServiceKindConnectEnabled, sn); err != nil {
+				return fmt.Errorf("failed to persist service name as connect-enabled: %v", err)
+			}
+		}
+
+		// Update the virtual IP for the service
 		supported, err := virtualIPsSupported(tx, nil)
 		if err != nil {
 			return err
 		}
-
-		// Update the virtual IP for the service
 		if supported {
 			psn := structs.PeeredServiceName{Peer: svc.PeerName, ServiceName: sn}
 			vip, err := assignServiceVirtualIP(tx, idx, psn)
@@ -1964,6 +1969,24 @@ func (s *Store) deleteServiceTxn(tx WriteTxn, idx uint64, nodeName, serviceID st
 		return fmt.Errorf("Could not find any service %s: %s", svc.ServiceName, err)
 	}
 
+	// Cleanup ConnectEnabled for this service if none exist.
+	if svc.PeerName == "" && (svc.ServiceKind == structs.ServiceKindConnectProxy || svc.ServiceConnect.Native) {
+		service := svc.ServiceName
+		if svc.ServiceKind == structs.ServiceKindConnectProxy {
+			service = svc.ServiceProxy.DestinationServiceName
+		}
+		sn := structs.ServiceName{Name: service, EnterpriseMeta: svc.EnterpriseMeta}
+		connectEnabled, err := serviceHasConnectEnabledInstances(tx, sn.Name, &sn.EnterpriseMeta)
+		if err != nil {
+			return fmt.Errorf("failed to search for connect instances for service %q: %w", sn.Name, err)
+		}
+		if !connectEnabled {
+			if err := cleanupKindServiceName(tx, idx, sn, structs.ServiceKindConnectEnabled); err != nil {
+				return fmt.Errorf("failed to cleanup connect-enabled service name: %v", err)
+			}
+		}
+	}
+
 	if svc.PeerName == "" {
 		sn := structs.ServiceName{Name: svc.ServiceName, EnterpriseMeta: svc.EnterpriseMeta}
 		if err := cleanupGatewayWildcards(tx, idx, sn, false); err != nil {
@@ -3731,6 +3754,27 @@ func serviceHasConnectInstances(tx WriteTxn, serviceName string, entMeta *acl.En
 	return hasConnectInstance, hasNonConnectInstance, nil
 }
 
+// serviceHasConnectEnabledInstances returns whether the given service name
+// has a corresponding connect-proxy or connect-native instance.
+// This function is mostly a clone of `serviceHasConnectInstances`, but it has
+// an early return to improve performance and returns true if at least one
+// connect-native instance exists.
+func serviceHasConnectEnabledInstances(tx WriteTxn, serviceName string, entMeta *acl.EnterpriseMeta) (bool, error) {
+	query := Query{
+		Value:          serviceName,
+		EnterpriseMeta: *entMeta,
+	}
+
+	svc, err := tx.First(tableServices, indexConnect, query)
+	if err != nil {
+		return false, fmt.Errorf("failed service lookup: %w", err)
+	}
+	if svc != nil {
+		return true, nil
+	}
+	return false, nil
+}
+
 // updateGatewayService associates services with gateways after an eligible event
 // ie. Registering a service in a namespace targeted by a gateway
 func updateGatewayService(tx WriteTxn, idx uint64, mapping *structs.GatewayService) error {
diff --git a/agent/consul/state/catalog_test.go b/agent/consul/state/catalog_test.go
index d354b9b09..cef5ba0a0 100644
--- a/agent/consul/state/catalog_test.go
+++ b/agent/consul/state/catalog_test.go
@@ -8664,7 +8664,7 @@ func TestStateStore_EnsureService_ServiceNames(t *testing.T) {
 		},
 	}
 
-	var idx uint64
+	var idx, connectEnabledIdx uint64
 	testRegisterNode(t, s, idx, "node1")
 
 	for _, svc := range services {
@@ -8678,8 +8678,29 @@ func TestStateStore_EnsureService_ServiceNames(t *testing.T) {
 		require.Len(t, gotNames, 1)
 		require.Equal(t, svc.CompoundServiceName(), gotNames[0].Service)
 		require.Equal(t, svc.Kind, gotNames[0].Kind)
+		if svc.Kind == structs.ServiceKindConnectProxy {
+			connectEnabledIdx = idx
+		}
 	}
 
+	// A ConnectEnabled service should exist if a corresponding ConnectProxy or ConnectNative service exists.
+	verifyConnectEnabled := func(expectIdx uint64) {
+		gotIdx, gotNames, err := s.ServiceNamesOfKind(nil, structs.ServiceKindConnectEnabled)
+		require.NoError(t, err)
+		require.Equal(t, expectIdx, gotIdx)
+		require.Equal(t, []*KindServiceName{
+			{
+				Kind:    structs.ServiceKindConnectEnabled,
+				Service: structs.NewServiceName("foo", entMeta),
+				RaftIndex: structs.RaftIndex{
+					CreateIndex: connectEnabledIdx,
+					ModifyIndex: connectEnabledIdx,
+				},
+			},
+		}, gotNames)
+	}
+	verifyConnectEnabled(connectEnabledIdx)
+
 	// Register another ingress gateway and there should be two names under the kind index
 	newIngress := structs.NodeService{
 		Kind:           structs.ServiceKindIngressGateway,
@@ -8749,6 +8770,38 @@ func TestStateStore_EnsureService_ServiceNames(t *testing.T) {
 	require.NoError(t, err)
 	require.Equal(t, idx, gotIdx)
 	require.Empty(t, got)
+
+	// A ConnectEnabled entry should not be removed until all corresponding services are removed.
+	{
+		verifyConnectEnabled(connectEnabledIdx)
+		// Add a connect-native service.
+		idx++
+		require.NoError(t, s.EnsureService(idx, "node1", &structs.NodeService{
+			Kind:           structs.ServiceKindTypical,
+			ID:             "foo",
+			Service:        "foo",
+			Address:        "5.5.5.5",
+			Port:           5555,
+			EnterpriseMeta: *entMeta,
+			Connect: structs.ServiceConnect{
+				Native: true,
+			},
+		}))
+		verifyConnectEnabled(connectEnabledIdx)
+
+		// Delete the proxy. This should not clean up the entry, because we still have a
+		// connect-native service registered.
+		idx++
+		require.NoError(t, s.DeleteService(idx, "node1", "connect-proxy", entMeta, ""))
+		verifyConnectEnabled(connectEnabledIdx)
+
+		// Remove the connect-native service to clear out the connect-enabled entry.
+		require.NoError(t, s.DeleteService(idx, "node1", "foo", entMeta, ""))
+		gotIdx, gotNames, err := s.ServiceNamesOfKind(nil, structs.ServiceKindConnectEnabled)
+		require.NoError(t, err)
+		require.Equal(t, idx, gotIdx)
+		require.Empty(t, gotNames)
+	}
 }
 
 func assertMaxIndexes(t *testing.T, tx ReadTxn, expect map[string]uint64, skip ...string) {
diff --git a/agent/consul/state/peering.go b/agent/consul/state/peering.go
index 708b28848..491d4887a 100644
--- a/agent/consul/state/peering.go
+++ b/agent/consul/state/peering.go
@@ -770,88 +770,181 @@ func exportedServicesForPeerTxn(
 	maxIdx := peering.ModifyIndex
 
 	entMeta := structs.NodeEnterpriseMetaInPartition(peering.Partition)
-	idx, conf, err := getExportedServicesConfigEntryTxn(tx, ws, nil, entMeta)
+	idx, exportConf, err := getExportedServicesConfigEntryTxn(tx, ws, nil, entMeta)
 	if err != nil {
 		return 0, nil, fmt.Errorf("failed to fetch exported-services config entry: %w", err)
 	}
 	if idx > maxIdx {
 		maxIdx = idx
 	}
-	if conf == nil {
+	if exportConf == nil {
 		return maxIdx, &structs.ExportedServiceList{}, nil
 	}
 
 	var (
-		normalSet = make(map[structs.ServiceName]struct{})
-		discoSet  = make(map[structs.ServiceName]struct{})
+		// exportedServices will contain the listing of all service names that are being exported
+		// and will need to be queried for connect / discovery chain information.
+		exportedServices = make(map[structs.ServiceName]struct{})
+
+		// exportedConnectServices will contain the listing of all connect service names that are being exported.
+		exportedConnectServices = make(map[structs.ServiceName]struct{})
+
+		// namespaceConnectServices provides a listing of all connect service names for a particular partition+namespace pair.
+		namespaceConnectServices = make(map[acl.EnterpriseMeta]map[string]struct{})
+
+		// namespaceDiscoChains provides a listing of all disco chain names for a particular partition+namespace pair.
+		namespaceDiscoChains = make(map[acl.EnterpriseMeta]map[string]struct{})
 	)
 
-	// At least one of the following should be true for a name for it to
-	// replicate:
-	//
-	// - are a discovery chain by definition (service-router, service-splitter, service-resolver)
-	// - have an explicit sidecar kind=connect-proxy
-	// - use connect native mode
+	// Helper function for inserting data and auto-creating maps.
+	insertEntry := func(m map[acl.EnterpriseMeta]map[string]struct{}, entMeta acl.EnterpriseMeta, name string) {
+		names, ok := m[entMeta]
+		if !ok {
+			names = make(map[string]struct{})
+			m[entMeta] = names
+		}
+		names[name] = struct{}{}
+	}
 
-	for _, svc := range conf.Services {
+	// Build the set of all services that will be exported.
+	// Any possible namespace wildcards or "consul" services should be removed by this step.
+	for _, svc := range exportConf.Services {
 		// Prevent exporting the "consul" service.
 		if svc.Name == structs.ConsulServiceName {
 			continue
 		}
-		svcMeta := acl.NewEnterpriseMetaWithPartition(entMeta.PartitionOrDefault(), svc.Namespace)
+		svcEntMeta := acl.NewEnterpriseMetaWithPartition(entMeta.PartitionOrDefault(), svc.Namespace)
+		svcName := structs.NewServiceName(svc.Name, &svcEntMeta)
 
-		sawPeer := false
+		peerFound := false
 		for _, consumer := range svc.Consumers {
-			name := structs.NewServiceName(svc.Name, &svcMeta)
-
-			if _, ok := normalSet[name]; ok {
-				// Service was covered by a wildcard that was already accounted for
-				continue
+			if consumer.Peer == peering.Name {
+				peerFound = true
+				break
 			}
-			if consumer.Peer != peering.Name {
-				continue
-			}
-			sawPeer = true
+		}
+		// Only look for more information if the matching peer was found.
+		if !peerFound {
+			continue
+		}
 
-			if svc.Name != structs.WildcardSpecifier {
-				normalSet[name] = struct{}{}
+		// If this isn't a wildcard, we can simply add it to the list of services to watch and move to the next entry.
+		if svc.Name != structs.WildcardSpecifier {
+			exportedServices[svcName] = struct{}{}
+			continue
+		}
+
+		// If all services in the namespace are exported by the wildcard, query those service names.
+		idx, typicalServices, err := serviceNamesOfKindTxn(tx, ws, structs.ServiceKindTypical, svcEntMeta)
+		if err != nil {
+			return 0, nil, fmt.Errorf("failed to get typical service names: %w", err)
+		}
+		if idx > maxIdx {
+			maxIdx = idx
+		}
+		for _, sn := range typicalServices {
+			// Prevent exporting the "consul" service.
+			if sn.Service.Name != structs.ConsulServiceName {
+				exportedServices[sn.Service] = struct{}{}
 			}
 		}
 
-		// If the target peer is a consumer, and all services in the namespace are exported, query those service names.
-		if sawPeer && svc.Name == structs.WildcardSpecifier {
-			idx, typicalServices, err := serviceNamesOfKindTxn(tx, ws, structs.ServiceKindTypical, svcMeta)
-			if err != nil {
-				return 0, nil, fmt.Errorf("failed to get typical service names: %w", err)
-			}
-			if idx > maxIdx {
-				maxIdx = idx
-			}
-			for _, s := range typicalServices {
-				// Prevent exporting the "consul" service.
-				if s.Service.Name == structs.ConsulServiceName {
-					continue
-				}
-				normalSet[s.Service] = struct{}{}
-			}
-
-			// list all config entries of kind service-resolver, service-router, service-splitter?
-			idx, discoChains, err := listDiscoveryChainNamesTxn(tx, ws, nil, svcMeta)
-			if err != nil {
-				return 0, nil, fmt.Errorf("failed to get discovery chain names: %w", err)
-			}
-			if idx > maxIdx {
-				maxIdx = idx
-			}
-			for _, sn := range discoChains {
-				discoSet[sn] = struct{}{}
+		// List all config entries of kind service-resolver, service-router, service-splitter, because they
+		// will be exported as connect services.
+		idx, discoChains, err := listDiscoveryChainNamesTxn(tx, ws, nil, svcEntMeta)
+		if err != nil {
+			return 0, nil, fmt.Errorf("failed to get discovery chain names: %w", err)
+		}
+		if idx > maxIdx {
+			maxIdx = idx
+		}
+		for _, sn := range discoChains {
+			// Prevent exporting the "consul" service.
+			if sn.Name != structs.ConsulServiceName {
+				exportedConnectServices[sn] = struct{}{}
+				insertEntry(namespaceDiscoChains, svcEntMeta, sn.Name)
 			}
 		}
 	}
 
-	normal := maps.SliceOfKeys(normalSet)
-	disco := maps.SliceOfKeys(discoSet)
+	// At least one of the following should be true for a name to replicate it as a *connect* service:
+	// - are a discovery chain by definition (service-router, service-splitter, service-resolver)
+	// - have an explicit sidecar kind=connect-proxy
+	// - use connect native mode
+	// - are registered with a terminating gateway
+	populateConnectService := func(sn structs.ServiceName) error {
+		// Load all disco-chains in this namespace if we haven't already.
+		if _, ok := namespaceDiscoChains[sn.EnterpriseMeta]; !ok {
+			// Check to see if we have a discovery chain with the same name.
+			idx, chains, err := listDiscoveryChainNamesTxn(tx, ws, nil, sn.EnterpriseMeta)
+			if err != nil {
+				return fmt.Errorf("failed to get connect services: %w", err)
+			}
+			if idx > maxIdx {
+				maxIdx = idx
+			}
+			for _, sn := range chains {
+				insertEntry(namespaceDiscoChains, sn.EnterpriseMeta, sn.Name)
+			}
+		}
+		// Check to see if we have the connect service.
+		if _, ok := namespaceDiscoChains[sn.EnterpriseMeta][sn.Name]; ok {
+			exportedConnectServices[sn] = struct{}{}
+			// Do not early return because we have multiple watches that should be established.
+		}
 
+		// Load all services in this namespace if we haven't already.
+		if _, ok := namespaceConnectServices[sn.EnterpriseMeta]; !ok {
+			// This is more efficient than querying the service instance table.
+			idx, connectServices, err := serviceNamesOfKindTxn(tx, ws, structs.ServiceKindConnectEnabled, sn.EnterpriseMeta)
+			if err != nil {
+				return fmt.Errorf("failed to get connect services: %w", err)
+			}
+			if idx > maxIdx {
+				maxIdx = idx
+			}
+			for _, ksn := range connectServices {
+				insertEntry(namespaceConnectServices, sn.EnterpriseMeta, ksn.Service.Name)
+			}
+		}
+		// Check to see if we have the connect service.
+		if _, ok := namespaceConnectServices[sn.EnterpriseMeta][sn.Name]; ok {
+			exportedConnectServices[sn] = struct{}{}
+			// Do not early return because we have multiple watches that should be established.
+		}
+
+		// Check if the service is exposed via terminating gateways.
+		svcGateways, err := tx.Get(tableGatewayServices, indexService, sn)
+		if err != nil {
+			return fmt.Errorf("failed gateway lookup for %q: %w", sn.Name, err)
+		}
+		ws.Add(svcGateways.WatchCh())
+		for svc := svcGateways.Next(); svc != nil; svc = svcGateways.Next() {
+			gs, ok := svc.(*structs.GatewayService)
+			if !ok {
+				return fmt.Errorf("failed converting to GatewayService for %q", sn.Name)
+			}
+			if gs.GatewayKind == structs.ServiceKindTerminatingGateway {
+				exportedConnectServices[sn] = struct{}{}
+				break
+			}
+		}
+
+		return nil
+	}
+
+	// Perform queries and check if each service is connect-enabled.
+	for sn := range exportedServices {
+		// Do not query for data if we already know it's a connect service.
+		if _, ok := exportedConnectServices[sn]; ok {
+			continue
+		}
+		if err := populateConnectService(sn); err != nil {
+			return 0, nil, err
+		}
+	}
+
+	// Fetch the protocol / targets for connect services.
 	chainInfo := make(map[structs.ServiceName]structs.ExportedDiscoveryChainInfo)
 	populateChainInfo := func(svc structs.ServiceName) error {
 		if _, ok := chainInfo[svc]; ok {
@@ -899,21 +992,17 @@ func exportedServicesForPeerTxn(
 		return nil
 	}
 
-	for _, svc := range normal {
-		if err := populateChainInfo(svc); err != nil {
-			return 0, nil, err
-		}
-	}
-	for _, svc := range disco {
+	for svc := range exportedConnectServices {
 		if err := populateChainInfo(svc); err != nil {
 			return 0, nil, err
 		}
 	}
 
-	structs.ServiceList(normal).Sort()
+	sortedServices := maps.SliceOfKeys(exportedServices)
+	structs.ServiceList(sortedServices).Sort()
 
 	list := &structs.ExportedServiceList{
-		Services:    normal,
+		Services:    sortedServices,
 		DiscoChains: chainInfo,
 	}
 
diff --git a/agent/consul/state/peering_test.go b/agent/consul/state/peering_test.go
index dc8dd8974..f7232ca1a 100644
--- a/agent/consul/state/peering_test.go
+++ b/agent/consul/state/peering_test.go
@@ -1908,18 +1908,28 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 					},
 				},
 				{
+					// Should be exported as both a normal and disco chain (resolver).
 					Name: "mysql",
 					Consumers: []structs.ServiceConsumer{
 						{Peer: "my-peering"},
 					},
 				},
 				{
+					// Should be exported as both a normal and disco chain (connect-proxy).
 					Name: "redis",
 					Consumers: []structs.ServiceConsumer{
 						{Peer: "my-peering"},
 					},
 				},
 				{
+					// Should only be exported as a normal service.
+					Name: "prometheus",
+					Consumers: []structs.ServiceConsumer{
+						{Peer: "my-peering"},
+					},
+				},
+				{
+					// Should not be exported (different peer consumer)
 					Name: "mongo",
 					Consumers: []structs.ServiceConsumer{
 						{Peer: "my-other-peering"},
@@ -1932,12 +1942,37 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 		require.True(t, watchFired(ws))
 		ws = memdb.NewWatchSet()
 
+		// Register extra things so that disco chain entries appear.
+		lastIdx++
+		require.NoError(t, s.EnsureNode(lastIdx, &structs.Node{
+			Node: "node1", Address: "10.0.0.1",
+		}))
+		lastIdx++
+		require.NoError(t, s.EnsureService(lastIdx, "node1", &structs.NodeService{
+			Kind:    structs.ServiceKindConnectProxy,
+			ID:      "redis-sidecar-proxy",
+			Service: "redis-sidecar-proxy",
+			Port:    5005,
+			Proxy: structs.ConnectProxyConfig{
+				DestinationServiceName: "redis",
+			},
+		}))
+		ensureConfigEntry(t, &structs.ServiceResolverConfigEntry{
+			Kind:           structs.ServiceResolver,
+			Name:           "mysql",
+			EnterpriseMeta: *defaultEntMeta,
+		})
+
 		expect := &structs.ExportedServiceList{
 			Services: []structs.ServiceName{
 				{
 					Name:           "mysql",
 					EnterpriseMeta: *defaultEntMeta,
 				},
+				{
+					Name:           "prometheus",
+					EnterpriseMeta: *defaultEntMeta,
+				},
 				{
 					Name:           "redis",
 					EnterpriseMeta: *defaultEntMeta,
@@ -1998,17 +2033,21 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 		ws = memdb.NewWatchSet()
 
 		expect := &structs.ExportedServiceList{
+			// Only "billing" shows up, because there are no other service instances running,
+			// and "consul" is never exported.
 			Services: []structs.ServiceName{
 				{
 					Name:           "billing",
 					EnterpriseMeta: *defaultEntMeta,
 				},
 			},
+			// Only "mysql" appears because there it has a service resolver.
+			// "redis" does not appear, because it's a sidecar proxy without a corresponding service, so the wildcard doesn't find it.
 			DiscoChains: map[structs.ServiceName]structs.ExportedDiscoveryChainInfo{
-				newSN("billing"): {
+				newSN("mysql"): {
 					Protocol: "tcp",
 					TCPTargets: []*structs.DiscoveryTarget{
-						newTarget("billing", "", "dc1"),
+						newTarget("mysql", "", "dc1"),
 					},
 				},
 			},
@@ -2025,13 +2064,17 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 			ID: "payments", Service: "payments", Port: 5000,
 		}))
 
-		// The proxy will be ignored.
+		// The proxy will cause "payments" to be output in the disco chains. It will NOT be output
+		// in the normal services list.
 		lastIdx++
 		require.NoError(t, s.EnsureService(lastIdx, "foo", &structs.NodeService{
 			Kind:    structs.ServiceKindConnectProxy,
 			ID:      "payments-proxy",
 			Service: "payments-proxy",
 			Port:    5000,
+			Proxy: structs.ConnectProxyConfig{
+				DestinationServiceName: "payments",
+			},
 		}))
 		lastIdx++
 		// The consul service should never be exported.
@@ -2099,10 +2142,11 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 			},
 			DiscoChains: map[structs.ServiceName]structs.ExportedDiscoveryChainInfo{
 				// NOTE: no consul-redirect here
-				newSN("billing"): {
+				// NOTE: no billing here, because it does not have a proxy.
+				newSN("payments"): {
 					Protocol: "http",
 				},
-				newSN("payments"): {
+				newSN("mysql"): {
 					Protocol: "http",
 				},
 				newSN("resolver"): {
@@ -2129,6 +2173,9 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 		lastIdx++
 		require.NoError(t, s.DeleteConfigEntry(lastIdx, structs.ServiceSplitter, "splitter", nil))
 
+		lastIdx++
+		require.NoError(t, s.DeleteConfigEntry(lastIdx, structs.ServiceResolver, "mysql", nil))
+
 		require.True(t, watchFired(ws))
 		ws = memdb.NewWatchSet()
 
@@ -2160,6 +2207,51 @@ func TestStateStore_ExportedServicesForPeer(t *testing.T) {
 		require.Equal(t, expect, got)
 	})
 
+	testutil.RunStep(t, "terminating gateway services are exported", func(t *testing.T) {
+		lastIdx++
+		require.NoError(t, s.EnsureService(lastIdx, "foo", &structs.NodeService{
+			ID: "term-svc", Service: "term-svc", Port: 6000,
+		}))
+		lastIdx++
+		require.NoError(t, s.EnsureService(lastIdx, "foo", &structs.NodeService{
+			Kind:    structs.ServiceKindTerminatingGateway,
+			Service: "some-terminating-gateway",
+			ID:      "some-terminating-gateway",
+			Port:    9000,
+		}))
+		lastIdx++
+		require.NoError(t, s.EnsureConfigEntry(lastIdx, &structs.TerminatingGatewayConfigEntry{
+			Kind:     structs.TerminatingGateway,
+			Name:     "some-terminating-gateway",
+			Services: []structs.LinkedService{{Name: "term-svc"}},
+		}))
+
+		expect := &structs.ExportedServiceList{
+			Services: []structs.ServiceName{
+				newSN("payments"),
+				newSN("term-svc"),
+			},
+			DiscoChains: map[structs.ServiceName]structs.ExportedDiscoveryChainInfo{
+				newSN("payments"): {
+					Protocol: "http",
+				},
+				newSN("resolver"): {
+					Protocol: "http",
+				},
+				newSN("router"): {
+					Protocol: "http",
+				},
+				newSN("term-svc"): {
+					Protocol: "http",
+				},
+			},
+		}
+		idx, got, err := s.ExportedServicesForPeer(ws, id, "dc1")
+		require.NoError(t, err)
+		require.Equal(t, lastIdx, idx)
+		require.Equal(t, expect, got)
+	})
+
 	testutil.RunStep(t, "deleting the config entry clears exported services", func(t *testing.T) {
 		expect := &structs.ExportedServiceList{}
 
diff --git a/agent/grpc-external/services/peerstream/stream_test.go b/agent/grpc-external/services/peerstream/stream_test.go
index 63df91aa7..904c2c28b 100644
--- a/agent/grpc-external/services/peerstream/stream_test.go
+++ b/agent/grpc-external/services/peerstream/stream_test.go
@@ -844,6 +844,13 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 		Node:    &structs.Node{Node: "foo", Address: "10.0.0.1"},
 		Service: &structs.NodeService{ID: "mysql-1", Service: "mysql", Port: 5000},
 	}
+	mysqlSidecar := &structs.NodeService{
+		Kind:    structs.ServiceKindConnectProxy,
+		Service: "mysql-sidecar-proxy",
+		Proxy: structs.ConnectProxyConfig{
+			DestinationServiceName: "mysql",
+		},
+	}
 
 	lastIdx++
 	require.NoError(t, store.EnsureNode(lastIdx, mysql.Node))
@@ -851,6 +858,9 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 	lastIdx++
 	require.NoError(t, store.EnsureService(lastIdx, "foo", mysql.Service))
 
+	lastIdx++
+	require.NoError(t, store.EnsureService(lastIdx, "foo", mysqlSidecar))
+
 	mongoSvcDefaults := &structs.ServiceConfigEntry{
 		Kind:     structs.ServiceDefaults,
 		Name:     "mongo",
@@ -870,6 +880,24 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 		mysqlProxySN = structs.NewServiceName("mysql-sidecar-proxy", nil).String()
 	)
 
+	testutil.RunStep(t, "initial stream data is received", func(t *testing.T) {
+		expectReplEvents(t, client,
+			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
+				require.Equal(t, pbpeerstream.TypeURLPeeringTrustBundle, msg.GetResponse().ResourceURL)
+				// Roots tested in TestStreamResources_Server_CARootUpdates
+			},
+			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
+				require.Equal(t, pbpeerstream.TypeURLExportedServiceList, msg.GetResponse().ResourceURL)
+				require.Equal(t, subExportedServiceList, msg.GetResponse().ResourceID)
+				require.Equal(t, pbpeerstream.Operation_OPERATION_UPSERT, msg.GetResponse().Operation)
+
+				var exportedServices pbpeerstream.ExportedServiceList
+				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&exportedServices))
+				require.ElementsMatch(t, []string{}, exportedServices.Services)
+			},
+		)
+	})
+
 	testutil.RunStep(t, "exporting mysql leads to an UPSERT event", func(t *testing.T) {
 		entry := &structs.ExportedServicesConfigEntry{
 			Name: "default",
@@ -895,10 +923,6 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 		require.NoError(t, store.EnsureConfigEntry(lastIdx, entry))
 
 		expectReplEvents(t, client,
-			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
-				require.Equal(t, pbpeerstream.TypeURLPeeringTrustBundle, msg.GetResponse().ResourceURL)
-				// Roots tested in TestStreamResources_Server_CARootUpdates
-			},
 			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
 				// no mongo instances exist
 				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
@@ -909,16 +933,6 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&nodes))
 				require.Len(t, nodes.Nodes, 0)
 			},
-			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
-				// proxies can't export because no mesh gateway exists yet
-				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
-				require.Equal(t, mongoProxySN, msg.GetResponse().ResourceID)
-				require.Equal(t, pbpeerstream.Operation_OPERATION_UPSERT, msg.GetResponse().Operation)
-
-				var nodes pbpeerstream.ExportedService
-				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&nodes))
-				require.Len(t, nodes.Nodes, 0)
-			},
 			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
 				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
 				require.Equal(t, mysqlSN, msg.GetResponse().ResourceID)
@@ -938,17 +952,6 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&nodes))
 				require.Len(t, nodes.Nodes, 0)
 			},
-			// This event happens because this is the first test case and there are
-			// no exported services when replication is initially set up.
-			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
-				require.Equal(t, pbpeerstream.TypeURLExportedServiceList, msg.GetResponse().ResourceURL)
-				require.Equal(t, subExportedServiceList, msg.GetResponse().ResourceID)
-				require.Equal(t, pbpeerstream.Operation_OPERATION_UPSERT, msg.GetResponse().Operation)
-
-				var exportedServices pbpeerstream.ExportedServiceList
-				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&exportedServices))
-				require.ElementsMatch(t, []string{}, exportedServices.Services)
-			},
 			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
 				require.Equal(t, pbpeerstream.TypeURLExportedServiceList, msg.GetResponse().ResourceURL)
 				require.Equal(t, subExportedServiceList, msg.GetResponse().ResourceID)
@@ -976,23 +979,6 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 		require.NoError(t, store.EnsureService(lastIdx, "mgw", gateway.Service))
 
 		expectReplEvents(t, client,
-			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
-				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
-				require.Equal(t, mongoProxySN, msg.GetResponse().ResourceID)
-				require.Equal(t, pbpeerstream.Operation_OPERATION_UPSERT, msg.GetResponse().Operation)
-
-				var nodes pbpeerstream.ExportedService
-				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&nodes))
-				require.Len(t, nodes.Nodes, 1)
-
-				pm := nodes.Nodes[0].Service.Connect.PeerMeta
-				require.Equal(t, "grpc", pm.Protocol)
-				spiffeIDs := []string{
-					"spiffe://11111111-2222-3333-4444-555555555555.consul/ns/default/dc/dc1/svc/mongo",
-					"spiffe://11111111-2222-3333-4444-555555555555.consul/gateway/mesh/dc/dc1",
-				}
-				require.Equal(t, spiffeIDs, pm.SpiffeID)
-			},
 			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
 				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
 				require.Equal(t, mysqlProxySN, msg.GetResponse().ResourceID)
@@ -1013,6 +999,33 @@ func TestStreamResources_Server_ServiceUpdates(t *testing.T) {
 		)
 	})
 
+	testutil.RunStep(t, "register service resolver to send proxy updates", func(t *testing.T) {
+		lastIdx++
+		require.NoError(t, store.EnsureConfigEntry(lastIdx, &structs.ServiceResolverConfigEntry{
+			Kind: structs.ServiceResolver,
+			Name: "mongo",
+		}))
+		expectReplEvents(t, client,
+			func(t *testing.T, msg *pbpeerstream.ReplicationMessage) {
+				require.Equal(t, pbpeerstream.TypeURLExportedService, msg.GetResponse().ResourceURL)
+				require.Equal(t, mongoProxySN, msg.GetResponse().ResourceID)
+				require.Equal(t, pbpeerstream.Operation_OPERATION_UPSERT, msg.GetResponse().Operation)
+
+				var nodes pbpeerstream.ExportedService
+				require.NoError(t, msg.GetResponse().Resource.UnmarshalTo(&nodes))
+				require.Len(t, nodes.Nodes, 1)
+
+				pm := nodes.Nodes[0].Service.Connect.PeerMeta
+				require.Equal(t, "grpc", pm.Protocol)
+				spiffeIDs := []string{
+					"spiffe://11111111-2222-3333-4444-555555555555.consul/ns/default/dc/dc1/svc/mongo",
+					"spiffe://11111111-2222-3333-4444-555555555555.consul/gateway/mesh/dc/dc1",
+				}
+				require.Equal(t, spiffeIDs, pm.SpiffeID)
+			},
+		)
+	})
+
 	mongo := &structs.CheckServiceNode{
 		Node:    &structs.Node{Node: "zip", Address: "10.0.0.3"},
 		Service: &structs.NodeService{ID: "mongo-1", Service: "mongo", Port: 5000},
diff --git a/agent/grpc-external/services/peerstream/subscription_manager.go b/agent/grpc-external/services/peerstream/subscription_manager.go
index d290d2dc1..58c629d5c 100644
--- a/agent/grpc-external/services/peerstream/subscription_manager.go
+++ b/agent/grpc-external/services/peerstream/subscription_manager.go
@@ -143,7 +143,7 @@ func (m *subscriptionManager) handleEvent(ctx context.Context, state *subscripti
 		pending := &pendingPayload{}
 		m.syncNormalServices(ctx, state, evt.Services)
 		if m.config.ConnectEnabled {
-			m.syncDiscoveryChains(state, pending, evt.ListAllDiscoveryChains())
+			m.syncDiscoveryChains(state, pending, evt.DiscoChains)
 		}
 
 		err := pending.Add(
diff --git a/agent/grpc-external/services/peerstream/subscription_manager_test.go b/agent/grpc-external/services/peerstream/subscription_manager_test.go
index a74978774..1e663ba4f 100644
--- a/agent/grpc-external/services/peerstream/subscription_manager_test.go
+++ b/agent/grpc-external/services/peerstream/subscription_manager_test.go
@@ -472,15 +472,40 @@ func TestSubscriptionManager_InitialSnapshot(t *testing.T) {
 		Node:    &structs.Node{Node: "foo", Address: "10.0.0.1"},
 		Service: &structs.NodeService{ID: "mysql-1", Service: "mysql", Port: 5000},
 	}
+	mysqlSidecar := structs.NodeService{
+		Kind:    structs.ServiceKindConnectProxy,
+		Service: "mysql-sidecar-proxy",
+		Proxy: structs.ConnectProxyConfig{
+			DestinationServiceName: "mysql",
+		},
+	}
 	backend.ensureNode(t, mysql.Node)
 	backend.ensureService(t, "foo", mysql.Service)
+	backend.ensureService(t, "foo", &mysqlSidecar)
 
 	mongo := &structs.CheckServiceNode{
-		Node:    &structs.Node{Node: "zip", Address: "10.0.0.3"},
-		Service: &structs.NodeService{ID: "mongo-1", Service: "mongo", Port: 5000},
+		Node: &structs.Node{Node: "zip", Address: "10.0.0.3"},
+		Service: &structs.NodeService{
+			ID:      "mongo-1",
+			Service: "mongo",
+			Port:    5000,
+		},
+	}
+	mongoSidecar := structs.NodeService{
+		Kind:    structs.ServiceKindConnectProxy,
+		Service: "mongo-sidecar-proxy",
+		Proxy: structs.ConnectProxyConfig{
+			DestinationServiceName: "mongo",
+		},
 	}
 	backend.ensureNode(t, mongo.Node)
 	backend.ensureService(t, "zip", mongo.Service)
+	backend.ensureService(t, "zip", &mongoSidecar)
+
+	backend.ensureConfigEntry(t, &structs.ServiceResolverConfigEntry{
+		Kind: structs.ServiceResolver,
+		Name: "chain",
+	})
 
 	var (
 		mysqlCorrID = subExportedService + structs.NewServiceName("mysql", nil).String()
diff --git a/agent/proxycfg-glue/exported_peered_services_test.go b/agent/proxycfg-glue/exported_peered_services_test.go
index 697c0d52c..ed07404ad 100644
--- a/agent/proxycfg-glue/exported_peered_services_test.go
+++ b/agent/proxycfg-glue/exported_peered_services_test.go
@@ -49,6 +49,14 @@ func TestServerExportedPeeredServices(t *testing.T) {
 		},
 	}))
 
+	// Create resolvers for each of the services so that they are guaranteed to be replicated by the peer stream.
+	for _, s := range []string{"web", "api", "db"} {
+		require.NoError(t, store.EnsureConfigEntry(0, &structs.ServiceResolverConfigEntry{
+			Kind: structs.ServiceResolver,
+			Name: s,
+		}))
+	}
+
 	authz := policyAuthorizer(t, `
 		service "web" { policy = "read" }
 		service "api" { policy = "read" }
diff --git a/agent/structs/peering.go b/agent/structs/peering.go
index 52d2f32a3..714a442e8 100644
--- a/agent/structs/peering.go
+++ b/agent/structs/peering.go
@@ -62,8 +62,7 @@ func (i ExportedDiscoveryChainInfo) Equal(o ExportedDiscoveryChainInfo) bool {
 	return true
 }
 
-// ListAllDiscoveryChains returns all discovery chains (union of Services and
-// DiscoChains).
+// ListAllDiscoveryChains returns all discovery chains (union of Services and DiscoChains).
 func (list *ExportedServiceList) ListAllDiscoveryChains() map[ServiceName]ExportedDiscoveryChainInfo {
 	chainsByName := make(map[ServiceName]ExportedDiscoveryChainInfo)
 	if list == nil {
diff --git a/agent/structs/structs.go b/agent/structs/structs.go
index 0a95da695..5191272a6 100644
--- a/agent/structs/structs.go
+++ b/agent/structs/structs.go
@@ -1235,6 +1235,12 @@ const (
 	// This service allows external traffic to exit the mesh through a terminating gateway
 	// based on centralized configuration.
 	ServiceKindDestination ServiceKind = "destination"
+
+	// ServiceKindConnectEnabled is used to indicate whether a service is either
+	// connect-native or if the service has a corresponding sidecar. It is used for
+	// internal query purposes and should not be exposed to users as a valid Kind
+	// option.
+	ServiceKindConnectEnabled ServiceKind = "connect-enabled"
 )
 
 // Type to hold a address and port of a service