diff --git a/agent/proxycfg/state_test.go b/agent/proxycfg/state_test.go
index c80e57f5d..7e88c6eab 100644
--- a/agent/proxycfg/state_test.go
+++ b/agent/proxycfg/state_test.go
@@ -1891,8 +1891,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 								Nodes: structs.CheckServiceNodes{
 									{
 										Node: &structs.Node{
-											Node:    "node1",
-											Address: "10.0.0.1",
+											Datacenter: "dc1",
+											Node:       "node1",
+											Address:    "10.0.0.1",
 										},
 										Service: &structs.NodeService{
 											Kind:    structs.ServiceKindConnectProxy,
@@ -1916,8 +1917,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 									},
 									{
 										Node: &structs.Node{
-											Node:    "node2",
-											Address: "10.0.0.2",
+											Datacenter: "dc1",
+											Node:       "node2",
+											Address:    "10.0.0.2",
 											RaftIndex: structs.RaftIndex{
 												ModifyIndex: 21,
 											},
@@ -1948,8 +1950,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 							structs.CheckServiceNodes{
 								{
 									Node: &structs.Node{
-										Node:    "node1",
-										Address: "10.0.0.1",
+										Datacenter: "dc1",
+										Node:       "node1",
+										Address:    "10.0.0.1",
 									},
 									Service: &structs.NodeService{
 										Kind:    structs.ServiceKindConnectProxy,
@@ -1973,8 +1976,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 								},
 								{
 									Node: &structs.Node{
-										Node:    "node2",
-										Address: "10.0.0.2",
+										Datacenter: "dc1",
+										Node:       "node2",
+										Address:    "10.0.0.2",
 										RaftIndex: structs.RaftIndex{
 											ModifyIndex: 21,
 										},
@@ -2065,8 +2069,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 								Nodes: structs.CheckServiceNodes{
 									{
 										Node: &structs.Node{
-											Node:    "node2",
-											Address: "10.0.0.2",
+											Datacenter: "dc1",
+											Node:       "node2",
+											Address:    "10.0.0.2",
 											RaftIndex: structs.RaftIndex{
 												ModifyIndex: 21,
 											},
@@ -2099,8 +2104,9 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 							structs.CheckServiceNodes{
 								{
 									Node: &structs.Node{
-										Node:    "node2",
-										Address: "10.0.0.2",
+										Datacenter: "dc1",
+										Node:       "node2",
+										Address:    "10.0.0.2",
 										RaftIndex: structs.RaftIndex{
 											ModifyIndex: 21,
 										},
@@ -2144,7 +2150,8 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 								Nodes: structs.CheckServiceNodes{
 									{
 										Node: &structs.Node{
-											Node: "node2",
+											Datacenter: "dc1",
+											Node:       "node2",
 										},
 										Service: &structs.NodeService{
 											Kind:    structs.ServiceKindConnectProxy,
@@ -2178,7 +2185,8 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 							structs.CheckServiceNodes{
 								{
 									Node: &structs.Node{
-										Node: "node2",
+										Datacenter: "dc1",
+										Node:       "node2",
 									},
 									Service: &structs.NodeService{
 										Kind:    structs.ServiceKindConnectProxy,
diff --git a/agent/proxycfg/upstreams.go b/agent/proxycfg/upstreams.go
index 4cd406a42..e77b554ff 100644
--- a/agent/proxycfg/upstreams.go
+++ b/agent/proxycfg/upstreams.go
@@ -111,9 +111,8 @@ func (s *handlerUpstreams) handleUpdateUpstreams(ctx context.Context, u cache.Up
 				continue
 			}
 
-			// Make sure to use an external address when crossing partitions.
-			// Datacenter is not considered because transparent proxies cannot dial other datacenters.
-			isRemote := !structs.EqualPartitions(node.Node.PartitionOrDefault(), s.proxyID.PartitionOrDefault())
+			// Make sure to use an external address when crossing partition or DC boundaries.
+			isRemote := !snap.Locality.Matches(node.Node.Datacenter, node.Node.PartitionOrDefault())
 			csnIdx, addr, _ := node.BestAddress(isRemote)
 
 			existing := upstreamsSnapshot.PassthroughIndices[addr]