diff --git a/internal/transport/http2_client.go b/internal/transport/http2_client.go
index d518b07e16f..847ac9a521d 100644
--- a/internal/transport/http2_client.go
+++ b/internal/transport/http2_client.go
@@ -59,11 +59,15 @@ var clientConnectionCounter uint64
 
 // http2Client implements the ClientTransport interface with HTTP2.
 type http2Client struct {
-	lastRead   int64 // Keep this field 64-bit aligned. Accessed atomically.
-	ctx        context.Context
-	cancel     context.CancelFunc
-	ctxDone    <-chan struct{} // Cache the ctx.Done() chan.
-	userAgent  string
+	lastRead  int64 // Keep this field 64-bit aligned. Accessed atomically.
+	ctx       context.Context
+	cancel    context.CancelFunc
+	ctxDone   <-chan struct{} // Cache the ctx.Done() chan.
+	userAgent string
+	// address contains the resolver returned address for this transport.
+	// If the `ServerName` field is set, it takes precedence over `CallHdr.Host`
+	// passed to `NewStream`, when determining the :authority header.
+	address    resolver.Address
 	md         metadata.MD
 	conn       net.Conn // underlying communication channel
 	loopy      *loopyWriter
@@ -314,6 +318,7 @@ func newHTTP2Client(connectCtx, ctx context.Context, addr resolver.Address, opts
 		cancel:                cancel,
 		userAgent:             opts.UserAgent,
 		registeredCompressors: grpcutil.RegisteredCompressors(),
+		address:               addr,
 		conn:                  conn,
 		remoteAddr:            conn.RemoteAddr(),
 		localAddr:             conn.LocalAddr(),
@@ -702,7 +707,18 @@ func (e NewStreamError) Error() string {
 // streams.  All non-nil errors returned will be *NewStreamError.
 func (t *http2Client) NewStream(ctx context.Context, callHdr *CallHdr) (*Stream, error) {
 	ctx = peer.NewContext(ctx, t.getPeer())
-	headerFields, err := t.createHeaderFields(ctx, callHdr)
+
+	dupCallHdr := *callHdr
+	// ServerName field of the resolver returned address takes precedence over
+	// Host field of CallHdr to determine the :authority header. This is because,
+	// the ServerName field takes precedence for server authentication during
+	// TLS handshake, and the :authority header should match the value used
+	// for server authentication.
+	if t.address.ServerName != "" {
+		dupCallHdr.Host = t.address.ServerName
+	}
+
+	headerFields, err := t.createHeaderFields(ctx, &dupCallHdr)
 	if err != nil {
 		return nil, &NewStreamError{Err: err, AllowTransparentRetry: false}
 	}
diff --git a/test/authority_test.go b/test/authority_test.go
index c841c64736f..ad21c169ae6 100644
--- a/test/authority_test.go
+++ b/test/authority_test.go
@@ -36,6 +36,8 @@ import (
 	"google.golang.org/grpc/credentials/insecure"
 	"google.golang.org/grpc/internal/stubserver"
 	"google.golang.org/grpc/metadata"
+	"google.golang.org/grpc/resolver"
+	"google.golang.org/grpc/resolver/manual"
 	"google.golang.org/grpc/status"
 	testpb "google.golang.org/grpc/test/grpc_testing"
 )
@@ -205,3 +207,35 @@ func (s) TestColonPortAuthority(t *testing.T) {
 		t.Errorf("us.client.EmptyCall(_, _) = _, %v; want _, nil", err)
 	}
 }
+
+// TestAuthorityReplacedWithResolverAddress This test makes sure that the http2 client
+// replaces the authority to the resolver address server name when it is set.
+func (s) TestAuthorityReplacedWithResolverAddress(t *testing.T) {
+	const expectedAuthority = "test.server.name"
+
+	ss := &stubserver.StubServer{
+		EmptyCallF: func(ctx context.Context, _ *testpb.Empty) (*testpb.Empty, error) {
+			return authorityChecker(ctx, expectedAuthority)
+		},
+		Network: "tcp",
+	}
+	if err := ss.Start(nil); err != nil {
+		t.Fatalf("Error starting endpoint server: %v", err)
+	}
+	defer ss.Stop()
+
+	r := manual.NewBuilderWithScheme("whatever")
+	r.InitialState(resolver.State{Addresses: []resolver.Address{{Addr: ss.Address, ServerName: expectedAuthority}}})
+	cc, err := grpc.Dial(r.Scheme()+":///whatever", grpc.WithInsecure(), grpc.WithResolvers(r))
+	if err != nil {
+		t.Fatalf("grpc.Dial(%q) = %v", ss.Address, err)
+	}
+	defer cc.Close()
+
+	ctx, cancel := context.WithTimeout(context.Background(), defaultTestTimeout)
+	defer cancel()
+	_, err = testpb.NewTestServiceClient(cc).EmptyCall(ctx, &testpb.Empty{})
+	if err != nil {
+		t.Errorf("us.client.EmptyCall(_, _) = _, %v; want _, nil", err)
+	}
+}
diff --git a/xds/internal/balancer/clusterresolver/configbuilder.go b/xds/internal/balancer/clusterresolver/configbuilder.go
index b76a40355cc..0f9efba4fb3 100644
--- a/xds/internal/balancer/clusterresolver/configbuilder.go
+++ b/xds/internal/balancer/clusterresolver/configbuilder.go
@@ -198,7 +198,7 @@ func buildClusterImplConfigForDNS(g *nameGenerator, addrStrs []string, mechanism
 	retAddrs := make([]resolver.Address, 0, len(addrStrs))
 	pName := fmt.Sprintf("priority-%v", g.prefix)
 	for _, addrStr := range addrStrs {
-		retAddrs = append(retAddrs, hierarchy.Set(resolver.Address{Addr: addrStr}, []string{pName}))
+		retAddrs = append(retAddrs, hierarchy.Set(resolver.Address{Addr: addrStr, ServerName: mechanism.DNSHostname}, []string{pName}))
 	}
 	return pName, &clusterimpl.LBConfig{
 		Cluster:     mechanism.Cluster,