diff --git a/openhands/app_server/app_conversation/live_status_app_conversation_service.py b/openhands/app_server/app_conversation/live_status_app_conversation_service.py
index e8bd8fc331..a0180f1fc2 100644
--- a/openhands/app_server/app_conversation/live_status_app_conversation_service.py
+++ b/openhands/app_server/app_conversation/live_status_app_conversation_service.py
@@ -63,6 +63,7 @@ from openhands.app_server.sandbox.sandbox_spec_service import SandboxSpecService
 from openhands.app_server.services.injector import InjectorState
 from openhands.app_server.services.jwt_service import JwtService
 from openhands.app_server.user.user_context import UserContext
+from openhands.app_server.utils.docker_utils import replace_localhost_hostname
 from openhands.experiments.experiment_manager import ExperimentManagerImpl
 from openhands.integrations.provider import ProviderType
 from openhands.sdk import LocalWorkspace
@@ -472,6 +473,7 @@ class LiveStatusAppConversationService(GitAppConversationService):
             for exposed_url in exposed_urls
             if exposed_url.name == AGENT_SERVER
         )
+        agent_server_url = replace_localhost_hostname(agent_server_url)
         return agent_server_url
 
     def _inherit_configuration_from_parent(
diff --git a/openhands/app_server/sandbox/docker_sandbox_service.py b/openhands/app_server/sandbox/docker_sandbox_service.py
index 1e2505a85e..34a541b924 100644
--- a/openhands/app_server/sandbox/docker_sandbox_service.py
+++ b/openhands/app_server/sandbox/docker_sandbox_service.py
@@ -32,6 +32,8 @@ from openhands.app_server.sandbox.sandbox_service import (
 )
 from openhands.app_server.sandbox.sandbox_spec_service import SandboxSpecService
 from openhands.app_server.services.injector import InjectorState
+from openhands.app_server.utils.docker_utils import replace_localhost_hostname
+from openhands.utils.environment import is_running_in_docker
 
 _logger = logging.getLogger(__name__)
 SESSION_API_KEY_VARIABLE = 'OH_SESSION_API_KEYS_0'
@@ -185,6 +187,10 @@ class DockerSandboxService(SandboxService):
                 if exposed_url.name == AGENT_SERVER
             )
             try:
+                # When running in Docker, replace localhost hostname with host.docker.internal for internal requests
+                if is_running_in_docker():
+                    app_server_url = replace_localhost_hostname(app_server_url)
+
                 response = await self.httpx_client.get(
                     f'{app_server_url}{self.health_check_path}'
                 )
diff --git a/openhands/app_server/utils/docker_utils.py b/openhands/app_server/utils/docker_utils.py
new file mode 100644
index 0000000000..cb12d8f2c3
--- /dev/null
+++ b/openhands/app_server/utils/docker_utils.py
@@ -0,0 +1,24 @@
+from urllib.parse import urlparse, urlunparse
+
+
+def replace_localhost_hostname(
+    url: str, replacement: str = 'host.docker.internal'
+) -> str:
+    """Replace localhost hostname in URL with the specified replacement.
+
+    Only replaces the hostname if it's exactly 'localhost', preserving all other
+    parts of the URL including port, path, query parameters, etc.
+
+    Args:
+        url: The URL to process
+        replacement: The hostname to replace localhost with
+
+    Returns:
+        URL with localhost hostname replaced, or original URL if hostname is not localhost
+    """
+    parsed = urlparse(url)
+    if parsed.hostname == 'localhost':
+        # Replace only the hostname part, preserving port and everything else
+        netloc = parsed.netloc.replace('localhost', replacement, 1)
+        return urlunparse(parsed._replace(netloc=netloc))
+    return url
diff --git a/tests/unit/app_server/test_docker_utils.py b/tests/unit/app_server/test_docker_utils.py
new file mode 100644
index 0000000000..61bc6432d7
--- /dev/null
+++ b/tests/unit/app_server/test_docker_utils.py
@@ -0,0 +1,174 @@
+from openhands.app_server.utils.docker_utils import replace_localhost_hostname
+
+
+class TestReplaceLocalhostHostname:
+    """Test cases for replace_localhost_hostname function."""
+
+    def test_replace_localhost_basic(self):
+        """Test basic localhost replacement."""
+        # Basic HTTP URL
+        result = replace_localhost_hostname('http://localhost:8080')
+        assert result == 'http://host.docker.internal:8080'
+
+        # HTTPS URL
+        result = replace_localhost_hostname('https://localhost:443')
+        assert result == 'https://host.docker.internal:443'
+
+        # No port specified
+        result = replace_localhost_hostname('http://localhost')
+        assert result == 'http://host.docker.internal'
+
+    def test_replace_localhost_with_path_and_query(self):
+        """Test localhost replacement preserving path and query parameters."""
+        # With path
+        result = replace_localhost_hostname('http://localhost:3000/api/health')
+        assert result == 'http://host.docker.internal:3000/api/health'
+
+        # With query parameters containing localhost
+        result = replace_localhost_hostname(
+            'http://localhost:8080/path?param=localhost&other=value'
+        )
+        assert (
+            result
+            == 'http://host.docker.internal:8080/path?param=localhost&other=value'
+        )
+
+        # With path containing localhost
+        result = replace_localhost_hostname('http://localhost:9000/localhost/endpoint')
+        assert result == 'http://host.docker.internal:9000/localhost/endpoint'
+
+        # With fragment
+        result = replace_localhost_hostname('http://localhost:8080/path#localhost')
+        assert result == 'http://host.docker.internal:8080/path#localhost'
+
+    def test_replace_localhost_with_authentication(self):
+        """Test localhost replacement with authentication in URL."""
+        result = replace_localhost_hostname('http://user:pass@localhost:8080/path')
+        assert result == 'http://user:pass@host.docker.internal:8080/path'
+
+        result = replace_localhost_hostname('https://admin:secret@localhost:443/admin')
+        assert result == 'https://admin:secret@host.docker.internal:443/admin'
+
+    def test_replace_localhost_different_protocols(self):
+        """Test localhost replacement with different protocols."""
+        # FTP
+        result = replace_localhost_hostname('ftp://localhost:21/files')
+        assert result == 'ftp://host.docker.internal:21/files'
+
+        # WebSocket
+        result = replace_localhost_hostname('ws://localhost:8080/socket')
+        assert result == 'ws://host.docker.internal:8080/socket'
+
+        # WebSocket Secure
+        result = replace_localhost_hostname('wss://localhost:443/secure-socket')
+        assert result == 'wss://host.docker.internal:443/secure-socket'
+
+    def test_no_replacement_for_non_localhost(self):
+        """Test that non-localhost hostnames are not replaced."""
+        # IP address
+        result = replace_localhost_hostname('http://127.0.0.1:8080')
+        assert result == 'http://127.0.0.1:8080'
+
+        # Different hostname
+        result = replace_localhost_hostname('http://example.com:8080')
+        assert result == 'http://example.com:8080'
+
+        # Hostname containing localhost but not exact match
+        result = replace_localhost_hostname('http://mylocalhost:8080')
+        assert result == 'http://mylocalhost:8080'
+
+        # Subdomain of localhost
+        result = replace_localhost_hostname('http://api.localhost:8080')
+        assert result == 'http://api.localhost:8080'
+
+        # localhost as subdomain
+        result = replace_localhost_hostname('http://localhost.example.com:8080')
+        assert result == 'http://localhost.example.com:8080'
+
+    def test_custom_replacement_hostname(self):
+        """Test using custom replacement hostname."""
+        result = replace_localhost_hostname('http://localhost:8080', 'custom.host')
+        assert result == 'http://custom.host:8080'
+
+        result = replace_localhost_hostname(
+            'https://localhost:443/path', 'internal.docker'
+        )
+        assert result == 'https://internal.docker:443/path'
+
+    def test_edge_cases(self):
+        """Test edge cases and malformed URLs."""
+        # Empty string
+        result = replace_localhost_hostname('')
+        assert result == ''
+
+        # Malformed URL (no protocol)
+        result = replace_localhost_hostname('localhost:8080')
+        assert result == 'localhost:8080'
+
+        # Just hostname
+        result = replace_localhost_hostname('localhost')
+        assert result == 'localhost'
+
+        # URL with no hostname
+        result = replace_localhost_hostname('http://:8080/path')
+        assert result == 'http://:8080/path'
+
+        # Invalid URL structure
+        result = replace_localhost_hostname('not-a-url')
+        assert result == 'not-a-url'
+
+    def test_complex_urls(self):
+        """Test complex URL scenarios."""
+        # Multiple query parameters and fragments
+        complex_url = 'http://localhost:8080/api/v1/health?timeout=30&retry=3&host=localhost#section'
+        result = replace_localhost_hostname(complex_url)
+        expected = 'http://host.docker.internal:8080/api/v1/health?timeout=30&retry=3&host=localhost#section'
+        assert result == expected
+
+        # URL with encoded characters
+        encoded_url = (
+            'http://localhost:8080/path%20with%20spaces?param=value%20with%20spaces'
+        )
+        result = replace_localhost_hostname(encoded_url)
+        expected = 'http://host.docker.internal:8080/path%20with%20spaces?param=value%20with%20spaces'
+        assert result == expected
+
+    def test_integration_with_docker_detection(self):
+        """Test integration scenario similar to actual usage."""
+        # Simulate the actual usage pattern in the code
+        app_server_url = 'http://localhost:35375'
+
+        # This is how it's used in the actual code
+        internal_url = replace_localhost_hostname(app_server_url)
+
+        assert internal_url == 'http://host.docker.internal:35375'
+
+        # Test with health check path appended
+        health_check_url = f'{internal_url}/health'
+        assert health_check_url == 'http://host.docker.internal:35375/health'
+
+    def test_preserves_original_url_structure(self):
+        """Test that all URL components are preserved correctly."""
+        original_url = 'https://user:pass@localhost:8443/api/v1/endpoint?param1=value1&param2=value2#fragment'
+        result = replace_localhost_hostname(original_url)
+        expected = 'https://user:pass@host.docker.internal:8443/api/v1/endpoint?param1=value1&param2=value2#fragment'
+
+        assert result == expected
+
+        # Verify each component is preserved
+        from urllib.parse import urlparse
+
+        original_parsed = urlparse(original_url)
+        result_parsed = urlparse(result)
+
+        assert original_parsed.scheme == result_parsed.scheme
+        assert original_parsed.username == result_parsed.username
+        assert original_parsed.password == result_parsed.password
+        assert original_parsed.port == result_parsed.port
+        assert original_parsed.path == result_parsed.path
+        assert original_parsed.query == result_parsed.query
+        assert original_parsed.fragment == result_parsed.fragment
+
+        # Only hostname should be different
+        assert original_parsed.hostname == 'localhost'
+        assert result_parsed.hostname == 'host.docker.internal'