diff --git a/k3os/set_hostname.sh b/k3os/set_hostname.sh
index 35d1287..f23b471 100644
--- a/k3os/set_hostname.sh
+++ b/k3os/set_hostname.sh
@@ -58,7 +58,7 @@ set_hostname() {
         echo "Warning: Failed to remount $CONFIG_DIR back to read-only. Proceeding..."
     fi
 
-    echo '$HOSTNAME_ENTRY' > /var/lib/rancher/k3os/hostname
+    echo -e "$HOSTNAME_ENTRY" > /var/lib/rancher/k3os/hostname
 
     # 4. Report status
     if [ $MODIFICATION_STATUS -eq 0 ]; then