diff --git a/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt b/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
index bec4ea5055e..1b8529bb996 100644
--- a/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
+++ b/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
@@ -94,6 +94,7 @@ object KotlinCompilerClient {
                         leaseSession: Boolean,
                         sessionAliveFlagFile: File? = null
     ): ServiceWithSession? = connectLoop(reportingTargets) {
+        setupServerHostName()
         val (service, newJVMOptions) = tryFindSuitableDaemonOrNewOpts(File(daemonOptions.runFilesPath), compilerId, daemonJVMOptions, { cat, msg -> reportingTargets.report(cat, msg) })
         if (service != null) {
             // the newJVMOptions could be checked here for additional parameters, if needed
@@ -370,9 +371,7 @@ object KotlinCompilerClient {
         val javaExecutable = File(File(System.getProperty("java.home"), "bin"), "java")
         val platformSpecificOptions = listOf(
                 // hide daemon window
-                "-Djava.awt.headless=true",
-                // prevent host name resolution
-                "-Djava.rmi.server.hostname=${LoopbackNetworkInterface.loopbackInetAddressName}")
+                "-Djava.awt.headless=true")
         val args = listOf(
                    javaExecutable.absolutePath, "-cp", compilerId.compilerClasspath.joinToString(File.pathSeparator)) +
                    platformSpecificOptions +
diff --git a/compiler/daemon/daemon-common/src/org/jetbrains/kotlin/daemon/common/NetworkUtils.kt b/compiler/daemon/daemon-common/src/org/jetbrains/kotlin/daemon/common/NetworkUtils.kt
index ab09aeb3066..6a47e509354 100644
--- a/compiler/daemon/daemon-common/src/org/jetbrains/kotlin/daemon/common/NetworkUtils.kt
+++ b/compiler/daemon/daemon-common/src/org/jetbrains/kotlin/daemon/common/NetworkUtils.kt
@@ -96,3 +96,10 @@ fun findPortAndCreateRegistry(attempts: Int, portRangeStart: Int, portRangeEnd:
     throw IllegalStateException("Cannot find free port in $attempts attempts", lastException)
 }
 
+/**
+ * Needs to be set up on both client and server to prevent localhost resolution,
+ * which may be slow and can cause a timeout when there is a network problem/misconfiguration.
+ */
+fun setupServerHostName() {
+    System.setProperty("java.rmi.server.hostname", LoopbackNetworkInterface.loopbackInetAddressName)
+}
diff --git a/compiler/daemon/src/org/jetbrains/kotlin/daemon/KotlinCompileDaemon.kt b/compiler/daemon/src/org/jetbrains/kotlin/daemon/KotlinCompileDaemon.kt
index 1be59f76c10..85d877683f0 100644
--- a/compiler/daemon/src/org/jetbrains/kotlin/daemon/KotlinCompileDaemon.kt
+++ b/compiler/daemon/src/org/jetbrains/kotlin/daemon/KotlinCompileDaemon.kt
@@ -89,6 +89,7 @@ object KotlinCompileDaemon {
 
     @JvmStatic
     fun main(args: Array<String>) {
+        setupServerHostName()
 
         log.info("Kotlin compiler daemon version " + (loadVersionFromResource() ?: "<unknown>"))
         log.info("daemon JVM args: " + ManagementFactory.getRuntimeMXBean().inputArguments.joinToString(" "))