diff -ru cloud-init-0.7.4-orig/cloudinit/distros/__init__.py cloud-init-0.7.4/cloudinit/distros/__init__.py
--- cloud-init-0.7.4-orig/cloudinit/distros/__init__.py 2013-11-19 22:27:46.000000000 +0100
+++ cloud-init-0.7.4/cloudinit/distros/__init__.py  2014-08-27 13:03:14.349230076 +0200
@@ -81,7 +81,7 @@
     def set_hostname(self, hostname, fqdn=None):
         writeable_hostname = self._select_hostname(hostname, fqdn)
         self._write_hostname(writeable_hostname, self.hostname_conf_fn)
-        self._apply_hostname(hostname)
+        self._apply_hostname(writeable_hostname)

     @abc.abstractmethod
     def package_command(self, cmd, args=None, pkgs=None):