When examining Windows 7 build 7100, many developers noticed this commented-out line in the hosts file:

# localhost name resolution is handled within DNS itself.
#   127.0.0.1 localhost
#   ::1 localhost

Microsoft made this architectural change for several important reasons:

• Native IPv6 support (::1) became a first-class citizen
• Reduced file I/O operations for critical network functions
• Better alignment with modern DNS standards (RFC 6761)
• Elimination of potential hosts file tampering vulnerabilities

You can verify this behavior with a simple PowerShell test:

Test-NetConnection -ComputerName localhost -Port 80
Resolve-DnsName localhost
nslookup localhost

For developers working with containerization or virtual networks:

1. Docker networking now relies on this native resolution
2. WSL2 benefits from the more efficient DNS handling
3. Custom domain testing requires different approaches

To temporarily revert to hosts-file resolution (for legacy testing):

# Uncomment these lines in C:\Windows\System32\drivers\etc\hosts
127.0.0.1 localhost
::1 localhost

Windows 7 introduced other notable DNS improvements:

• DNS client service cache optimization
• Smart multi-homed name resolution
• Improved DNSSEC support
• Enhanced netbios over TCP/IP handling

In Windows 7 build 7100, Microsoft made a significant change to localhost resolution by moving it from the traditional hosts file to the DNS subsystem. The commented lines in the hosts file explicitly state:

# localhost name resolution is handled within DNS itself.
#   127.0.0.1 localhost
#   ::1 localhost

Several architectural improvements drove this modification:

• Performance Optimization: Bypassing the hosts file lookup reduces one filesystem access operation
• IPv6 Readiness: Built-in handling of both IPv4 (127.0.0.1) and IPv6 (::1) addresses
• Security Hardening: Removes potential attack surface from hosts file tampering
• DNS Cache Integration: Localhost resolution now benefits from DNS client cache

To confirm your system's behavior, use this PowerShell diagnostic script:

Test-NetConnection -ComputerName localhost -TraceRoute
Resolve-DnsName localhost
Get-DnsClientCache | Where-Object {$_.Entry -like "*localhost*"}

Additional DNS-related modifications include:

For applications requiring hosts file modification, use this registry tweak:

Windows Registry Editor Version 5.00

[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\Dnscache\Parameters]
"LocalHostForwarding"=dword:00000001

Create a test application to compare resolution methods:

using System;
using System.Net;

class ResolutionTest {
    static void Main() {
        // Method 1: Direct IP (bypasses resolution)
        Console.WriteLine("Pinging 127.0.0.1...");
        TestConnection("127.0.0.1");
        
        // Method 2: Standard resolution
        Console.WriteLine("\nResolving localhost...");
        TestConnection("localhost");
        
        // Method 3: Hosts file lookup
        Console.WriteLine("\nTesting hosts file override...");
        OverrideHostsEntry();
        TestConnection("test.local");
    }
    
    static void TestConnection(string host) {
        try {
            IPHostEntry entry = Dns.GetHostEntry(host);
            Console.WriteLine($"Resolved to: {entry.AddressList[0]}");
        } catch (Exception ex) {
            Console.WriteLine($"Resolution failed: {ex.Message}");
        }
    }
    
    static void OverrideHostsEntry() {
        // Requires admin privileges
        string hostsPath = @"C:\Windows\System32\drivers\etc\hosts";
        System.IO.File.AppendAllText(hostsPath, "\n127.0.0.1 test.local");
    }
}