diff --git a/e2e/validation.go b/e2e/validation.go
index 3cf65423dd0..fadf8eab5e6 100644
--- a/e2e/validation.go
+++ b/e2e/validation.go
@@ -79,6 +79,7 @@ func ValidateCommonLinux(ctx context.Context, s *Scenario) {
 	if !s.VHD.UnsupportedLocalDns && !config.Config.TestPreProvision && !s.VHDCaching {
 		ValidateLocalDNSService(ctx, s, "enabled")
 		ValidateLocalDNSResolution(ctx, s, "169.254.10.10")
+		ValidateLocalDNSIptablesRules(ctx, s)
 		ValidateLocalDNSExporterMetrics(ctx, s)
 
 		// Validate hosts plugin validators only if hosts plugin is explicitly enabled
diff --git a/e2e/validators.go b/e2e/validators.go
index 96597ada092..1cd5b3966cf 100644
--- a/e2e/validators.go
+++ b/e2e/validators.go
@@ -1494,6 +1494,36 @@ func ValidateLocalDNSResolution(ctx context.Context, s *Scenario, server string)
 	assert.Contains(s.T, execResult.stdout, fmt.Sprintf("SERVER: %s", server))
 }
 
+// ValidateLocalDNSIptablesRules checks that the NOTRACK iptables rules for localdns are correctly
+// applied in the raw table. These rules skip connection tracking for DNS traffic to localdns IPs
+// to prevent conntrack table exhaustion on busy nodes.
+func ValidateLocalDNSIptablesRules(ctx context.Context, s *Scenario) {
+	s.T.Helper()
+	script := `set -euo pipefail
+failed=0
+# Check each rule individually to avoid multiline grep issues
+for chain in OUTPUT PREROUTING; do
+    for proto in tcp udp; do
+        rule=$(sudo iptables -w -t raw -S "$chain" | tr -d '\r' | grep -m1 -- "-p ${proto}.*localdns: skip conntrack.*--dport 53.*NOTRACK" || true)
+        if [ -n "$rule" ]; then
+            echo "OK: $chain/$proto: $rule"
+        else
+            echo "FAIL: missing NOTRACK rule for $proto in $chain chain"
+            failed=1
+        fi
+    done
+done
+
+if [ "$failed" -ne 0 ]; then
+    echo "Dumping all raw table rules for debugging:"
+    sudo iptables -w -t raw -S | tr -d '\r'
+    exit 1
+fi
+	echo "PASS: all localdns NOTRACK iptables rules present"
+`
+	execScriptOnVMForScenarioValidateExitCode(ctx, s, script, 0, "localdns iptables NOTRACK rules validation failed")
+}
+
 // ValidateLocalDNSHostsFile checks that /etc/localdns/hosts contains at least one IPv4 entry for each critical FQDN.
 // This validation approach avoids flakiness with CDN/frontdoor-backed FQDNs (like mcr.microsoft.com) whose A records
 // can rotate between queries. We verify presence, not exact IP matching.
diff --git a/parts/linux/cloud-init/artifacts/localdns.sh b/parts/linux/cloud-init/artifacts/localdns.sh
index 8d54c4f1430..a5ef935fe8b 100644
--- a/parts/linux/cloud-init/artifacts/localdns.sh
+++ b/parts/linux/cloud-init/artifacts/localdns.sh
@@ -419,11 +419,12 @@ start_localdns() {
     ${COREDNS_COMMAND} &
 
     # Wait until the PID file is created.
+    # Use 0.1s polling interval since CoreDNS typically creates the PID file in <100ms.
     local elapsed=0
     while [ ! -f "${LOCALDNS_PID_FILE}" ]; do
-        sleep 1
+        sleep 0.1
         elapsed=$((elapsed + 1))
-        if [ "$elapsed" -ge "$START_LOCALDNS_TIMEOUT" ]; then
+        if [ "$elapsed" -ge "$((START_LOCALDNS_TIMEOUT * 10))" ]; then
             echo "Timed out waiting for CoreDNS to create PID file at ${LOCALDNS_PID_FILE}."
             return 1
         fi
@@ -454,7 +455,7 @@ wait_for_localdns_ready() {
             echo "Localdns failed to come online after $timeout_duration seconds (timeout)."
             return 1
         fi
-        sleep 1
+        sleep 0.1
         ((attempts++))
     done
     echo "Localdns is online and ready to serve traffic."
@@ -588,10 +589,19 @@ add_iptable_rules_to_skip_conntrack_from_pods(){
     ip addr add ${LOCALDNS_CLUSTER_LISTENER_IP}/32 dev localdns
 
     # Add IPtables rules that skip conntrack for DNS connections coming from pods.
+    # Use iptables-restore to batch all rules in a single lock acquisition for performance.
     echo "Adding iptables rules to skip conntrack for queries to localdns."
+    local restore_input="*raw"
     for RULE in "${IPTABLES_RULES[@]}"; do
-        eval "${IPTABLES}" -A "${RULE}"
+        # Extract chain name and remainder, insert comment after chain to match legacy display order.
+        local chain="${RULE%% *}"
+        local rule_rest="${RULE#"$chain" }"
+        restore_input="${restore_input}
+-A ${chain} -m comment --comment \"localdns: skip conntrack\" ${rule_rest}"
     done
+    restore_input="${restore_input}
+COMMIT"
+    echo "${restore_input}" | iptables-restore -w --noflush
 }
 
 # Wait for localdns IP to be removed from resolv.conf after networkctl reload.
@@ -1029,7 +1039,6 @@ replace_azurednsip_in_corefile || exit $ERR_LOCALDNS_FAIL
 
 # Build IPtable rules.
 # ---------------------------------------------------------------------------------------------------------------------
-IPTABLES='iptables -w -t raw -m comment --comment "localdns: skip conntrack"'
 IPTABLES_RULES=()
 build_localdns_iptable_rules
 
@@ -1059,7 +1068,7 @@ fi
 start_localdns || exit $ERR_LOCALDNS_FAIL
 
 # Wait to direct traffic to localdns until it's ready.
-wait_for_localdns_ready 60 60 || exit $ERR_LOCALDNS_FAIL
+wait_for_localdns_ready 600 60 || exit $ERR_LOCALDNS_FAIL
 
 # Disable DNS from DHCP and point the system at localdns.
 # --------------------------------------------------------------------------------------------------------------------
diff --git a/spec/parts/linux/cloud-init/artifacts/localdns_spec.sh b/spec/parts/linux/cloud-init/artifacts/localdns_spec.sh
index d61cf348413..e3ee1908758 100644
--- a/spec/parts/linux/cloud-init/artifacts/localdns_spec.sh
+++ b/spec/parts/linux/cloud-init/artifacts/localdns_spec.sh
@@ -758,7 +758,14 @@ EOF
             LOCALDNS_NODE_LISTENER_IP="10.0.0.1"
             LOCALDNS_CLUSTER_LISTENER_IP="10.0.0.2"
             IPTABLES_RULES=("raw -t raw -p udp --dport 53 -j NOTRACK" "raw -t raw -p tcp --dport 53 -j NOTRACK")
-            IPTABLES="echo iptables"
+            MOCK_BIN_DIR=$(mktemp -d)
+            cat > "${MOCK_BIN_DIR}/iptables-restore" << 'MOCK'
+#!/bin/sh
+echo "iptables-restore called with args: $*"
+cat
+MOCK
+            chmod +x "${MOCK_BIN_DIR}/iptables-restore"
+            export PATH="${MOCK_BIN_DIR}:${PATH}"
         }
         BeforeEach 'setup'
         #------------------------- add_iptable_rules_to_skip_conntrack_from_pods -------------------------------------
@@ -782,11 +789,14 @@ EOF
                         ;;
                 esac
             }
-            Path prepend "$(pwd)"
             When call add_iptable_rules_to_skip_conntrack_from_pods
             The output should include "Adding iptables rules to skip conntrack for queries to localdns."
-            The output should include "iptables -A raw -t raw -p udp --dport 53 -j NOTRACK"
-            The output should include "iptables -A raw -t raw -p tcp --dport 53 -j NOTRACK"
+            The output should include "*raw"
+            The output should include "-A raw -m comment --comment"
+            The output should include "-p udp"
+            The output should include "-p tcp"
+            The output should include "-j NOTRACK"
+            The output should include "COMMIT"
         End
 
         It 'should delete existing localdns interface'
@@ -804,7 +814,6 @@ EOF
                 esac
             }
 
-            Path prepend "$(pwd)"
             When call add_iptable_rules_to_skip_conntrack_from_pods
             The output should include "Interface localdns already exists, deleting it."
             The output should include "Deleting interface: link delete localdns"