diff --git a/components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml b/components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml.j2
similarity index 79%
rename from components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml
rename to components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml.j2
index 7687b1c..1384f56 100644
--- a/components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml
+++ b/components/common/salt/state/monitoring/otelcol/etc/otel-collector-config.yaml.j2
@@ -42,18 +42,10 @@ processors:
     attributes:
       - key: "url.domain"
         action: "insert"
-        ### The following section will be updated by init_logging_facilities in common.sh
-        ### BEGIN AUTO SECTION, DO NOT EDIT
-        # This is the domain of the URL that the logs are coming from
-        value: "<URL_DOMAIN>"
-        ### END AUTO SECTION
+        value: "{{ grains.get('otel_guest_ip', '<GUEST_IP>') }}"
       - key: "lit.subnet.id"
         action: "insert"
-        ### The following section will be updated by init_logging_facilities in common.sh
-        ### BEGIN AUTO SECTION, DO NOT EDIT
-        # This is the subnet ID of the GCP project
-        value: "<SUBNET_ID>"
-        ### END AUTO SECTION
+        value: "{{ grains.get('otel_guest_subnet_id', '<SUBNET_ID>') }}"
 
 exporters:
   googlecloud:
diff --git a/components/common/salt/state/monitoring/otelcol/init.sls b/components/common/salt/state/monitoring/otelcol/init.sls
index 80842b5..ee85ec8 100644
--- a/components/common/salt/state/monitoring/otelcol/init.sls
+++ b/components/common/salt/state/monitoring/otelcol/init.sls
@@ -38,7 +38,8 @@ print_otelcol_notification:
 
 /etc/monitoring/otelcol/otel-collector-config.yaml:
   file.managed:
-    - source: salt://monitoring/otelcol/etc/otel-collector-config.yaml
+    - source: salt://monitoring/otelcol/etc/otel-collector-config.yaml.j2
+    - template: jinja
     - mode: 0644
     - makedirs: True
 
diff --git a/components/guest/instance/common.sh b/components/guest/instance/common.sh
index 49b713d..79cfaa5 100755
--- a/components/guest/instance/common.sh
+++ b/components/guest/instance/common.sh
@@ -187,13 +187,16 @@ services:
       - ${INSTANCE_LOGS_DIR}:/logs
 EOF
 
-  # We also need to update the latest guest / subnet information in the otelcol config file.
-  local otel_collector_config_file="/etc/monitoring/otelcol/otel-collector-config.yaml"
+  # Set Salt grains with the guest's subnet and IP information for OTEL Collector config.
   # Extract IP without CIDR notation (remove /XX suffix)
   local ip_no_cidr="${NET4_IP%/*}"
-  sed -i "/# This is the domain of the URL that the logs are coming from/{n;s|.*|        value: \"${ip_no_cidr}\"|}" ${otel_collector_config_file}
-  sed -i "/# This is the subnet ID of the GCP project/{n;s|.*|        value: \"${local_subnet_id}\"|}" ${otel_collector_config_file}
 
-  systemctl stop otelcol
-  systemctl start otelcol
+  # Set grains for otel-collector config template
+  salt-call --local grains.setval otel_guest_ip "${ip_no_cidr}"
+  salt-call --local grains.setval otel_guest_subnet_id "${local_subnet_id}"
+
+  # Re-apply the otelcol state to regenerate the config with new grain values
+  salt-call --local state.apply monitoring.otelcol
+
+  systemctl restart otelcol
 }