diff --git a/cmd/cloudflared/tunnel/cmd.go b/cmd/cloudflared/tunnel/cmd.go
index 8bb331aa..f9407c8f 100644
--- a/cmd/cloudflared/tunnel/cmd.go
+++ b/cmd/cloudflared/tunnel/cmd.go
@@ -296,7 +296,7 @@ func StartServer(
 	}()
 
 	// Serve DNS proxy stand-alone if no hostname or tag or app is going to run
-	if dnsProxyStandAlone(c) {
+	if dnsProxyStandAlone(c, namedTunnel) {
 		connectedSignal.Notify()
 		// no grace period, handle SIGINT/SIGTERM immediately
 		return waitToShutdown(&wg, cancel, errC, graceShutdownC, 0, log)
diff --git a/cmd/cloudflared/tunnel/configuration.go b/cmd/cloudflared/tunnel/configuration.go
index 38b74d7c..c2be5784 100644
--- a/cmd/cloudflared/tunnel/configuration.go
+++ b/cmd/cloudflared/tunnel/configuration.go
@@ -85,8 +85,8 @@ func logClientOptions(c *cli.Context, log *zerolog.Logger) {
 	}
 }
 
-func dnsProxyStandAlone(c *cli.Context) bool {
-	return c.IsSet("proxy-dns") && (!c.IsSet("hostname") && !c.IsSet("tag") && !c.IsSet("hello-world"))
+func dnsProxyStandAlone(c *cli.Context, namedTunnel *connection.NamedTunnelConfig) bool {
+	return c.IsSet("proxy-dns") && (!c.IsSet("hostname") && !c.IsSet("tag") && !c.IsSet("hello-world") && namedTunnel == nil)
 }
 
 func findOriginCert(originCertPath string, log *zerolog.Logger) (string, error) {
diff --git a/component-tests/conftest.py b/component-tests/conftest.py
index 799914b5..386fc1dc 100644
--- a/component-tests/conftest.py
+++ b/component-tests/conftest.py
@@ -20,11 +20,21 @@ def component_tests_config():
         LOGGER.info(f"component tests base config {config}")
 
         def _component_tests_config(additional_config={}, named_tunnel=True):
+
+            # Regression test for TUN-4177, running with proxy-dns should not prevent tunnels from running
+            additional_config["proxy-dns"] = True
+            additional_config["proxy-dns-port"] = 9053
+
             if named_tunnel:
                 return NamedTunnelConfig(additional_config=additional_config,
-                                         cloudflared_binary=config['cloudflared_binary'], tunnel=config['tunnel'], credentials_file=config['credentials_file'],  ingress=config['ingress'])
+                                         cloudflared_binary=config['cloudflared_binary'],
+                                         tunnel=config['tunnel'],
+                                         credentials_file=config['credentials_file'],
+                                         ingress=config['ingress'])
+
             return ClassicTunnelConfig(
-                additional_config=additional_config, cloudflared_binary=config['cloudflared_binary'], hostname=config['classic_hostname'], origincert=config['origincert'])
+                additional_config=additional_config, cloudflared_binary=config['cloudflared_binary'],
+                hostname=config['classic_hostname'], origincert=config['origincert'])
 
         return _component_tests_config
 
diff --git a/component-tests/test_logging.py b/component-tests/test_logging.py
index dcee7989..d464d5ca 100644
--- a/component-tests/test_logging.py
+++ b/component-tests/test_logging.py
@@ -11,13 +11,13 @@ expect_message = "Starting Hello World server"
 
 
 def assert_log_to_terminal(cloudflared):
-    stderr = cloudflared.stderr.read(1250)
+    stderr = cloudflared.stderr.read(1500)
     assert expect_message.encode() in stderr, f"{stderr} doesn't contain {expect_message}"
 
 
 def assert_log_in_file(file):
     with open(file, "r") as f:
-        log = f.read(1500)
+        log = f.read(1850)
         assert expect_message in log, f"{log} doesn't contain {expect_message}"