diff --git a/app/server/appsmith-server/src/main/java/com/appsmith/server/migrations/db/ce/Migration035RemoveMockDbEndPointInDatasourceInSelfHostedInstance.java b/app/server/appsmith-server/src/main/java/com/appsmith/server/migrations/db/ce/Migration035RemoveMockDbEndPointInDatasourceInSelfHostedInstance.java
new file mode 100644
index 0000000000..1c68fcc069
--- /dev/null
+++ b/app/server/appsmith-server/src/main/java/com/appsmith/server/migrations/db/ce/Migration035RemoveMockDbEndPointInDatasourceInSelfHostedInstance.java
@@ -0,0 +1,53 @@
+package com.appsmith.server.migrations.db.ce;
+
+import com.appsmith.external.models.DatasourceStorage;
+import com.appsmith.server.configurations.CommonConfig;
+import com.appsmith.server.solutions.EnvManager;
+import io.mongock.api.annotations.ChangeUnit;
+import io.mongock.api.annotations.Execution;
+import io.mongock.api.annotations.RollbackExecution;
+import lombok.extern.slf4j.Slf4j;
+import org.springframework.data.mongodb.core.MongoTemplate;
+
+import static org.springframework.data.mongodb.core.query.Criteria.where;
+import static org.springframework.data.mongodb.core.query.Query.query;
+import static org.springframework.data.mongodb.core.query.Update.update;
+
+@Slf4j
+@ChangeUnit(order = "035", id = "remove-mockdb-endpoint-in-datasource-self-hosted-instance", author = " ")
+public class Migration035RemoveMockDbEndPointInDatasourceInSelfHostedInstance {
+
+    private final MongoTemplate mongoTemplate;
+
+    private final CommonConfig commonConfig;
+
+    private final EnvManager envManager;
+
+    public Migration035RemoveMockDbEndPointInDatasourceInSelfHostedInstance(
+            MongoTemplate mongoTemplate, CommonConfig commonConfig, EnvManager envManager) {
+        this.mongoTemplate = mongoTemplate;
+        this.commonConfig = commonConfig;
+        this.envManager = envManager;
+    }
+
+    @RollbackExecution
+    public void rollbackExecution() {}
+
+    @Execution
+    public void removeMockDbEndpointInDatasource() {
+        // This migration is applicable for self-hosted instances only.
+        // The end point used in templates is redirected to internal postgres db
+        // We are now switching to RDS and hence want to remove this endpoint from the datasource and replace it with
+        // localhost, so that the existing queries do not break. And the data stored in the db by users is not lost
+
+        // APPSMITH_ENABLE_EMBEDDED_DB && isCloudHosting
+        boolean isEmbeddedDbEnabled = !"0".equals(System.getenv("APPSMITH_ENABLE_EMBEDDED_DB"));
+        if (isEmbeddedDbEnabled && Boolean.FALSE.equals(commonConfig.isCloudHosting())) {
+
+            mongoTemplate.updateMulti(
+                    query(where("datasourceConfiguration.endpoints.host").is("mockdb.internal.appsmith.com")),
+                    update("datasourceConfiguration.endpoints.$.host", "127.0.0.1"),
+                    DatasourceStorage.class);
+        }
+    }
+}
diff --git a/deploy/docker/fs/opt/appsmith/entrypoint.sh b/deploy/docker/fs/opt/appsmith/entrypoint.sh
index 5ee6981f7a..45223aeea8 100644
--- a/deploy/docker/fs/opt/appsmith/entrypoint.sh
+++ b/deploy/docker/fs/opt/appsmith/entrypoint.sh
@@ -354,8 +354,6 @@ configure_supervisord() {
     fi
     if [[ $runEmbeddedPostgres -eq 1 ]]; then
       cp "$supervisord_conf_source/postgres.conf" "$SUPERVISORD_CONF_TARGET"
-      # Update hosts lookup to resolve to embedded postgres
-      echo '127.0.0.1     mockdb.internal.appsmith.com' >> /etc/hosts
     fi
   fi