diff --git a/CHANGELOG.md b/CHANGELOG.md
index fb1a6370f..40c29b3ea 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -6,6 +6,8 @@
 
 ### Bug Fixes:
 
+- fix(compute/serve): persist default `override_host` to `fastly.toml` for Viceroy and log when applied ([#1940](https://github.com/fastly/cli/pull/1940))
+
 ### Enhancements:
 
 ### Dependencies:
diff --git a/pkg/commands/compute/serve.go b/pkg/commands/compute/serve.go
index 26b4dc49a..c95a311a2 100644
--- a/pkg/commands/compute/serve.go
+++ b/pkg/commands/compute/serve.go
@@ -174,8 +174,6 @@ func (c *ServeCommand) Exec(in io.Reader, out io.Writer) (err error) {
 		text.Break(out)
 	}
 
-	c.setBackendsWithDefaultOverrideHostIfMissing(out)
-
 	spinner, err := text.NewSpinner(out)
 	if err != nil {
 		return err
@@ -204,6 +202,10 @@ func (c *ServeCommand) Exec(in io.Reader, out io.Writer) (err error) {
 		}
 	}
 
+	if err := c.setBackendsWithDefaultOverrideHostIfMissing(out, manifestPath); err != nil {
+		return err
+	}
+
 	bin, err := c.GetViceroy(spinner, out, manifestPath)
 	if err != nil {
 		return err
@@ -338,21 +340,28 @@ func (c *ServeCommand) Build(in io.Reader, out io.Writer) error {
 // local_server.backends that is missing that property. The value will only be
 // set if the URL defined uses a hostname (e.g. http://127.0.0.1/ won't) so we
 // can set the override_host to match the hostname.
-func (c *ServeCommand) setBackendsWithDefaultOverrideHostIfMissing(out io.Writer) {
+//
+// Viceroy reads backend configuration from the manifest file on disk, so any
+// defaults applied here are written back to manifestPath before Viceroy starts.
+func (c *ServeCommand) setBackendsWithDefaultOverrideHostIfMissing(out io.Writer, manifestPath string) error {
+	updated := false
 	for k, backend := range c.Globals.Manifest.File.LocalServer.Backends {
 		if backend.OverrideHost == "" {
 			if u, err := url.Parse(backend.URL); err == nil {
 				segs := strings.Split(u.Host, ":") // avoid parsing IP with port
 				if ip := net.ParseIP(segs[0]); ip == nil {
-					if c.Globals.Verbose() {
-						text.Info(out, "[local_server.backends.%s] (%s) is configured without an `override_host`. We will use %s as a default to help avoid any unexpected errors. See https://www.fastly.com/documentation/reference/compute/fastly-toml#local-server for more details.", k, backend.URL, u.Host)
-					}
+					text.Info(out, "[local_server.backends.%s] (%s) is configured without an `override_host`. We will use %s as a default to help avoid any unexpected errors. See https://www.fastly.com/documentation/reference/compute/fastly-toml#local-server for more details.", k, backend.URL, u.Host)
 					backend.OverrideHost = u.Host
 					c.Globals.Manifest.File.LocalServer.Backends[k] = backend
+					updated = true
 				}
 			}
 		}
 	}
+	if !updated {
+		return nil
+	}
+	return c.Globals.Manifest.File.Write(manifestPath)
 }
 
 // GetViceroy returns the path to the installed binary.
diff --git a/pkg/commands/compute/serve_internal_test.go b/pkg/commands/compute/serve_internal_test.go
index e2007d64f..b18bade8d 100644
--- a/pkg/commands/compute/serve_internal_test.go
+++ b/pkg/commands/compute/serve_internal_test.go
@@ -1,9 +1,17 @@
 package compute
 
 import (
+	"bytes"
+	"os"
+	"path/filepath"
+	"strings"
 	"testing"
 
 	"github.com/fsnotify/fsnotify"
+
+	"github.com/fastly/cli/pkg/argparser"
+	"github.com/fastly/cli/pkg/global"
+	"github.com/fastly/cli/pkg/manifest"
 )
 
 // TestIsContentChange checks that content/existence events trigger a rebuild and
@@ -30,3 +38,47 @@ func TestIsContentChange(t *testing.T) {
 		})
 	}
 }
+
+func TestSetBackendsWithDefaultOverrideHostIfMissingWritesManifest(t *testing.T) {
+	dir := t.TempDir()
+	manifestPath := filepath.Join(dir, "fastly.toml")
+	const initial = `manifest_version = "3.0.0"
+name = "test"
+
+[local_server.backends.http-me]
+url = "https://http-me.glitch.me"
+`
+	if err := os.WriteFile(manifestPath, []byte(initial), 0o600); err != nil {
+		t.Fatal(err)
+	}
+
+	var file manifest.File
+	if err := file.Read(manifestPath); err != nil {
+		t.Fatal(err)
+	}
+
+	c := &ServeCommand{
+		Base: argparser.Base{
+			Globals: &global.Data{
+				Manifest: &manifest.Data{File: file},
+			},
+		},
+	}
+
+	var out bytes.Buffer
+	if err := c.setBackendsWithDefaultOverrideHostIfMissing(&out, manifestPath); err != nil {
+		t.Fatal(err)
+	}
+
+	written, err := os.ReadFile(manifestPath)
+	if err != nil {
+		t.Fatal(err)
+	}
+	body := string(written)
+	if !strings.Contains(body, "override_host") || !strings.Contains(body, "http-me.glitch.me") {
+		t.Fatalf("expected override_host persisted in manifest, got:\n%s", body)
+	}
+	if !strings.Contains(out.String(), "http-me.glitch.me") {
+		t.Fatalf("expected override_host info message, got: %q", out.String())
+	}
+}