diff --git a/src/backend/distributed/shared_library_init.c b/src/backend/distributed/shared_library_init.c
index ea1f33810..9854ecc34 100644
--- a/src/backend/distributed/shared_library_init.c
+++ b/src/backend/distributed/shared_library_init.c
@@ -1992,7 +1992,7 @@ RegisterCitusConfigVariables(void)
 			"When enabled, rebalancer propagates all the allowed GUC settings to new connections."),
 		NULL,
 		&PropagateSessionSettingsForLoopbackConnection,
-		true,
+		false,
 		PGC_USERSET,
 		GUC_NO_SHOW_ALL,
 		NULL, NULL, NULL);
diff --git a/src/test/regress/expected/shard_rebalancer.out b/src/test/regress/expected/shard_rebalancer.out
index 79de1bdf7..baeee5fd7 100644
--- a/src/test/regress/expected/shard_rebalancer.out
+++ b/src/test/regress/expected/shard_rebalancer.out
@@ -2,6 +2,7 @@
 -- MUTLI_SHARD_REBALANCER
 --
 SET citus.next_shard_id TO 433000;
+SET citus.propagate_session_settings_for_loopback_connection TO ON;
 CREATE TABLE ref_table_test(a int primary key);
 SELECT create_reference_table('ref_table_test');
  create_reference_table
@@ -214,6 +215,8 @@ NOTICE:  issuing SET LOCAL citus.next_shard_id TO '433105';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.node_connection_timeout TO '35000';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
+NOTICE:  issuing SET LOCAL citus.propagate_session_settings_for_loopback_connection TO 'on';
+DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_count TO '4';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_replication_factor TO '2';
@@ -235,6 +238,8 @@ NOTICE:  issuing SET LOCAL citus.next_shard_id TO '433105';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.node_connection_timeout TO '35000';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
+NOTICE:  issuing SET LOCAL citus.propagate_session_settings_for_loopback_connection TO 'on';
+DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_count TO '4';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_replication_factor TO '2';
@@ -256,6 +261,8 @@ NOTICE:  issuing SET LOCAL citus.next_shard_id TO '433105';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.node_connection_timeout TO '35000';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
+NOTICE:  issuing SET LOCAL citus.propagate_session_settings_for_loopback_connection TO 'on';
+DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_count TO '4';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_replication_factor TO '2';
@@ -277,6 +284,8 @@ NOTICE:  issuing SET LOCAL citus.next_shard_id TO '433105';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.node_connection_timeout TO '35000';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
+NOTICE:  issuing SET LOCAL citus.propagate_session_settings_for_loopback_connection TO 'on';
+DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_count TO '4';
 DETAIL:  on server postgres@localhost:xxxxx connectionId: xxxxxxx
 NOTICE:  issuing SET LOCAL citus.shard_replication_factor TO '2';
diff --git a/src/test/regress/sql/shard_rebalancer.sql b/src/test/regress/sql/shard_rebalancer.sql
index 47807421e..a5141813b 100644
--- a/src/test/regress/sql/shard_rebalancer.sql
+++ b/src/test/regress/sql/shard_rebalancer.sql
@@ -3,6 +3,7 @@
 --
 
 SET citus.next_shard_id TO 433000;
+SET citus.propagate_session_settings_for_loopback_connection TO ON;
 
 CREATE TABLE ref_table_test(a int primary key);
 SELECT create_reference_table('ref_table_test');