diff --git a/daemon/cmd/status.go b/daemon/cmd/status.go
index 4ceeddf473f55..df76d29d058ae 100644
--- a/daemon/cmd/status.go
+++ b/daemon/cmd/status.go
@@ -596,6 +596,14 @@ func (d *Daemon) startStatusCollector(cleaner *daemonCleanup) {
 				}
 
 				if kvstore, ok := status.Data.(*models.Status); ok {
+					if kvstore.State == models.StatusStateWarning && option.Config.KVstorePodNetworkSupport {
+						// Don't treat warnings as errors when the support for running
+						// etcd in pod network is enabled. This is necessary to allow
+						// Cilium turning ready even before connecting to the kvstore,
+						// and break the chicken-and-egg dependency during startup.
+						kvstore.State = models.StatusStateOk
+					}
+
 					d.statusResponse.Kvstore = kvstore
 				}
 			},
diff --git a/operator/api/health.go b/operator/api/health.go
index 8ce23cd108a57..e4d74b792dc90 100644
--- a/operator/api/health.go
+++ b/operator/api/health.go
@@ -16,6 +16,7 @@ import (
 	k8sClient "github.com/cilium/cilium/pkg/k8s/client"
 	"github.com/cilium/cilium/pkg/kvstore"
 	"github.com/cilium/cilium/pkg/logging/logfields"
+	"github.com/cilium/cilium/pkg/option"
 )
 
 type kvstoreEnabledFunc func() bool
@@ -86,7 +87,12 @@ func (h *healthHandler) checkStatus() error {
 		}
 
 		status := client.Status()
-		if status.State != models.StatusStateOk {
+		if status.State != models.StatusStateOk &&
+			// Don't treat warnings as errors when the support for running
+			// etcd in pod network is enabled. This is necessary to allow
+			// Cilium turning ready even before connecting to the kvstore,
+			// and break the chicken-and-egg dependency during startup.
+			!(status.State == models.StatusStateWarning && option.Config.KVstorePodNetworkSupport) {
 			return errors.New(status.Msg)
 		}
 	}
diff --git a/pkg/kvstore/etcd.go b/pkg/kvstore/etcd.go
index 2fd8ef0469015..75dde84877d80 100644
--- a/pkg/kvstore/etcd.go
+++ b/pkg/kvstore/etcd.go
@@ -544,7 +544,7 @@ func connectEtcdClient(ctx context.Context, config *client.Config, cfgPath strin
 		configPath:   cfgPath,
 		firstSession: make(chan struct{}),
 		status: models.Status{
-			State: models.StatusStateOk,
+			State: models.StatusStateWarning,
 			Msg:   "Waiting for initial connection to be established",
 		},
 		stopStatusChecker: make(chan struct{}),