diff --git a/ansible_collections/arista/avd/roles/eos_designs/docs/tables/network-services-vrfs-settings.md b/ansible_collections/arista/avd/roles/eos_designs/docs/tables/network-services-vrfs-settings.md
index 27b6d017c0a..503eb1562d5 100644
--- a/ansible_collections/arista/avd/roles/eos_designs/docs/tables/network-services-vrfs-settings.md
+++ b/ansible_collections/arista/avd/roles/eos_designs/docs/tables/network-services-vrfs-settings.md
@@ -30,7 +30,7 @@
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;mlag_ibgp_peering_vlan</samp>](## "<network_services_keys.name>.[].vrfs.[].mlag_ibgp_peering_vlan") | Integer |  |  | Min: 1<br>Max: 4096 | Manually define the VLAN used on the MLAG pair for the iBGP session.<br>By default this parameter is calculated using the following formula: `<mlag_ibgp_peering_vrfs.base_vlan>` + `<vrf_id>` - 1.<br> |
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vtep_diagnostic</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic") | Dictionary |  |  |  | Enable VTEP Network diagnostics.<br>This will create a loopback with virtual source-nat enable to perform diagnostics from the switch.<br> |
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loopback</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback") | Integer |  |  | Min: 2<br>Max: 2100 | Loopback interface number, required when vtep_diagnotics defined.<br> |
-    | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loopback_description</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback_description") | String |  |  |  | Provide a custom description for loopback interface. |
+    | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loopback_description</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback_description") | String |  |  |  | Provide a custom description or description template to be used on the VRF diagnostic loopback interface.<br>This can be a template using the format string syntax.<br>The available template fields are:<br>  - `interface`: The Loopback interface name.<br>  - `vrf`: The VRF name.<br>  - `tenant`: The tenant name.<br><br>The default description is set by `default_vrf_diag_loopback_description`.<br>By default the description is templated from the VRF name. |
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loopback_ip_range</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback_ip_range") | String |  |  |  | IPv4_address/Mask.<br>Loopback ip range, a unique ip is derived from this ranged and assignedto each l3 leaf based on it's unique id.<br>Loopback is not created unless loopback_ip_range or loopback_ip_pools are set.<br> |
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;loopback_ip_pools</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback_ip_pools") | List, items: Dictionary |  |  |  | For inventories with multiple PODs a loopback range can be set per POD to avoid overlaps.<br>This only takes effect when loopback_ip_range is not defined, ptional (loopback is not created unless loopback_ip_range or loopback_ip_pools are set).<br> |
     | [<samp>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;pod</samp>](## "<network_services_keys.name>.[].vrfs.[].vtep_diagnostic.loopback_ip_pools.[].pod") | String |  |  |  | POD name. |
@@ -179,7 +179,15 @@
               # Loopback interface number, required when vtep_diagnotics defined.
               loopback: <int; 2-2100>
 
-              # Provide a custom description for loopback interface.
+              # Provide a custom description or description template to be used on the VRF diagnostic loopback interface.
+              # This can be a template using the format string syntax.
+              # The available template fields are:
+              #   - `interface`: The Loopback interface name.
+              #   - `vrf`: The VRF name.
+              #   - `tenant`: The tenant name.
+              #
+              # The default description is set by `default_vrf_diag_loopback_description`.
+              # By default the description is templated from the VRF name.
               loopback_description: <str>
 
               # IPv4_address/Mask.
diff --git a/python-avd/pyavd/_eos_designs/schema/eos_designs.schema.yml b/python-avd/pyavd/_eos_designs/schema/eos_designs.schema.yml
index 4867e4c6591..1055b13ada9 100644
--- a/python-avd/pyavd/_eos_designs/schema/eos_designs.schema.yml
+++ b/python-avd/pyavd/_eos_designs/schema/eos_designs.schema.yml
@@ -6391,7 +6391,13 @@ $defs:
                     max: 2100
                   loopback_description:
                     type: str
-                    description: Provide a custom description for loopback interface.
+                    description: "Provide a custom description or description template
+                      to be used on the VRF diagnostic loopback interface.\nThis can
+                      be a template using the format string syntax.\nThe available
+                      template fields are:\n  - `interface`: The Loopback interface
+                      name.\n  - `vrf`: The VRF name.\n  - `tenant`: The tenant name.\n\nThe
+                      default description is set by `default_vrf_diag_loopback_description`.\nBy
+                      default the description is templated from the VRF name."
                   loopback_ip_range:
                     type: str
                     description: 'IPv4_address/Mask.
diff --git a/python-avd/pyavd/_eos_designs/schema/schema_fragments/defs_network_services.schema.yml b/python-avd/pyavd/_eos_designs/schema/schema_fragments/defs_network_services.schema.yml
index f65ace97ef1..0ba249aa909 100644
--- a/python-avd/pyavd/_eos_designs/schema/schema_fragments/defs_network_services.schema.yml
+++ b/python-avd/pyavd/_eos_designs/schema/schema_fragments/defs_network_services.schema.yml
@@ -425,7 +425,17 @@ $defs:
                     max: 2100
                   loopback_description:
                     type: str
-                    description: Provide a custom description for loopback interface.
+                    # TODO: Insert link to format string syntax article.
+                    description: |-
+                      Provide a custom description or description template to be used on the VRF diagnostic loopback interface.
+                      This can be a template using the format string syntax.
+                      The available template fields are:
+                        - `interface`: The Loopback interface name.
+                        - `vrf`: The VRF name.
+                        - `tenant`: The tenant name.
+
+                      The default description is set by `default_vrf_diag_loopback_description`.
+                      By default the description is templated from the VRF name.
                   loopback_ip_range:
                     type: str
                     description: |