diff --git a/docs/how-it-works/policies/network-rules.mdx b/docs/how-it-works/policies/network-rules.mdx
index 5b3b366458..bcaba59218 100644
--- a/docs/how-it-works/policies/network-rules.mdx
+++ b/docs/how-it-works/policies/network-rules.mdx
@@ -353,8 +353,11 @@ OpenShell blocks connections to private network addresses by default to prevent
 server-side request forgery (SSRF). An endpoint with an exact hostname can still
 reach the private addresses that its hostname resolves to, unless the endpoint
 comes from an approved [policy advisor](/how-it-works/policies/advisor)
-proposal. Loopback, link-local, and unspecified addresses, including the cloud
-metadata address `169.254.169.254`, are always blocked.
+proposal. Network policy never authorizes an outbound endpoint whose destination
+is loopback, link-local, or unspecified, including the cloud metadata address
+`169.254.169.254`. This restriction does not apply to sandbox-local loopback
+connections: a workload can reach a service listening on `127.0.0.1` in the
+same sandbox.
 
 Use `allowed_ips` to limit the addresses an endpoint can reach, or to let a
 wildcard host such as `*.internal.example` reach private addresses. This rule
diff --git a/docs/how-it-works/policies/schema.mdx b/docs/how-it-works/policies/schema.mdx
index 505a0a7838..a4801b0b0a 100644
--- a/docs/how-it-works/policies/schema.mdx
+++ b/docs/how-it-works/policies/schema.mdx
@@ -137,13 +137,16 @@ reach the private addresses they resolve to, unless the endpoint comes from an
 approved policy advisor proposal. Wildcard and hostless endpoints can reach
 private addresses only through `allowed_ips`.
 
-Loopback, link-local, and unspecified addresses, including the cloud metadata
-address `169.254.169.254`, are always blocked. `openshell policy update` rejects
-an `allowed_ips` entry that overlaps them, and in a complete policy such an
-entry blocks every connection to the endpoint. OpenShell also blocks the
-Kubernetes and etcd control-plane ports 2379, 2380, 6443, 10250, and 10255 on
-endpoints that use an exact hostname, an IP address, or `allowed_ips`. A rule
-for `host.openshell.internal` can still reach services on the gateway host.
+Network policy never authorizes an outbound endpoint whose destination is
+loopback, link-local, or unspecified, including the cloud metadata address
+`169.254.169.254`. This does not prevent a workload from connecting to a
+sandbox-local service listening on loopback. `openshell policy update` rejects
+an `allowed_ips` entry that overlaps the blocked ranges, and in a complete
+policy such an entry blocks every connection to the endpoint. OpenShell also
+blocks the Kubernetes and etcd control-plane ports 2379, 2380, 6443, 10250,
+and 10255 on endpoints that use an exact hostname, an IP address, or
+`allowed_ips`. A rule for `host.openshell.internal` can still reach services on
+the gateway host.
 
 #### Inspection Fields
 
diff --git a/docs/observability/logging.mdx b/docs/observability/logging.mdx
index b41c40c885..e9b6a03845 100644
--- a/docs/observability/logging.mdx
+++ b/docs/observability/logging.mdx
@@ -194,7 +194,7 @@ Common reason phrases emitted by the sandbox include:
 | Reason | Meaning |
 |---|---|
 | `no matching policy` | OPA evaluated the request and no allow rule matched. |
-| `resolves to always-blocked address` | The destination resolved to loopback, link-local, or unspecified. These ranges are always blocked, even when listed in `allowed_ips`. |
+| `resolves to always-blocked address` | An outbound policy endpoint resolved to loopback, link-local, or unspecified. Network policy cannot authorize these destinations, even when they appear in `allowed_ips`; sandbox-local loopback connections do not use this policy path. |
 | `resolves to <ip> which is not in allowed_ips, connection rejected` | The destination resolved to an IP outside the policy's `allowed_ips` allowlist. |
 | `DNS resolution failed for <host>:<port>` | The proxy could not resolve the destination. |
 | `port <n> is a blocked control-plane port, connection rejected` | The destination port matches a control-plane port (etcd, Kubernetes API, kubelet) and is always blocked. |