diff --git a/pkg/operator/options/options.go b/pkg/operator/options/options.go
index 84d9c38c5268..25b33a50c16a 100644
--- a/pkg/operator/options/options.go
+++ b/pkg/operator/options/options.go
@@ -42,6 +42,7 @@ type Options struct {
 	VMMemoryOverheadPercent float64
 	InterruptionQueue       string
 	ReservedENIs            int
+	MaxPodsExtraCapacity    int
 }
 
 func (o *Options) AddFlags(fs *coreoptions.FlagSet) {
@@ -54,6 +55,7 @@ func (o *Options) AddFlags(fs *coreoptions.FlagSet) {
 	fs.Float64Var(&o.VMMemoryOverheadPercent, "vm-memory-overhead-percent", env.WithDefaultFloat64("VM_MEMORY_OVERHEAD_PERCENT", 0.075), "The VM memory overhead as a percent that will be subtracted from the total memory for all instance types.")
 	fs.StringVar(&o.InterruptionQueue, "interruption-queue", env.WithDefaultString("INTERRUPTION_QUEUE", ""), "Interruption queue is disabled if not specified. Enabling interruption handling may require additional permissions on the controller service account. Additional permissions are outlined in the docs.")
 	fs.IntVar(&o.ReservedENIs, "reserved-enis", env.WithDefaultInt("RESERVED_ENIS", 0), "Reserved ENIs are not included in the calculations for max-pods or kube-reserved. This is most often used in the VPC CNI custom networking setup https://docs.aws.amazon.com/eks/latest/userguide/cni-custom-network.html.")
+	fs.IntVar(&o.MaxPodsExtraCapacity, "max-pods-extra-capacity", env.WithDefaultInt("MAX_PODS_EXTRA_CAPACITY", 2), "Extra pod capacity allocatable on nodes due to host networked pods that do not consume ENIs. The default is for aws-cni and kube-proxy pods, which are not included in the calculations for max-pods or kube-reserved.")
 }
 
 func (o *Options) Parse(fs *coreoptions.FlagSet, args ...string) error {
diff --git a/pkg/operator/options/options_validation.go b/pkg/operator/options/options_validation.go
index 1c4a733700ec..55893722b247 100644
--- a/pkg/operator/options/options_validation.go
+++ b/pkg/operator/options/options_validation.go
@@ -28,6 +28,7 @@ func (o Options) Validate() error {
 		o.validateVMMemoryOverheadPercent(),
 		o.validateAssumeRoleDuration(),
 		o.validateReservedENIs(),
+		o.validateMaxPodsExtraCapacity(),
 		o.validateRequiredFields(),
 	)
 }
@@ -66,6 +67,13 @@ func (o Options) validateReservedENIs() error {
 	return nil
 }
 
+func (o Options) validateMaxPodsExtraCapacity() error {
+	if o.MaxPodsExtraCapacity < 0 {
+		return fmt.Errorf("max-pods-extra-capacity cannot be negative")
+	}
+	return nil
+}
+
 func (o Options) validateRequiredFields() error {
 	if o.ClusterName == "" {
 		return fmt.Errorf("missing field, cluster-name")
diff --git a/pkg/operator/options/suite_test.go b/pkg/operator/options/suite_test.go
index 6b7e39715149..266110114497 100644
--- a/pkg/operator/options/suite_test.go
+++ b/pkg/operator/options/suite_test.go
@@ -65,7 +65,8 @@ var _ = Describe("Options", func() {
 			"--isolated-vpc",
 			"--vm-memory-overhead-percent", "0.1",
 			"--interruption-queue", "env-cluster",
-			"--reserved-enis", "10")
+			"--reserved-enis", "10",
+			"--max-pods-extra-capacity", "1")
 		Expect(err).ToNot(HaveOccurred())
 		expectOptionsEqual(opts, test.Options(test.OptionsFields{
 			AssumeRoleARN:           lo.ToPtr("env-role"),
@@ -77,6 +78,7 @@ var _ = Describe("Options", func() {
 			VMMemoryOverheadPercent: lo.ToPtr[float64](0.1),
 			InterruptionQueue:       lo.ToPtr("env-cluster"),
 			ReservedENIs:            lo.ToPtr(10),
+			MaxPodsExtraCapacity:    lo.ToPtr(1),
 		}))
 	})
 	It("should correctly fallback to env vars when CLI flags aren't set", func() {
@@ -89,6 +91,7 @@ var _ = Describe("Options", func() {
 		os.Setenv("VM_MEMORY_OVERHEAD_PERCENT", "0.1")
 		os.Setenv("INTERRUPTION_QUEUE", "env-cluster")
 		os.Setenv("RESERVED_ENIS", "10")
+		os.Setenv("MAX_PODS_EXTRA_CAPACITY", "1")
 
 		// Add flags after we set the environment variables so that the parsing logic correctly refers
 		// to the new environment variable values
@@ -105,6 +108,7 @@ var _ = Describe("Options", func() {
 			VMMemoryOverheadPercent: lo.ToPtr[float64](0.1),
 			InterruptionQueue:       lo.ToPtr("env-cluster"),
 			ReservedENIs:            lo.ToPtr(10),
+			MaxPodsExtraCapacity:    lo.ToPtr(1),
 		}))
 	})
 
@@ -132,6 +136,10 @@ var _ = Describe("Options", func() {
 			err := opts.Parse(fs, "--cluster-name", "test-cluster", "--reserved-enis", "-1")
 			Expect(err).To(HaveOccurred())
 		})
+		It("should fail when maxPodsExtraCapacity is negative", func() {
+			err := opts.Parse(fs, "--cluster-name", "test-cluster", "--max-pods-extra-capacity", "-1")
+			Expect(err).To(HaveOccurred())
+		})
 	})
 })
 
@@ -146,4 +154,5 @@ func expectOptionsEqual(optsA *options.Options, optsB *options.Options) {
 	Expect(optsA.VMMemoryOverheadPercent).To(Equal(optsB.VMMemoryOverheadPercent))
 	Expect(optsA.InterruptionQueue).To(Equal(optsB.InterruptionQueue))
 	Expect(optsA.ReservedENIs).To(Equal(optsB.ReservedENIs))
+	Expect(optsA.MaxPodsExtraCapacity).To(Equal(optsB.MaxPodsExtraCapacity))
 }
diff --git a/pkg/providers/instancetype/types.go b/pkg/providers/instancetype/types.go
index 6cebec2f523b..fbbff2e71aa2 100644
--- a/pkg/providers/instancetype/types.go
+++ b/pkg/providers/instancetype/types.go
@@ -331,7 +331,7 @@ func ENILimitedPods(ctx context.Context, info *ec2.InstanceTypeInfo) *resource.Q
 		return resource.NewQuantity(0, resource.DecimalSI)
 	}
 	addressesPerInterface := *info.NetworkInfo.Ipv4AddressesPerInterface
-	return resources.Quantity(fmt.Sprint(usableNetworkInterfaces*(addressesPerInterface-1) + 2))
+	return resources.Quantity(fmt.Sprint(usableNetworkInterfaces*(addressesPerInterface-1) + int64(options.FromContext(ctx).MaxPodsExtraCapacity)))
 }
 
 func privateIPv4Address(info *ec2.InstanceTypeInfo) *resource.Quantity {
diff --git a/pkg/test/options.go b/pkg/test/options.go
index 4657f28e9c53..585241496c2d 100644
--- a/pkg/test/options.go
+++ b/pkg/test/options.go
@@ -34,6 +34,7 @@ type OptionsFields struct {
 	VMMemoryOverheadPercent *float64
 	InterruptionQueue       *string
 	ReservedENIs            *int
+	MaxPodsExtraCapacity    *int
 }
 
 func Options(overrides ...OptionsFields) *options.Options {
@@ -53,5 +54,6 @@ func Options(overrides ...OptionsFields) *options.Options {
 		VMMemoryOverheadPercent: lo.FromPtrOr(opts.VMMemoryOverheadPercent, 0.075),
 		InterruptionQueue:       lo.FromPtrOr(opts.InterruptionQueue, ""),
 		ReservedENIs:            lo.FromPtrOr(opts.ReservedENIs, 0),
+		MaxPodsExtraCapacity:    lo.FromPtrOr(opts.MaxPodsExtraCapacity, 2),
 	}
 }