diff --git a/playbooks/roles/bifrost-ironic-install/templates/dnsmasq.conf.j2 b/playbooks/roles/bifrost-ironic-install/templates/dnsmasq.conf.j2
index 919ef3aac..8619ddb1e 100644
--- a/playbooks/roles/bifrost-ironic-install/templates/dnsmasq.conf.j2
+++ b/playbooks/roles/bifrost-ironic-install/templates/dnsmasq.conf.j2
@@ -45,6 +45,7 @@ conf-dir=/etc/dnsmasq.d
 {% if inventory_dhcp %}
 addn-hosts=/etc/dnsmasq.d/bifrost.hosts.d
 dhcp-hostsfile=/etc/dnsmasq.d/bifrost.dhcp-hosts.d
+dhcp-ignore=tag:!known
 {% endif %}
 
 # Set the domain for dnsmasq. this is optional, but if it is set, it
diff --git a/releasenotes/notes/dhcp_ignore_inventory_dhcp-44668e3fe710c134.yaml b/releasenotes/notes/dhcp_ignore_inventory_dhcp-44668e3fe710c134.yaml
new file mode 100644
index 000000000..8944ff185
--- /dev/null
+++ b/releasenotes/notes/dhcp_ignore_inventory_dhcp-44668e3fe710c134.yaml
@@ -0,0 +1,4 @@
+---
+fixes:
+  - Dnsmasq option was added to only offer DHCP leases
+    to known mac addresses when inventory_dhcp is being used.