diff --git a/include/zephyr/net/ppp.h b/include/zephyr/net/ppp.h
index a2f58825c358..82e026483806 100644
--- a/include/zephyr/net/ppp.h
+++ b/include/zephyr/net/ppp.h
@@ -353,7 +353,11 @@ struct ppp_my_option_data {
 	uint32_t flags;
 };
 
+#if defined(CONFIG_NET_L2_PPP_OPTION_DNS_USE)
 #define IPCP_NUM_MY_OPTIONS	3
+#else
+#define IPCP_NUM_MY_OPTIONS	1
+#endif
 #define IPV6CP_NUM_MY_OPTIONS	1
 
 enum ppp_flags {
diff --git a/subsys/net/l2/ppp/ipcp.c b/subsys/net/l2/ppp/ipcp.c
index 35b7bac018bc..320b78a0c0c3 100644
--- a/subsys/net/l2/ppp/ipcp.c
+++ b/subsys/net/l2/ppp/ipcp.c
@@ -42,16 +42,6 @@ static int ipcp_add_ip_address(struct ppp_context *ctx, struct net_pkt *pkt)
 	return ipcp_add_address(ctx, pkt, &ctx->ipcp.my_options.address);
 }
 
-static int ipcp_add_dns1(struct ppp_context *ctx, struct net_pkt *pkt)
-{
-	return ipcp_add_address(ctx, pkt, &ctx->ipcp.my_options.dns1_address);
-}
-
-static int ipcp_add_dns2(struct ppp_context *ctx, struct net_pkt *pkt)
-{
-	return ipcp_add_address(ctx, pkt, &ctx->ipcp.my_options.dns2_address);
-}
-
 static int ipcp_ack_check_address(struct net_pkt *pkt, size_t oplen,
 				  struct in_addr *addr)
 {
@@ -81,20 +71,6 @@ static int ipcp_ack_ip_address(struct ppp_context *ctx, struct net_pkt *pkt,
 				      &ctx->ipcp.my_options.address);
 }
 
-static int ipcp_ack_dns1(struct ppp_context *ctx, struct net_pkt *pkt,
-			 uint8_t oplen)
-{
-	return ipcp_ack_check_address(pkt, oplen,
-				      &ctx->ipcp.my_options.dns1_address);
-}
-
-static int ipcp_ack_dns2(struct ppp_context *ctx, struct net_pkt *pkt,
-			 uint8_t oplen)
-{
-	return ipcp_ack_check_address(pkt, oplen,
-				      &ctx->ipcp.my_options.dns2_address);
-}
-
 static int ipcp_nak_override_address(struct net_pkt *pkt, size_t oplen,
 				     struct in_addr *addr)
 {
@@ -112,6 +88,31 @@ static int ipcp_nak_ip_address(struct ppp_context *ctx, struct net_pkt *pkt,
 					 &ctx->ipcp.my_options.address);
 }
 
+#if defined(CONFIG_NET_L2_PPP_OPTION_DNS_USE)
+static int ipcp_add_dns1(struct ppp_context *ctx, struct net_pkt *pkt)
+{
+	return ipcp_add_address(ctx, pkt, &ctx->ipcp.my_options.dns1_address);
+}
+
+static int ipcp_add_dns2(struct ppp_context *ctx, struct net_pkt *pkt)
+{
+	return ipcp_add_address(ctx, pkt, &ctx->ipcp.my_options.dns2_address);
+}
+
+static int ipcp_ack_dns1(struct ppp_context *ctx, struct net_pkt *pkt,
+			 uint8_t oplen)
+{
+	return ipcp_ack_check_address(pkt, oplen,
+				      &ctx->ipcp.my_options.dns1_address);
+}
+
+static int ipcp_ack_dns2(struct ppp_context *ctx, struct net_pkt *pkt,
+			 uint8_t oplen)
+{
+	return ipcp_ack_check_address(pkt, oplen,
+				      &ctx->ipcp.my_options.dns2_address);
+}
+
 static int ipcp_nak_dns1(struct ppp_context *ctx, struct net_pkt *pkt,
 			 uint8_t oplen)
 {
@@ -125,21 +126,24 @@ static int ipcp_nak_dns2(struct ppp_context *ctx, struct net_pkt *pkt,
 	return ipcp_nak_override_address(pkt, oplen,
 					 &ctx->ipcp.my_options.dns2_address);
 }
+#endif /* CONFIG_NET_L2_PPP_OPTION_DNS_USE */
 
 static const struct ppp_my_option_info ipcp_my_options[] = {
 	PPP_MY_OPTION(IPCP_OPTION_IP_ADDRESS, ipcp_add_ip_address,
 		      ipcp_ack_ip_address, ipcp_nak_ip_address),
+#if defined(CONFIG_NET_L2_PPP_OPTION_DNS_USE)
 	PPP_MY_OPTION(IPCP_OPTION_DNS1, ipcp_add_dns1,
 		      ipcp_ack_dns1, ipcp_nak_dns1),
 	PPP_MY_OPTION(IPCP_OPTION_DNS2, ipcp_add_dns2,
 		      ipcp_ack_dns2, ipcp_nak_dns2),
+#endif
 };
 
 BUILD_ASSERT(ARRAY_SIZE(ipcp_my_options) == IPCP_NUM_MY_OPTIONS);
 
 static struct net_pkt *ipcp_config_info_add(struct ppp_fsm *fsm)
 {
-	return ppp_my_options_add(fsm, 3 * IP_ADDRESS_OPTION_LEN);
+	return ppp_my_options_add(fsm, IPCP_NUM_MY_OPTIONS * IP_ADDRESS_OPTION_LEN);
 }
 
 struct ipcp_peer_option_data {
@@ -224,6 +228,37 @@ static int ipcp_server_nak_ip_address(struct ppp_fsm *fsm,
 #endif
 
 #if defined(CONFIG_NET_L2_PPP_OPTION_SERVE_DNS)
+
+static int ipcp_dns1_address_parse(struct ppp_fsm *fsm, struct net_pkt *pkt,
+				  void *user_data)
+{
+	struct ppp_context *ctx =
+		CONTAINER_OF(fsm, struct ppp_context, ipcp.fsm);
+	int ret;
+
+	ret = ipcp_dns_address_parse(fsm, pkt, user_data);
+
+	if (ret == -EINVAL && ctx->ipcp.peer_options.dns1_address.s_addr == INADDR_ANY) {
+		return -ENOTSUP;
+	}
+	return ret;
+}
+
+static int ipcp_dns2_address_parse(struct ppp_fsm *fsm, struct net_pkt *pkt,
+				  void *user_data)
+{
+	struct ppp_context *ctx =
+		CONTAINER_OF(fsm, struct ppp_context, ipcp.fsm);
+	int ret;
+
+	ret = ipcp_dns_address_parse(fsm, pkt, user_data);
+
+	if (ret == -EINVAL && ctx->ipcp.peer_options.dns2_address.s_addr == INADDR_ANY) {
+		return -ENOTSUP;
+	}
+	return ret;
+}
+
 static int ipcp_server_nak_dns1_address(struct ppp_fsm *fsm,
 					struct net_pkt *ret_pkt,
 					void *user_data)
@@ -232,7 +267,7 @@ static int ipcp_server_nak_dns1_address(struct ppp_fsm *fsm,
 		CONTAINER_OF(fsm, struct ppp_context, ipcp.fsm);
 
 	(void)net_pkt_write_u8(ret_pkt, IPCP_OPTION_DNS1);
-	ipcp_add_dns1(ctx, ret_pkt);
+	(void)ipcp_add_address(ctx, ret_pkt, &ctx->ipcp.peer_options.dns1_address);
 
 	return 0;
 }
@@ -245,7 +280,7 @@ static int ipcp_server_nak_dns2_address(struct ppp_fsm *fsm,
 		CONTAINER_OF(fsm, struct ppp_context, ipcp.fsm);
 
 	(void)net_pkt_write_u8(ret_pkt, IPCP_OPTION_DNS2);
-	ipcp_add_dns2(ctx, ret_pkt);
+	(void)ipcp_add_address(ctx, ret_pkt, &ctx->ipcp.peer_options.dns2_address);
 
 	return 0;
 }
@@ -259,9 +294,9 @@ static const struct ppp_peer_option_info ipcp_peer_options[] = {
 	PPP_PEER_OPTION(IPCP_OPTION_IP_ADDRESS, ipcp_ip_address_parse, NULL),
 #endif
 #if defined(CONFIG_NET_L2_PPP_OPTION_SERVE_DNS)
-	PPP_PEER_OPTION(IPCP_OPTION_DNS1, ipcp_dns_address_parse,
+	PPP_PEER_OPTION(IPCP_OPTION_DNS1, ipcp_dns1_address_parse,
 			ipcp_server_nak_dns1_address),
-	PPP_PEER_OPTION(IPCP_OPTION_DNS2, ipcp_dns_address_parse,
+	PPP_PEER_OPTION(IPCP_OPTION_DNS2, ipcp_dns2_address_parse,
 			ipcp_server_nak_dns2_address),
 #endif
 };
diff --git a/subsys/net/l2/ppp/options.c b/subsys/net/l2/ppp/options.c
index 6fd8c15de6e0..694d338c9b76 100644
--- a/subsys/net/l2/ppp/options.c
+++ b/subsys/net/l2/ppp/options.c
@@ -144,14 +144,38 @@ static int ppp_parse_option_conf_req_supported(struct net_pkt *pkt,
 {
 	struct ppp_parse_option_conf_req_data *parse_data = user_data;
 	struct ppp_fsm *fsm = parse_data->fsm;
+	struct net_pkt *ret_pkt = parse_data->ret_pkt;
+	struct net_pkt_cursor cursor;
 	const struct ppp_peer_option_info *option_info =
 		ppp_peer_option_info_get(parse_data->options_info,
 					 parse_data->num_options_info,
 					 code);
 	int ret;
 
+	net_pkt_cursor_backup(pkt, &cursor);
 	ret = option_info->parse(fsm, pkt, parse_data->user_data);
-	if (ret == -EINVAL) {
+	if (ret == -ENOTSUP) {
+		net_pkt_cursor_restore(pkt, &cursor);
+		parse_data->rej_count++;
+		if (parse_data->nack_count != 0) {
+			/* Remove any NACKed data, if we need to reject something first */
+			net_pkt_update_length(ret_pkt, 0);
+			net_pkt_cursor_init(ret_pkt);
+			parse_data->nack_count = 0;
+		}
+		net_pkt_write_u8(ret_pkt, code);
+		net_pkt_write_u8(ret_pkt, len + sizeof(code) + sizeof(len));
+		if (len > 0) {
+			net_pkt_copy(ret_pkt, pkt, len);
+		}
+		return 0;
+	} else if (ret == -EINVAL) {
+		if (parse_data->rej_count != 0) {
+			/* If we have already rejected some options, we
+			 * cannot NACK anything in the same packet.
+			 */
+			return 0;
+		}
 		parse_data->nack_count++;
 		ret = option_info->nack(fsm, parse_data->ret_pkt,
 					parse_data->user_data);
@@ -202,6 +226,10 @@ int ppp_config_info_req(struct ppp_fsm *fsm,
 		return -EINVAL;
 	}
 
+	if (parse_data.rej_count) {
+		return PPP_CONFIGURE_REJ;
+	}
+
 	if (parse_data.nack_count) {
 		return PPP_CONFIGURE_NACK;
 	}