diff --git a/nixos/modules/services/networking/headscale.nix b/nixos/modules/services/networking/headscale.nix
index 07924f54e369..33336ebdd119 100644
--- a/nixos/modules/services/networking/headscale.nix
+++ b/nixos/modules/services/networking/headscale.nix
@@ -406,14 +406,6 @@ in
                 '';
                 example = [ "alice@example.com" ];
               };
-
-              strip_email_domain = lib.mkOption {
-                type = lib.types.bool;
-                default = true;
-                description = ''
-                  Whether the domain part of the email address should be removed when generating namespaces.
-                '';
-              };
             };
 
             tls_letsencrypt_hostname = lib.mkOption {
@@ -585,6 +577,11 @@ in
         "dns_config"
         "nameservers"
       ] "Use `dns.nameservers.global` instead.")
+      (assertRemovedOption [
+        "settings"
+        "oidc"
+        "strip_email_domain"
+      ] "The strip_email_domain option got removed upstream")
     ];
 
     services.headscale.settings = lib.mkMerge [
diff --git a/nixos/tests/headscale.nix b/nixos/tests/headscale.nix
index c4e69cd1ffd5..a4368838e87a 100644
--- a/nixos/tests/headscale.nix
+++ b/nixos/tests/headscale.nix
@@ -43,7 +43,10 @@ in
                 region_id = 999;
                 stun_listen_addr = "0.0.0.0:${toString stunPort}";
               };
-              dns.base_domain = "tailnet";
+              dns = {
+                base_domain = "tailnet";
+                override_local_dns = false;
+              };
             };
           };
           nginx = {
@@ -77,7 +80,7 @@ in
 
     # Create headscale user and preauth-key
     headscale.succeed("headscale users create test")
-    authkey = headscale.succeed("headscale preauthkeys -u test create --reusable")
+    authkey = headscale.succeed("headscale preauthkeys -u 1 create --reusable")
 
     # Connect peers
     up_cmd = f"tailscale up --login-server 'https://headscale' --auth-key {authkey}"
diff --git a/pkgs/servers/headscale/default.nix b/pkgs/servers/headscale/default.nix
index 68edb88fb00c..f013ba355905 100644
--- a/pkgs/servers/headscale/default.nix
+++ b/pkgs/servers/headscale/default.nix
@@ -11,16 +11,16 @@
 }:
 buildGoModule rec {
   pname = "headscale";
-  version = "0.25.1";
+  version = "0.26.0";
 
   src = fetchFromGitHub {
     owner = "juanfont";
     repo = "headscale";
     tag = "v${version}";
-    hash = "sha256-CrdMxRAgrDE1lJ3v9AhCN+cKOVqmIVwjE0x+msSVT+c=";
+    hash = "sha256-BzCcOUousbw+PrYM7SGDtJuTGvhpsTNOF2kQZEl6z84=";
   };
 
-  vendorHash = "sha256-ZQj2A0GdLhHc7JLW7qgpGBveXXNWg9ueSG47OZQQXEw=";
+  vendorHash = "sha256-dR8xmUIDMIy08lhm7r95GNNMAbXv4qSH3v9HR40HlNk=";
 
   subPackages = [ "cmd/headscale" ];
 
diff --git a/pkgs/top-level/all-packages.nix b/pkgs/top-level/all-packages.nix
index 68f275e9a295..a97f02e87031 100644
--- a/pkgs/top-level/all-packages.nix
+++ b/pkgs/top-level/all-packages.nix
@@ -3294,9 +3294,7 @@ with pkgs;
 
   heimdall-gui = heimdall.override { enableGUI = true; };
 
-  headscale = callPackage ../servers/headscale {
-    buildGoModule = buildGo123Module;
-  };
+  headscale = callPackage ../servers/headscale { };
 
   highlight = callPackage ../tools/text/highlight {
     lua = lua5;