diff --git a/meta/recipes-extended/shadow/shadow.inc b/meta/recipes-extended/shadow/shadow.inc
index 33ecc7db40..048709edd2 100644
--- a/meta/recipes-extended/shadow/shadow.inc
+++ b/meta/recipes-extended/shadow/shadow.inc
@@ -109,6 +109,9 @@ do_install() {
 	# Disable checking emails.
 	sed -i 's/MAIL_CHECK_ENAB/#MAIL_CHECK_ENAB/g' ${D}${sysconfdir}/login.defs
 
+	# Use proper encryption for passwords
+	sed -i 's/^#ENCRYPT_METHOD.*$/ENCRYPT_METHOD SHA512/' ${D}${sysconfdir}/login.defs
+
 	# Now we don't have a mail system. Disable mail creation for now.
 	sed -i 's:/bin/bash:/bin/sh:g' ${D}${sysconfdir}/default/useradd
 	sed -i '/^CREATE_MAIL_SPOOL/ s:^:#:' ${D}${sysconfdir}/default/useradd