diff --git a/package/shadow/shadow.mk b/package/shadow/shadow.mk
index 2ba7a0e03e..cf05fc1bdc 100644
--- a/package/shadow/shadow.mk
+++ b/package/shadow/shadow.mk
@@ -140,4 +140,19 @@ define SHADOW_PERMISSIONS
 	$(SHADOW_SUBORDINATE_IDS_PERMISSIONS)
 endef
 
+ifeq ($(BR2_TARGET_GENERIC_PASSWD_SHA256),y)
+SHADOW_ENCRYPT_METHOD = SHA256
+else ifeq ($(BR2_TARGET_GENERIC_PASSWD_SHA512),y)
+SHADOW_ENCRYPT_METHOD = SHA512
+endif
+
+ifneq ($(SHADOW_ENCRYPT_METHOD),)
+define SHADOW_SET_ENCRYPT_METHOD
+	$(SED) 's/^[#]\?ENCRYPT_METHOD .*/ENCRYPT_METHOD $(SHADOW_ENCRYPT_METHOD)/' \
+		$(TARGET_DIR)/etc/login.defs
+endef
+
+SHADOW_POST_INSTALL_TARGET_HOOKS += SHADOW_SET_ENCRYPT_METHOD
+endif
+
 $(eval $(autotools-package))