diff --git a/com.unity.netcode.gameobjects/CHANGELOG.md b/com.unity.netcode.gameobjects/CHANGELOG.md
index fab2e97f48..065f0a09ea 100644
--- a/com.unity.netcode.gameobjects/CHANGELOG.md
+++ b/com.unity.netcode.gameobjects/CHANGELOG.md
@@ -13,6 +13,7 @@ Additional documentation and release notes are available at [Multiplayer Documen
 
 ### Fixed
 
+- Fixed issue where root level in-scene placed `NetworkObject`s would only allow the ownership permission to be no less than distributable or sessionowner. (#3407)
 
 ### Changed
 
diff --git a/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs b/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
index dbdff3ca2b..59a187a5fc 100644
--- a/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
+++ b/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
@@ -1195,16 +1195,13 @@ internal void OnClientDisconnectFromServer(ulong clientId)
                         }
                         else if (!NetworkManager.ShutdownInProgress)
                         {
-                            // DANGO-TODO: We will want to match how the CMB service handles this. For now, we just try to evenly distribute
-                            // ownership.
-                            // NOTE: All of the below code only handles ownership transfer.
+                            // NOTE: All of the below code only handles ownership transfer
                             // For client-server, we just remove the ownership.
-                            // For distributed authority, we need to change ownership based on parenting
+                            // For distributed authority (DAHost only), we only transfer objects that are not parented or belong to the session owner.
+                            // Rust server handles the object redistribution on its end.
                             if (NetworkManager.DistributedAuthorityMode)
                             {
-                                // Only NetworkObjects that have the OwnershipStatus.Distributable flag set and are not OwnershipSessionOwner are distributed.
-                                // If the object has a parent - skip it for now, it will be distributed when its root parent is distributed.
-                                if (!ownedObject.IsOwnershipDistributable || ownedObject.IsOwnershipSessionOwner || ownedObject.GetCachedParent())
+                                if (ownedObject.IsOwnershipSessionOwner || ownedObject.GetCachedParent())
                                 {
                                     continue;
                                 }
diff --git a/com.unity.netcode.gameobjects/Runtime/Core/NetworkObject.cs b/com.unity.netcode.gameobjects/Runtime/Core/NetworkObject.cs
index 502ffefcb6..64c8e96076 100644
--- a/com.unity.netcode.gameobjects/Runtime/Core/NetworkObject.cs
+++ b/com.unity.netcode.gameobjects/Runtime/Core/NetworkObject.cs
@@ -325,15 +325,6 @@ private void CheckForInScenePlaced()
 
                 // Default scene migration synchronization to false for in-scene placed NetworkObjects
                 SceneMigrationSynchronization = false;
-
-                // Root In-scene placed NetworkObjects have to either have the SessionOwner or Distributable permission flag set.
-                if (transform.parent == null)
-                {
-                    if (!Ownership.HasFlag(OwnershipStatus.SessionOwner) && !Ownership.HasFlag(OwnershipStatus.Distributable))
-                    {
-                        Ownership |= OwnershipStatus.Distributable;
-                    }
-                }
             }
         }
 #endif // UNITY_EDITOR