diff --git a/snapcraft.yaml b/snapcraft.yaml
index 168efac6..c9f0419c 100644
--- a/snapcraft.yaml
+++ b/snapcraft.yaml
@@ -1415,7 +1415,12 @@ parts:
 
       # Build the binaries
       go build -trimpath -o "${CRAFT_PART_INSTALL}/bin/lxc" github.com/canonical/lxd/lxc
-      go build -trimpath -o "${CRAFT_PART_INSTALL}/bin/lxd" -tags=libsqlite3 github.com/canonical/lxd/lxd
+
+      # Build LXD server binary into ${CRAFT_PART_INSTALL}/sbin/lxd so that it does not conflict with the
+      # lxd-stophook wrapper script which is stored in ${CRAFT_PART_INSTALL}/bin/lxd.
+      # This way when a container stops it will call "/snap/lxd/current/bin/lxd callhook" which is handled by the
+      # lxd-stophook script, which in turn will execute "/snap/lxd/current/bin/lxd-user callhook" to notify LXD.
+      go build -trimpath -o "${CRAFT_PART_INSTALL}/sbin/lxd" -tags=libsqlite3 github.com/canonical/lxd/lxd
 
       # Build static binaries
       CGO_ENABLED=0 go build -trimpath -o "${CRAFT_PART_INSTALL}/bin/lxd-agent" -tags=agent,netgo github.com/canonical/lxd/lxd-agent
@@ -1456,7 +1461,7 @@ parts:
       usr/share/misc/: share/misc/
       var/lib/usbutils/usb.ids: share/misc/
       usr/sbin/: bin/
-      sbin/: bin/
+      sbin/sgdisk: bin/
     prime:
       - bin/dnsmasq
       - bin/getfattr
@@ -1477,9 +1482,9 @@ parts:
       - share/misc/usb.ids
 
       - bin/lxc
-      - bin/lxd
       - bin/lxd-agent
       - bin/lxd-user
+      - sbin/lxd
 
   lxd-ui:
     source: https://github.com/canonical/lxd-ui
@@ -1562,10 +1567,12 @@ parts:
       rm -rf "${CRAFT_PRIME}/usr/share/"
 
       # Strip binaries (excluding shell scripts and LXCFS)
+      # The "${CRAFT_PRIME}/bin/lxd" file is ignored as that is the lxd-stophook wrapper script.
       find "${CRAFT_PRIME}"/bin -type f \
         -not -path "${CRAFT_PRIME}/bin/ceph" \
         -not -path "${CRAFT_PRIME}/bin/editor" \
         -not -path "${CRAFT_PRIME}/bin/lxc-checkconfig" \
+        -not -path "${CRAFT_PRIME}/bin/lxd" \
         -not -path "${CRAFT_PRIME}/bin/nvidia-container-cli" \
         -not -path "${CRAFT_PRIME}/bin/remote-viewer" \
         -not -path "${CRAFT_PRIME}/bin/snap-query" \
@@ -1577,6 +1584,9 @@ parts:
         -not -path "${CRAFT_PRIME}/bin/gpu-2404-custom-wrapper" \
         -exec strip --strip-all {} +
 
+      # This is the actual LXD binary.
+      strip --strip-all "${CRAFT_PRIME}/sbin/lxd"
+
       # Strip binaries not under bin/ due to being dynamically
       # added to the path with `snap set lxd`, like `criu.enable=true`
       for binary in "${CRAFT_PRIME}/criu/criu"; do
@@ -1618,6 +1628,7 @@ parts:
     organize:
       commands/snap-query: bin/
       hooks/: snap/hooks/
+      wrappers/lxd-stophook: bin/lxd
       wrappers/gpu-2404-custom-wrapper: bin/
       wrappers/editor: bin/
       wrappers/remote-viewer: bin/
diff --git a/snapcraft/commands/daemon.start b/snapcraft/commands/daemon.start
index fdec8032..774d0d13 100755
--- a/snapcraft/commands/daemon.start
+++ b/snapcraft/commands/daemon.start
@@ -23,7 +23,7 @@ export HOME="/tmp/"
 export LXD_DIR="${SNAP_COMMON}/lxd/"
 export LXD_LXC_TEMPLATE_CONFIG="${SNAP_CURRENT}/lxc/config/"
 export LXD_LXC_HOOK="${SNAP_CURRENT}/lxc/hooks/"
-export LXD_EXEC_PATH="${SNAP_CURRENT}/bin/lxd"
+export LXD_EXEC_PATH="${SNAP_CURRENT}/sbin/lxd"
 export LD_LIBRARY_PATH="${LD_LIBRARY_PATH:-}:${SNAP_CURRENT}/lib:${SNAP_CURRENT}/lib/${ARCH}:${SNAP_CURRENT}/lib/${ARCH}/ceph"
 export PATH="${PATH}:${SNAP_CURRENT}/bin"
 export LXD_CLUSTER_UPDATE="${SNAP_CURRENT}/commands/refresh"
diff --git a/snapcraft/wrappers/lxd-stophook b/snapcraft/wrappers/lxd-stophook
new file mode 100755
index 00000000..fbb01f41
--- /dev/null
+++ b/snapcraft/wrappers/lxd-stophook
@@ -0,0 +1,9 @@
+#!/bin/sh
+# Use exec so that this script process is replaced.
+# This avoids polluting the process tree with this wrapper script.
+if [ "$1" = "callhook" ]; then
+    exec /snap/lxd/current/bin/lxd-user "$@"
+fi
+
+echo "lxd-stophook: Invalid argument: ${1}" >&2
+exit 1