I'm assuming you're using Ziti Desktop Edge for macOS from the App Store on your Mac for the bind side of the connection. Let us know if you're running a different tunneler, such as ziti-edge-tunnel. Note that both tunnelers should use /etc/hosts entries regardless... I'm just asking to make sure we were on the same page.
That said, Ziti Desktop Edge for macOS does respect entries in /etc/hosts when connecting to addresses from the host.v1 service configuration:
% grep .ziti /etc/hosts
127.0.0.1 foo.ziti
Prior to adding the above entry I would see this in the tunneler's log (apex.log):
INFO tunnel-cbs:ziti_hosting.c:642 on_hosted_client_connect() hosted_service[etchoststest] client[zet.fedora-41-vm] client_src_addr[tcp:100.64.1.1:36256] dst_addr[tcp:foo.ziti:22]: incoming connection
ERROR tunnel-cbs:ziti_hosting.c:689 on_hosted_client_connect_resolved() hosted_service[etchoststest] client[zet.fedora-41-vm] client_src_addr[tcp:100.64.1.1:36256] getaddrinfo(tcp:foo.ziti:22) failed: unknown node or service
Connections work after adding the host entry why trying to connect to "foo.ziti":
INFO tunnel-cbs:ziti_hosting.c:642 on_hosted_client_connect() hosted_service[etchoststest] client[zet.fedora-41-vm] client_src_addr[tcp:100.64.1.1:41084] dst_addr[tcp:foo.ziti:22]: incoming connection
DEBUG tunnel-cbs:ziti_hosting.c:714 on_hosted_client_connect_resolved() hosted_service[etchoststest] client[zet.fedora-41-vm] client_src_addr[tcp:100.64.1.1:41084] initiating connection to tcp:127.0.0.1:22
DEBUG tunnel-cbs:ziti_hosting.c:221 complete_hosted_tcp_connection() hosted_service[etchoststest], client[zet.fedora-41-vm] client_src_addr[tcp:100.64.1.1:41084]: connected to server tcp:127.0.0.1:22
Can you share your service configurations and logs from the tunnelers on both sides of your connection?