diff --git a/notebook/base/handlers.py b/notebook/base/handlers.py
index e3fbddc2e0..582731639d 100755
--- a/notebook/base/handlers.py
+++ b/notebook/base/handlers.py
@@ -35,7 +35,7 @@
 
 from traitlets.config import Application
 from ipython_genutils.path import filefind
-from ipython_genutils.py3compat import string_types
+from ipython_genutils.py3compat import string_types, PY3
 
 import notebook
 from notebook._tz import utcnow
@@ -427,11 +427,15 @@ def check_host(self):
         if host.startswith('[') and host.endswith(']'):
             host = host[1:-1]
 
+        if not PY3:
+            # ip_address only accepts unicode on Python 2
+            host = host.decode('utf8', 'replace')
+
         try:
             addr = ipaddress.ip_address(host)
         except ValueError:
             # Not an IP address: check against hostnames
-            allow = host in self.settings.get('local_hostnames', [])
+            allow = host in self.settings.get('local_hostnames', ['localhost'])
         else:
             allow = addr.is_loopback