diff --git a/esphome/components/mdns/__init__.py b/esphome/components/mdns/__init__.py
index 3fa4d2ebef..61fc1e196a 100644
--- a/esphome/components/mdns/__init__.py
+++ b/esphome/components/mdns/__init__.py
@@ -58,11 +58,21 @@ CONFIG_SCHEMA = cv.All(
 )
 
 
-def mdns_txt_record(key: str, value: str):
+def mdns_txt_record_static(key: str, value: str):
+    """Create a TXT record with a static (compile-time) value stored in flash."""
     return cg.StructInitializer(
         MDNSTXTRecord,
         ("key", cg.RawExpression(f"MDNS_STR({cg.safe_exp(key)})")),
-        ("value", value),
+        ("value", cg.RawExpression(f"MDNS_STR({cg.safe_exp(value)})")),
+    )
+
+
+def mdns_txt_record_dynamic(key: str, value_expr: str):
+    """Create a TXT record with a dynamic value (will be evaluated and stored in vector)."""
+    return cg.StructInitializer(
+        MDNSTXTRecord,
+        ("key", cg.RawExpression(f"MDNS_STR({cg.safe_exp(key)})")),
+        ("value", cg.RawExpression(f"MDNS_STR({value_expr})")),
     )
 
 
@@ -107,23 +117,56 @@ async def to_code(config):
     # Ensure at least 1 service (fallback service)
     cg.add_define("MDNS_SERVICE_COUNT", max(1, service_count))
 
+    # Calculate compile-time dynamic TXT value count
+    # Dynamic values are those that cannot be stored in flash at compile time
+    dynamic_txt_count = 0
+    if "api" in CORE.config:
+        # Always: get_mac_address()
+        dynamic_txt_count += 1
+        # Conditional: friendly_name (if not empty, but we conservatively count it)
+        dynamic_txt_count += 1
+        # Conditional: dashboard_import_url
+        if "dashboard_import" in CORE.config:
+            dynamic_txt_count += 1
+    # User-provided templatable TXT values (only lambdas, not static strings)
+    dynamic_txt_count += sum(
+        1
+        for service in config[CONF_SERVICES]
+        for txt_value in service[CONF_TXT].values()
+        if cg.is_template(txt_value)
+    )
+
+    # Ensure at least 1 to avoid zero-size array
+    cg.add_define("MDNS_DYNAMIC_TXT_COUNT", max(1, dynamic_txt_count))
+
     var = cg.new_Pvariable(config[CONF_ID])
     await cg.register_component(var, config)
 
     for service in config[CONF_SERVICES]:
-        txt = [
-            cg.StructInitializer(
-                MDNSTXTRecord,
-                ("key", cg.RawExpression(f"MDNS_STR({cg.safe_exp(txt_key)})")),
-                ("value", await cg.templatable(txt_value, [], cg.std_string)),
-            )
-            for txt_key, txt_value in service[CONF_TXT].items()
-        ]
+        # Build the txt records list for the service
+        txt_records = []
+        for txt_key, txt_value in service[CONF_TXT].items():
+            if cg.is_template(txt_value):
+                # It's a lambda - evaluate and store using helper
+                templated_value = await cg.templatable(txt_value, [], cg.std_string)
+                txt_records.append(
+                    cg.RawExpression(
+                        f"{{MDNS_STR({cg.safe_exp(txt_key)}), MDNS_STR({var}->add_dynamic_txt_value(({templated_value})()))}}"
+                    )
+                )
+            else:
+                # It's a static string - use directly in flash, no need to store in vector
+                txt_records.append(
+                    cg.RawExpression(
+                        f"{{MDNS_STR({cg.safe_exp(txt_key)}), MDNS_STR({cg.safe_exp(txt_value)})}}"
+                    )
+                )
+
         exp = mdns_service(
             service[CONF_SERVICE],
             service[CONF_PROTOCOL],
             await cg.templatable(service[CONF_PORT], [], cg.uint16),
-            txt,
+            txt_records,
         )
 
         cg.add(var.add_extra_service(exp))
diff --git a/esphome/components/mdns/mdns_component.cpp b/esphome/components/mdns/mdns_component.cpp
index 8945053b7d..15310815fb 100644
--- a/esphome/components/mdns/mdns_component.cpp
+++ b/esphome/components/mdns/mdns_component.cpp
@@ -9,21 +9,9 @@
 #include <pgmspace.h>
 // Macro to define strings in PROGMEM on ESP8266, regular memory on other platforms
 #define MDNS_STATIC_CONST_CHAR(name, value) static const char name[] PROGMEM = value
-// Helper to convert PROGMEM string to std::string for TemplatableValue
-// Only define this function if we have services that will use it
-#if defined(USE_API) || defined(USE_PROMETHEUS) || defined(USE_WEBSERVER) || defined(USE_MDNS_EXTRA_SERVICES)
-static std::string mdns_str_value(PGM_P str) {
-  char buf[64];
-  strncpy_P(buf, str, sizeof(buf) - 1);
-  buf[sizeof(buf) - 1] = '\0';
-  return std::string(buf);
-}
-#define MDNS_STR_VALUE(name) mdns_str_value(name)
-#endif
 #else
 // On non-ESP8266 platforms, use regular const char*
 #define MDNS_STATIC_CONST_CHAR(name, value) static constexpr const char name[] = value
-#define MDNS_STR_VALUE(name) std::string(name)
 #endif
 
 #ifdef USE_API
@@ -109,47 +97,48 @@ void MDNSComponent::compile_records_() {
     txt_records.reserve(txt_count);
 
     if (!friendly_name_empty) {
-      txt_records.push_back({MDNS_STR(TXT_FRIENDLY_NAME), friendly_name});
+      txt_records.push_back({MDNS_STR(TXT_FRIENDLY_NAME), MDNS_STR(this->add_dynamic_txt_value(friendly_name))});
     }
-    txt_records.push_back({MDNS_STR(TXT_VERSION), ESPHOME_VERSION});
-    txt_records.push_back({MDNS_STR(TXT_MAC), get_mac_address()});
+    txt_records.push_back({MDNS_STR(TXT_VERSION), MDNS_STR(ESPHOME_VERSION)});
+    txt_records.push_back({MDNS_STR(TXT_MAC), MDNS_STR(this->add_dynamic_txt_value(get_mac_address()))});
 
 #ifdef USE_ESP8266
-    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR_VALUE(PLATFORM_ESP8266)});
+    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR(PLATFORM_ESP8266)});
 #elif defined(USE_ESP32)
-    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR_VALUE(PLATFORM_ESP32)});
+    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR(PLATFORM_ESP32)});
 #elif defined(USE_RP2040)
-    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR_VALUE(PLATFORM_RP2040)});
+    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR(PLATFORM_RP2040)});
 #elif defined(USE_LIBRETINY)
-    txt_records.push_back({MDNS_STR(TXT_PLATFORM), lt_cpu_get_model_name()});
+    txt_records.push_back({MDNS_STR(TXT_PLATFORM), MDNS_STR(lt_cpu_get_model_name())});
 #endif
 
-    txt_records.push_back({MDNS_STR(TXT_BOARD), ESPHOME_BOARD});
+    txt_records.push_back({MDNS_STR(TXT_BOARD), MDNS_STR(ESPHOME_BOARD)});
 
 #if defined(USE_WIFI)
-    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR_VALUE(NETWORK_WIFI)});
+    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR(NETWORK_WIFI)});
 #elif defined(USE_ETHERNET)
-    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR_VALUE(NETWORK_ETHERNET)});
+    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR(NETWORK_ETHERNET)});
 #elif defined(USE_OPENTHREAD)
-    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR_VALUE(NETWORK_THREAD)});
+    txt_records.push_back({MDNS_STR(TXT_NETWORK), MDNS_STR(NETWORK_THREAD)});
 #endif
 
 #ifdef USE_API_NOISE
     MDNS_STATIC_CONST_CHAR(NOISE_ENCRYPTION, "Noise_NNpsk0_25519_ChaChaPoly_SHA256");
     if (api::global_api_server->get_noise_ctx()->has_psk()) {
-      txt_records.push_back({MDNS_STR(TXT_API_ENCRYPTION), MDNS_STR_VALUE(NOISE_ENCRYPTION)});
+      txt_records.push_back({MDNS_STR(TXT_API_ENCRYPTION), MDNS_STR(NOISE_ENCRYPTION)});
     } else {
-      txt_records.push_back({MDNS_STR(TXT_API_ENCRYPTION_SUPPORTED), MDNS_STR_VALUE(NOISE_ENCRYPTION)});
+      txt_records.push_back({MDNS_STR(TXT_API_ENCRYPTION_SUPPORTED), MDNS_STR(NOISE_ENCRYPTION)});
     }
 #endif
 
 #ifdef ESPHOME_PROJECT_NAME
-    txt_records.push_back({MDNS_STR(TXT_PROJECT_NAME), ESPHOME_PROJECT_NAME});
-    txt_records.push_back({MDNS_STR(TXT_PROJECT_VERSION), ESPHOME_PROJECT_VERSION});
+    txt_records.push_back({MDNS_STR(TXT_PROJECT_NAME), MDNS_STR(ESPHOME_PROJECT_NAME)});
+    txt_records.push_back({MDNS_STR(TXT_PROJECT_VERSION), MDNS_STR(ESPHOME_PROJECT_VERSION)});
 #endif  // ESPHOME_PROJECT_NAME
 
 #ifdef USE_DASHBOARD_IMPORT
-    txt_records.push_back({MDNS_STR(TXT_PACKAGE_IMPORT_URL), dashboard_import::get_package_import_url()});
+    txt_records.push_back({MDNS_STR(TXT_PACKAGE_IMPORT_URL),
+                           MDNS_STR(this->add_dynamic_txt_value(dashboard_import::get_package_import_url()))});
 #endif
   }
 #endif  // USE_API
@@ -175,7 +164,7 @@ void MDNSComponent::compile_records_() {
   fallback_service.service_type = MDNS_STR(SERVICE_HTTP);
   fallback_service.proto = MDNS_STR(SERVICE_TCP);
   fallback_service.port = USE_WEBSERVER_PORT;
-  fallback_service.txt_records.push_back({MDNS_STR(TXT_VERSION), ESPHOME_VERSION});
+  fallback_service.txt_records.push_back({MDNS_STR(TXT_VERSION), MDNS_STR(ESPHOME_VERSION)});
 #endif
 }
 
@@ -190,8 +179,7 @@ void MDNSComponent::dump_config() {
     ESP_LOGV(TAG, "  - %s, %s, %d", MDNS_STR_ARG(service.service_type), MDNS_STR_ARG(service.proto),
              const_cast<TemplatableValue<uint16_t> &>(service.port).value());
     for (const auto &record : service.txt_records) {
-      ESP_LOGV(TAG, "    TXT: %s = %s", MDNS_STR_ARG(record.key),
-               const_cast<TemplatableValue<std::string> &>(record.value).value().c_str());
+      ESP_LOGV(TAG, "    TXT: %s = %s", MDNS_STR_ARG(record.key), MDNS_STR_ARG(record.value));
     }
   }
 #endif
diff --git a/esphome/components/mdns/mdns_component.h b/esphome/components/mdns/mdns_component.h
index b1f73fbb32..a3684f6f5e 100644
--- a/esphome/components/mdns/mdns_component.h
+++ b/esphome/components/mdns/mdns_component.h
@@ -27,7 +27,7 @@ struct MDNSString;
 
 struct MDNSTXTRecord {
   const MDNSString *key;
-  TemplatableValue<std::string> value;
+  const MDNSString *value;
 };
 
 struct MDNSService {
@@ -59,6 +59,14 @@ class MDNSComponent : public Component {
 
   void on_shutdown() override;
 
+  /// Add a dynamic TXT value and return pointer to it for use in MDNSTXTRecord
+  const char *add_dynamic_txt_value(const std::string &value) {
+    this->dynamic_txt_values_.push_back(value);
+    return this->dynamic_txt_values_.back().c_str();
+  }
+
+  StaticVector<std::string, MDNS_DYNAMIC_TXT_COUNT> dynamic_txt_values_;
+
  protected:
   StaticVector<MDNSService, MDNS_SERVICE_COUNT> services_{};
   std::string hostname_;
diff --git a/esphome/components/mdns/mdns_esp32.cpp b/esphome/components/mdns/mdns_esp32.cpp
index 40d305a1e6..223eeb8e8c 100644
--- a/esphome/components/mdns/mdns_esp32.cpp
+++ b/esphome/components/mdns/mdns_esp32.cpp
@@ -29,10 +29,10 @@ void MDNSComponent::setup() {
     std::vector<mdns_txt_item_t> txt_records;
     for (const auto &record : service.txt_records) {
       mdns_txt_item_t it{};
-      // key is a compile-time string literal in flash, no need to strdup
+      // key and value are either compile-time string literals in flash or pointers to dynamic_txt_values_
+      // ESP-IDF requires strdup for both to keep them alive during mdns operation
       it.key = MDNS_STR_ARG(record.key);
-      // value is a temporary from TemplatableValue, must strdup to keep it alive
-      it.value = strdup(const_cast<TemplatableValue<std::string> &>(record.value).value().c_str());
+      it.value = strdup(MDNS_STR_ARG(record.value));
       txt_records.push_back(it);
     }
     uint16_t port = const_cast<TemplatableValue<uint16_t> &>(service.port).value();
diff --git a/esphome/components/mdns/mdns_esp8266.cpp b/esphome/components/mdns/mdns_esp8266.cpp
index f1c8909807..f3779042ed 100644
--- a/esphome/components/mdns/mdns_esp8266.cpp
+++ b/esphome/components/mdns/mdns_esp8266.cpp
@@ -33,7 +33,7 @@ void MDNSComponent::setup() {
     MDNS.addService(FPSTR(service_type), FPSTR(proto), port);
     for (const auto &record : service.txt_records) {
       MDNS.addServiceTxt(FPSTR(service_type), FPSTR(proto), FPSTR(MDNS_STR_ARG(record.key)),
-                         const_cast<TemplatableValue<std::string> &>(record.value).value().c_str());
+                         FPSTR(MDNS_STR_ARG(record.value)));
     }
   }
 }
diff --git a/esphome/components/mdns/mdns_libretiny.cpp b/esphome/components/mdns/mdns_libretiny.cpp
index 9010ca2bc6..5540bf361a 100644
--- a/esphome/components/mdns/mdns_libretiny.cpp
+++ b/esphome/components/mdns/mdns_libretiny.cpp
@@ -32,8 +32,7 @@ void MDNSComponent::setup() {
     uint16_t port_ = const_cast<TemplatableValue<uint16_t> &>(service.port).value();
     MDNS.addService(service_type, proto, port_);
     for (const auto &record : service.txt_records) {
-      MDNS.addServiceTxt(service_type, proto, MDNS_STR_ARG(record.key),
-                         const_cast<TemplatableValue<std::string> &>(record.value).value().c_str());
+      MDNS.addServiceTxt(service_type, proto, MDNS_STR_ARG(record.key), MDNS_STR_ARG(record.value));
     }
   }
 }
diff --git a/esphome/components/mdns/mdns_rp2040.cpp b/esphome/components/mdns/mdns_rp2040.cpp
index 039453f501..5ad006f5d4 100644
--- a/esphome/components/mdns/mdns_rp2040.cpp
+++ b/esphome/components/mdns/mdns_rp2040.cpp
@@ -32,8 +32,7 @@ void MDNSComponent::setup() {
     uint16_t port = const_cast<TemplatableValue<uint16_t> &>(service.port).value();
     MDNS.addService(service_type, proto, port);
     for (const auto &record : service.txt_records) {
-      MDNS.addServiceTxt(service_type, proto, MDNS_STR_ARG(record.key),
-                         const_cast<TemplatableValue<std::string> &>(record.value).value().c_str());
+      MDNS.addServiceTxt(service_type, proto, MDNS_STR_ARG(record.key), MDNS_STR_ARG(record.value));
     }
   }
 }
diff --git a/esphome/core/helpers.h b/esphome/core/helpers.h
index e06f2d15ef..fe89f0b24f 100644
--- a/esphome/core/helpers.h
+++ b/esphome/core/helpers.h
@@ -146,6 +146,9 @@ template<typename T, size_t N> class StaticVector {
   T &operator[](size_t i) { return data_[i]; }
   const T &operator[](size_t i) const { return data_[i]; }
 
+  T &back() { return data_[count_ - 1]; }
+  const T &back() const { return data_[count_ - 1]; }
+
   // For range-based for loops
   iterator begin() { return data_.begin(); }
   iterator end() { return data_.begin() + count_; }
diff --git a/tests/components/mdns/test-comprehensive.esp8266-ard.yaml b/tests/components/mdns/test-comprehensive.esp8266-ard.yaml
index 02767833a3..3129ca3143 100644
--- a/tests/components/mdns/test-comprehensive.esp8266-ard.yaml
+++ b/tests/components/mdns/test-comprehensive.esp8266-ard.yaml
@@ -25,6 +25,9 @@ mdns:
     - service: _http
       protocol: _tcp
       port: 80
+      txt:
+        version: "1.0"
+        path: "/"
 
 # OTA should run at priority 54 (after mdns)
 ota: