diff --git a/p2p/net/swarm/swarm.go b/p2p/net/swarm/swarm.go
index d26b9e781e..a51ed99018 100644
--- a/p2p/net/swarm/swarm.go
+++ b/p2p/net/swarm/swarm.go
@@ -17,6 +17,7 @@ import (
 	"github.com/libp2p/go-libp2p/core/peer"
 	"github.com/libp2p/go-libp2p/core/peerstore"
 	"github.com/libp2p/go-libp2p/core/transport"
+	"golang.org/x/exp/slices"
 
 	logging "github.com/ipfs/go-log/v2"
 	ma "github.com/multiformats/go-multiaddr"
@@ -169,7 +170,8 @@ type Swarm struct {
 
 	notifs struct {
 		sync.RWMutex
-		m map[network.Notifiee]struct{}
+		m          map[network.Notifiee]struct{}
+		directConn map[peer.ID][]chan struct{}
 	}
 
 	transports struct {
@@ -230,7 +232,9 @@ func NewSwarm(local peer.ID, peers peerstore.Peerstore, eventBus event.Bus, opts
 	s.conns.m = make(map[peer.ID][]*Conn)
 	s.listeners.m = make(map[transport.Listener]struct{})
 	s.transports.m = make(map[int]transport.Transport)
+
 	s.notifs.m = make(map[network.Notifiee]struct{})
+	s.notifs.directConn = make(map[peer.ID][]chan struct{})
 
 	for _, opt := range opts {
 		if err := opt(s); err != nil {
@@ -390,6 +394,16 @@ func (s *Swarm) addConn(tc transport.CapableConn, dir network.Direction) (*Conn,
 	c.notifyLk.Lock()
 	s.conns.Unlock()
 
+	// Notify goroutines waiting for a direct connection
+	s.notifs.Lock()
+	if !c.Stat().Transient {
+		for _, ch := range s.notifs.directConn[p] {
+			close(ch)
+		}
+		delete(s.notifs.directConn, p)
+	}
+	s.notifs.Unlock()
+
 	// Emit event after releasing `s.conns` lock so that a consumer can still
 	// use swarm methods that need the `s.conns` lock.
 	if isFirstConnection {
@@ -441,40 +455,83 @@ func (s *Swarm) NewStream(ctx context.Context, p peer.ID) (network.Stream, error
 	//    connection but don't notice it until we actually try to open a
 	//    stream.
 	//
-	// Note: We only dial once.
-	//
 	// TODO: Try all connections even if we get an error opening a stream on
 	// a non-closed connection.
-	dials := 0
-	for {
-		// will prefer direct connections over relayed connections for opening streams
-		c := s.bestAcceptableConnToPeer(ctx, p)
-
+	dialed := false
+	for i := 0; i < 1; i++ {
+		c := s.bestConnToPeer(p)
 		if c == nil {
-			if nodial, _ := network.GetNoDial(ctx); nodial {
+			if nodial, _ := network.GetNoDial(ctx); !nodial {
+				if dialed {
+					return nil, errors.New("max dial attempts exceeded")
+				}
+				dialed = true
+				var err error
+				c, err = s.dialPeer(ctx, p)
+				if err != nil {
+					return nil, err
+				}
+			} else {
 				return nil, network.ErrNoConn
 			}
+		}
 
-			if dials >= DialAttempts {
-				return nil, errors.New("max dial attempts exceeded")
-			}
-			dials++
-
+		useTransient, _ := network.GetUseTransient(ctx)
+		if !useTransient && c.Stat().Transient {
 			var err error
-			c, err = s.dialPeer(ctx, p)
+			c, err = s.waitForTransientUpgrade(ctx, p)
 			if err != nil {
 				return nil, err
 			}
 		}
 
-		s, err := c.NewStream(ctx)
+		str, err := c.NewStream(ctx)
 		if err != nil {
 			if c.conn.IsClosed() {
 				continue
 			}
 			return nil, err
 		}
-		return s, nil
+		return str, nil
+	}
+	return nil, network.ErrNoConn
+}
+
+// waitForTransientUpgrade waits for a direct connection established through DCUtR or connection reversal.
+func (s *Swarm) waitForTransientUpgrade(ctx context.Context, p peer.ID) (*Conn, error) {
+	s.notifs.Lock()
+	c := s.bestConnToPeer(p)
+	if c == nil {
+		s.notifs.Unlock()
+		return nil, network.ErrNoConn
+	} else if !c.Stat().Transient {
+		s.notifs.Unlock()
+		return c, nil
+	}
+	// Wait for transient connection to upgrade to a direct connection either via connection reversal
+	// or hole punching.
+	ch := make(chan struct{})
+	s.notifs.directConn[p] = append(s.notifs.directConn[p], ch)
+	s.notifs.Unlock()
+
+	// Wait for notification.
+	// There's no point waiting for more than a minute here.
+	ctx, cancel := context.WithTimeout(ctx, time.Minute)
+	defer cancel()
+	select {
+	case <-ctx.Done():
+		s.notifs.Lock()
+		// Remove ourselves from the notification list
+		slices.DeleteFunc(s.notifs.directConn[p], func(c chan struct{}) bool { return c == ch })
+		if len(s.notifs.directConn[p]) == 0 {
+			delete(s.notifs.directConn, p)
+		}
+		s.notifs.Unlock()
+		return nil, ctx.Err()
+	case <-ch:
+		// We do not need to remove ourselves from the list here as the notifier would have cleared the map
+		// entry
+		return s.bestConnToPeer(p), nil
 	}
 }
 
diff --git a/p2p/test/basichost/basic_host_test.go b/p2p/test/basichost/basic_host_test.go
index 6b010ed2aa..f146872261 100644
--- a/p2p/test/basichost/basic_host_test.go
+++ b/p2p/test/basichost/basic_host_test.go
@@ -4,6 +4,7 @@ import (
 	"context"
 	"fmt"
 	"testing"
+	"time"
 
 	"github.com/libp2p/go-libp2p"
 	"github.com/libp2p/go-libp2p/core/network"
@@ -62,10 +63,12 @@ func TestNoStreamOverTransientConnection(t *testing.T) {
 	err = h1.Connect(context.Background(), h2Info)
 	require.NoError(t, err)
 
-	ctx := network.WithNoDial(context.Background(), "test")
+	ctx, cancel := context.WithTimeout(context.Background(), time.Second)
+	defer cancel()
+	ctx = network.WithNoDial(ctx, "test")
 	_, err = h1.NewStream(ctx, h2.ID(), "/testprotocol")
 
-	require.ErrorIs(t, err, network.ErrTransientConn)
+	require.Error(t, err)
 
 	_, err = h1.NewStream(network.WithUseTransient(context.Background(), "test"), h2.ID(), "/testprotocol")
 	require.NoError(t, err)