diff --git a/homeassistant/components/proximity/sensor.py b/homeassistant/components/proximity/sensor.py
index c562467f8be..8eb7aae9bb9 100644
--- a/homeassistant/components/proximity/sensor.py
+++ b/homeassistant/components/proximity/sensor.py
@@ -69,6 +69,7 @@ class TrackedEntityDescriptor(NamedTuple):
 
     entity_id: str
     identifier: str
+    name: str
 
 
 def _device_info(coordinator: ProximityDataUpdateCoordinator) -> DeviceInfo:
@@ -95,13 +96,24 @@ async def async_setup_entry(
 
     entity_reg = er.async_get(hass)
     for tracked_entity_id in coordinator.tracked_entities:
+        tracked_entity_object_id = tracked_entity_id.split(".")[-1]
         if (entity_entry := entity_reg.async_get(tracked_entity_id)) is not None:
             tracked_entity_descriptors.append(
-                TrackedEntityDescriptor(tracked_entity_id, entity_entry.id)
+                TrackedEntityDescriptor(
+                    tracked_entity_id,
+                    entity_entry.id,
+                    entity_entry.name
+                    or entity_entry.original_name
+                    or tracked_entity_object_id,
+                )
             )
         else:
             tracked_entity_descriptors.append(
-                TrackedEntityDescriptor(tracked_entity_id, tracked_entity_id)
+                TrackedEntityDescriptor(
+                    tracked_entity_id,
+                    tracked_entity_id,
+                    tracked_entity_object_id,
+                )
             )
 
     entities += [
@@ -165,7 +177,7 @@ class ProximityTrackedEntitySensor(
         self._attr_unique_id = f"{coordinator.config_entry.entry_id}_{tracked_entity_descriptor.identifier}_{description.key}"
         self._attr_device_info = _device_info(coordinator)
         self._attr_translation_placeholders = {
-            "tracked_entity": self.tracked_entity_id.split(".")[-1]
+            "tracked_entity": tracked_entity_descriptor.name
         }
 
     async def async_added_to_hass(self) -> None:
diff --git a/tests/components/proximity/test_init.py b/tests/components/proximity/test_init.py
index bce4c319ce0..8fa9e4a1ce1 100644
--- a/tests/components/proximity/test_init.py
+++ b/tests/components/proximity/test_init.py
@@ -11,7 +11,12 @@ from homeassistant.components.proximity.const import (
     DOMAIN,
 )
 from homeassistant.components.script import scripts_with_entity
-from homeassistant.const import CONF_ZONE, STATE_UNAVAILABLE, STATE_UNKNOWN
+from homeassistant.const import (
+    ATTR_FRIENDLY_NAME,
+    CONF_ZONE,
+    STATE_UNAVAILABLE,
+    STATE_UNKNOWN,
+)
 from homeassistant.core import HomeAssistant
 from homeassistant.helpers import entity_registry as er
 import homeassistant.helpers.issue_registry as ir
@@ -1205,7 +1210,7 @@ async def test_sensor_unique_ids(
 ) -> None:
     """Test that when tracked entity is renamed."""
     t1 = entity_registry.async_get_or_create(
-        "device_tracker", "device_tracker", "test1"
+        "device_tracker", "device_tracker", "test1", original_name="Test tracker 1"
     )
     hass.states.async_set(t1.entity_id, "not_home")
 
@@ -1227,10 +1232,12 @@ async def test_sensor_unique_ids(
     assert await hass.config_entries.async_setup(mock_config.entry_id)
     await hass.async_block_till_done()
 
-    sensor_t1 = f"sensor.home_{t1.entity_id.split('.')[-1]}_distance"
+    sensor_t1 = "sensor.home_test_tracker_1_distance"
     entity = entity_registry.async_get(sensor_t1)
     assert entity
     assert entity.unique_id == f"{mock_config.entry_id}_{t1.id}_dist_to_zone"
+    state = hass.states.get(sensor_t1)
+    assert state.attributes.get(ATTR_FRIENDLY_NAME) == "home Test tracker 1 Distance"
 
     entity = entity_registry.async_get("sensor.home_test2_distance")
     assert entity