diff --git a/homeassistant/components/esphome/entity.py b/homeassistant/components/esphome/entity.py
index 37f8e738aee..81dd7d7f1ed 100644
--- a/homeassistant/components/esphome/entity.py
+++ b/homeassistant/components/esphome/entity.py
@@ -244,9 +244,21 @@ class EsphomeEntity(EsphomeBaseEntity, Generic[_InfoT, _StateT]):
         self._key = entity_info.key
         self._state_type = state_type
         self._on_static_info_update(entity_info)
-        self._attr_device_info = DeviceInfo(
-            connections={(dr.CONNECTION_NETWORK_MAC, device_info.mac_address)}
-        )
+
+        # Determine the device connection based on whether this entity belongs to a sub device
+        if entity_info.device_id:
+            # Entity belongs to a sub device
+            self._attr_device_info = DeviceInfo(
+                identifiers={
+                    (DOMAIN, f"{device_info.mac_address}_{entity_info.device_id}")
+                }
+            )
+        else:
+            # Entity belongs to the main device
+            self._attr_device_info = DeviceInfo(
+                connections={(dr.CONNECTION_NETWORK_MAC, device_info.mac_address)}
+            )
+
         if entity_info.name:
             self.entity_id = f"{domain}.{device_info.name}_{entity_info.object_id}"
         else:
diff --git a/homeassistant/components/esphome/manager.py b/homeassistant/components/esphome/manager.py
index b4af39586d4..84c9b36f838 100644
--- a/homeassistant/components/esphome/manager.py
+++ b/homeassistant/components/esphome/manager.py
@@ -751,6 +751,26 @@ def _async_setup_device_registry(
     device_info = entry_data.device_info
     if TYPE_CHECKING:
         assert device_info is not None
+
+    device_registry = dr.async_get(hass)
+    # Build sets of valid device identifiers and connections
+    valid_connections = {(dr.CONNECTION_NETWORK_MAC, device_info.mac_address)}
+    valid_identifiers = {
+        (DOMAIN, f"{device_info.mac_address}_{sub_device.device_id}")
+        for sub_device in device_info.devices
+    }
+
+    # Remove devices that no longer exist
+    for device in dr.async_entries_for_config_entry(device_registry, entry.entry_id):
+        # Skip devices we want to keep
+        if (
+            device.connections & valid_connections
+            or device.identifiers & valid_identifiers
+        ):
+            continue
+        # Remove everything else
+        device_registry.async_remove_device(device.id)
+
     sw_version = device_info.esphome_version
     if device_info.compilation_time:
         sw_version += f" ({device_info.compilation_time})"
@@ -779,11 +799,14 @@ def _async_setup_device_registry(
             f"{device_info.project_version} (ESPHome {device_info.esphome_version})"
         )
 
-    suggested_area = None
+    suggested_area: str | None = None
     if device_info.suggested_area:
         suggested_area = device_info.suggested_area
+    elif device_info.area:
+        # Use main device area if suggested_area is not set
+        suggested_area = device_info.area.name
 
-    device_registry = dr.async_get(hass)
+    # Create/update main device
     device_entry = device_registry.async_get_or_create(
         config_entry_id=entry.entry_id,
         configuration_url=configuration_url,
@@ -794,6 +817,36 @@ def _async_setup_device_registry(
         sw_version=sw_version,
         suggested_area=suggested_area,
     )
+
+    # Handle sub devices
+    # Find available areas from device_info
+    areas_by_id = {area.area_id: area for area in device_info.areas}
+    # Create/update sub devices that should exist
+    for sub_device in device_info.devices:
+        # Create a unique identifier for this sub device
+        sub_device_identifier = f"{device_info.mac_address}_{sub_device.device_id}"
+
+        # Determine the area for this sub device
+        sub_device_suggested_area: str | None = None
+        if sub_device.area_id and sub_device.area_id in areas_by_id:
+            sub_device_suggested_area = areas_by_id[sub_device.area_id].name
+
+        sub_device_entry = device_registry.async_get_or_create(
+            config_entry_id=entry.entry_id,
+            identifiers={(DOMAIN, sub_device_identifier)},
+            name=sub_device.name,
+            manufacturer=manufacturer,
+            model=model,
+            sw_version=sw_version,
+            suggested_area=sub_device_suggested_area,
+        )
+
+        # Update the sub device to set via_device_id
+        device_registry.async_update_device(
+            sub_device_entry.id,
+            via_device_id=device_entry.id,
+        )
+
     return device_entry.id