In your example you put jvm-options inside jvm node. If you put it inside server node, it should work. Just verified it in Eclipse Kepler R for Linux with Oracle Java 1.7.0, it works for me with both localhost and 127.0.0.1. Do not forget restart domain server. Also in your example address=18787, but you mention 8787, make sure ports are the same in hosts.xml and eclipse remote debugging launch configuration.