diff --git a/controllers/mdutil/util.go b/controllers/mdutil/util.go
index 2edf8939f359..34bef06a5a6f 100644
--- a/controllers/mdutil/util.go
+++ b/controllers/mdutil/util.go
@@ -26,7 +26,7 @@ import (
 
 	"github.com/davecgh/go-spew/spew"
 	"github.com/go-logr/logr"
-	v1 "k8s.io/api/core/v1"
+	corev1 "k8s.io/api/core/v1"
 	apiequality "k8s.io/apimachinery/pkg/api/equality"
 	"k8s.io/apimachinery/pkg/api/meta"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
@@ -34,6 +34,7 @@ import (
 	intstrutil "k8s.io/apimachinery/pkg/util/intstr"
 	"k8s.io/utils/integer"
 	clusterv1 "sigs.k8s.io/cluster-api/api/v1alpha3"
+	"sigs.k8s.io/cluster-api/util/conversion"
 )
 
 const (
@@ -139,11 +140,18 @@ func Revision(obj runtime.Object) (int64, error) {
 }
 
 var annotationsToSkip = map[string]bool{
-	v1.LastAppliedConfigAnnotation:      true,
+	corev1.LastAppliedConfigAnnotation:  true,
 	clusterv1.RevisionAnnotation:        true,
 	clusterv1.RevisionHistoryAnnotation: true,
 	clusterv1.DesiredReplicasAnnotation: true,
 	clusterv1.MaxReplicasAnnotation:     true,
+
+	// Exclude the conversion annotation, to avoid infinite loops between the conversion webhook
+	// and the MachineDeployment controller syncing the annotations between a MachineDeployment
+	// and its linked MachineSets.
+	//
+	// See https://github.com/kubernetes-sigs/cluster-api/pull/3010#issue-413767831 for more details.
+	conversion.DataAnnotation: true,
 }
 
 // skipCopyAnnotation returns true if we should skip copying the annotation with the given annotation key