Is there any way to change the instance name of LocalDB of SQL Server 2012 from
(LocalDB)\xxxx to just
I need it for an application that needs SQL Server DB instance name to be MSSQLDEFAULT.
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Have you looked into creating an alias via Native Client Configuration? You would need to do this on every client computer that connects to the server. If you have only a few computers that connect to the server (a few web servers, maybe a devops workstation), then this isn't a big deal. There is a ServerFault question covering this topic.