How do I disable "Self Assigned IP Addresses"?

Could you please tell me how to configure my Mac to behave this way?

Sure. Make sure there's a DHCP server running on the network 100% of the time.

If your machine is set to use DHCP then it will request an address from the DHCP server. If there is no server (or the server doesn't have any spare IP addresses) then the Mac will self-assign an address.
This is standard procedure for most OSes. AFAIK there's no way to stop it from self-assigning, therefore the only solution is to make sure your DHCP server responds with an address.

Self assigned IP addresses (usually beginning 169.254.x.x) are your macs way of telling you that for some reason (DHCP not working or not giving out leases) it cannot acquire a connection from the network and is resorting to giving itself this IP address to avoid a serious identity crisis.

I gather you are using a router or wireless device of some sort. If so I would check that it is giving out IP addresses as needed (and not filtering based in MAC Address or anything like that) and when all else fails, powercycle. (unplug, wait 30 seconds, and plug in again).

If you are still having issues with this, let us know what your setup is like and we'll see what we can do.

I have seen Self Assigned IP Addresses, if the network interface is configured with a Proxy AND the "Bypass proxy settings..." field has a badly formed list of hosts that should be ignored for proxy service.

I saw one system where the comma separated list had a period instead of a comma and that system happened to be the domain where the DHCP service was coming from. Thus the DHCP request was directed to the Proxy server which didn't know what to do with that DHCP request.

I have no idea why this would work, but from troubleshooting Mac connectivity, I've noticed sometimes connection issues would exist if Appletalk was disabled.

This is just from my previous life as a help desk techie for an ISP. Again, no idea why it worked, but it did.

HistoryStudent1113 wrote:
Self assigned IP addresses (usually beginning 169.254.x.x) are your macs way of telling you that for some reason (DHCP not working or not giving out leases) it cannot acquire a connection from the network and is resorting to giving itself this IP address to avoid a serious identity crisis.

That's a little exaggerated.

Self-assigned addresses are used when a DHCP server cannot be found in order to allow your Mac to connect to other machines without the need for a DHCP server.

Example: If you simply connect one Mac to another via Ethernet, the two machines will be able to communicate with each other without a dedicated DHCP server on the network thanks to self-assigned IP addresses.

It only self-assigns when it can't find anything else to talk to.

Nope.

Self-assigned IP addresses are exceptionally useful, so there's no way to disable them on any operating system, Mac OS X, Windows, Solaris, Linux, Unix, etc.