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Accurate localization of devices within Internet of Things (IoT) networks is driven by the emergence of novel applications that require context awareness to improve operational efficiency, resource management, automation, and safety in industry and smart cities. With the Integrated Localization and Communication (ILAC) functionality, IoT devices can simultaneously exchange data and determine their position in space, resulting in maximized resource utilization with reduced deployment and operational costs. Localization capability in challenging scenarios, including harsh environments with complex geometry and obstacles, can be provided with robust, reliable, and energy-efficient communication protocols able to combat impairments caused by interference and multipath, such as the IEEE 802.15.4 Time-Slotted Channel Hopping (TSCH) protocol. This paper presents an enhancement of the TSCH protocol that integrates localization functionality along with communication, improving the protocol’s operational capabilities and setting a baseline for monitoring, automation, and interaction within IoT setups in physical environments. A novel approach is proposed to incorporate a hybrid localization by integrating Direction of Arrival (DoA) estimation and Multi-Carrier Phase Difference (MCPD) ranging methods for providing DoA and distance estimates with each transmitted packet. With the proposed enhancement, a single node can determine the location of its neighboring nodes without significantly affecting the reliability of communication and the efficiency of the network. The feasibility and effectiveness of the proposed approach are validated in a real scenario in an office building using low-cost proprietary devices, and the software incorporating the solution is provided. The experimental evaluation results show that a node positioned in the center of the room successfully estimates both the DoA and the distance to each neighboring node. The proposed hybrid localization algorithm demonstrates an accuracy of a few tens of centimeters in a two-dimensional space. Full article