diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-0.1.0-r4.ebuild b/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-0.1.0-r3.ebuild
similarity index 100%
rename from sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-0.1.0-r4.ebuild
rename to sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-0.1.0-r3.ebuild
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-9999.ebuild b/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-9999.ebuild
index cf1723410e..9650fd7980 100644
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-9999.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/coreos-base/update_engine/update_engine-9999.ebuild
@@ -5,11 +5,13 @@ EAPI=5
 CROS_WORKON_PROJECT="coreos/update_engine"
 CROS_WORKON_REPO="git://github.com"
 AUTOTOOLS_AUTORECONF=1
+# TODO: this can be disabled once -I.. is no longer used
+AUTOTOOLS_IN_SOURCE_BUILD=1
 
 if [[ "${PV}" == 9999 ]]; then
 	KEYWORDS="~amd64 ~arm ~arm64 ~x86"
 else
-	CROS_WORKON_COMMIT="f79c8f95dd8bd2a0c532d1922869e2e602be8037"
+	CROS_WORKON_COMMIT="c88492c39ec0ad81bb26ae6efde7b4fc46a9804a"
 	KEYWORDS="amd64 arm arm64 x86"
 fi