diff --git a/sdk_container/src/third_party/coreos-overlay/changelog/changes/2023-02-20-etc-overlayfs.md b/sdk_container/src/third_party/coreos-overlay/changelog/changes/2023-02-20-etc-overlayfs.md
new file mode 100644
index 0000000000..cd3ade4ca4
--- /dev/null
+++ b/sdk_container/src/third_party/coreos-overlay/changelog/changes/2023-02-20-etc-overlayfs.md
@@ -0,0 +1 @@
+- `/etc` is now set up as overlayfs with the original `/etc` folder being the store for changed files/directories and `/usr/share/flatcar/etc` providing the lower default directory tree ([bootengine#53](https://github.com/flatcar/bootengine/pull/53), [scripts#666](https://github.com/flatcar/scripts/pull/666))
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-9999.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-9999.ebuild
index 3657e78fa2..823dbdafdb 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-9999.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-9999.ebuild
@@ -10,7 +10,7 @@ CROS_WORKON_REPO="https://github.com"
 if [[ "${PV}" == 9999 ]]; then
 	KEYWORDS="~amd64 ~arm ~arm64 ~x86"
 else
-	CROS_WORKON_COMMIT="aa8a19eb8e555d75535632600a353ea4cb5576eb" # flatcar-master
+	CROS_WORKON_COMMIT="98a903c775dc0dea3db45e5ca730d7be4d480cf2" # flatcar-master
 	KEYWORDS="amd64 arm arm64 x86"
 fi