diff --git a/sdk_container/src/third_party/coreos-overlay/changelog/changes/2022-03-07-ignition.md b/sdk_container/src/third_party/coreos-overlay/changelog/changes/2022-03-07-ignition.md
new file mode 100644
index 0000000000..42706e9719
--- /dev/null
+++ b/sdk_container/src/third_party/coreos-overlay/changelog/changes/2022-03-07-ignition.md
@@ -0,0 +1 @@
+- Besides Ignition v1 and v2 configurations, Ignition configurations with specification v3 (up to 3.3.0) are now supported, see the [docs section for details](https://www.flatcar.org/docs/latest/provisioning/ignition/specification/#ignition-v3)
diff --git a/sdk_container/src/third_party/coreos-overlay/changelog/updates/2022-03-07-ignition.md b/sdk_container/src/third_party/coreos-overlay/changelog/updates/2022-03-07-ignition.md
new file mode 100644
index 0000000000..3b85bc1cb7
--- /dev/null
+++ b/sdk_container/src/third_party/coreos-overlay/changelog/updates/2022-03-07-ignition.md
@@ -0,0 +1 @@
+- ignition ([2.13.0](https://github.com/coreos/ignition/releases/tag/v2.13.0))
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/coreos-init/coreos-init-9999.ebuild b/sdk_container/src/third_party/coreos-overlay/coreos-base/coreos-init/coreos-init-9999.ebuild
index 00111e8f64..090fdff7e5 100644
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/coreos-init/coreos-init-9999.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/coreos-base/coreos-init/coreos-init-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="5f97a6a0dfd7a7b1125d089ea9057aea121e11f1" # flatcar-master
+	CROS_WORKON_COMMIT="d993da38542849664417e9eb775b89e712b09586" # flatcar-master
 	KEYWORDS="amd64 arm arm64 x86"
 fi
 
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-azure/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-azure/files/base/default.ign
deleted file mode 100644
index 29b7c91e59..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-azure/files/base/default.ign
+++ /dev/null
@@ -1,14 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from Azure metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=azure\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-digitalocean/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-digitalocean/files/base/default.ign
deleted file mode 100644
index 58589c2d2a..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-digitalocean/files/base/default.ign
+++ /dev/null
@@ -1,14 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from DigitalOcean metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=digitalocean\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/files/base/default.ign
deleted file mode 100644
index ed427e8a5b..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/files/base/default.ign
+++ /dev/null
@@ -1,22 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "user-configdrive.service",
-        "mask": true
-      },
-      {
-        "name": "user-configvirtfs.service",
-        "mask": true
-      },
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from platform metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=ec2-compat\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/oem-ec2-compat-0.1.2-r2.ebuild b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/oem-ec2-compat-0.1.2-r2.ebuild
index 3978697142..96a8bf8fab 100644
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/oem-ec2-compat-0.1.2-r2.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-ec2-compat/oem-ec2-compat-0.1.2-r2.ebuild
@@ -60,7 +60,6 @@ src_install() {
 
 	insinto "/usr/share/oem/base"
 	doins "${FILESDIR}/base/README"
-	doins "${FILESDIR}/base/default.ign"
 	if use ec2 ; then
 		newins "${FILESDIR}/base/base-ec2.ign" base.ign
 	fi
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-gce/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-gce/files/base/default.ign
deleted file mode 100644
index 28bf972ad5..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-gce/files/base/default.ign
+++ /dev/null
@@ -1,14 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from GCE metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=gce\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-packet/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-packet/files/base/default.ign
deleted file mode 100644
index 8d97655935..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-packet/files/base/default.ign
+++ /dev/null
@@ -1,14 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from Packet metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=packet\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-vmware/files/base/default.ign b/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-vmware/files/base/default.ign
deleted file mode 100644
index 4829082510..0000000000
--- a/sdk_container/src/third_party/coreos-overlay/coreos-base/oem-vmware/files/base/default.ign
+++ /dev/null
@@ -1,14 +0,0 @@
-{
-  "ignition": {
-    "version": "2.1.0"
-  },
-  "systemd": {
-    "units": [
-      {
-        "name": "oem-cloudinit.service",
-        "enabled": true,
-        "contents": "[Unit]\nDescription=Cloudinit from VMware metadata\n\n[Service]\nType=oneshot\nExecStart=/usr/bin/coreos-cloudinit --oem=vmware\n\n[Install]\nWantedBy=multi-user.target\n"
-      }
-    ]
-  }
-}
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-0.36.1.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-2.13.0.ebuild
similarity index 100%
rename from sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-0.36.1.ebuild
rename to sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-2.13.0.ebuild
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-9999.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-9999.ebuild
index 564ce4e4d5..4e67d12819 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-9999.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-apps/ignition/ignition-9999.ebuild
@@ -5,14 +5,14 @@ EAPI=7
 CROS_WORKON_PROJECT="flatcar-linux/ignition"
 CROS_WORKON_LOCALNAME="ignition"
 CROS_WORKON_REPO="https://github.com"
-COREOS_GO_PACKAGE="github.com/flatcar-linux/ignition"
+COREOS_GO_PACKAGE="github.com/flatcar-linux/ignition/v2"
 COREOS_GO_GO111MODULE="off"
 inherit coreos-go cros-workon systemd udev
 
 if [[ "${PV}" == 9999 ]]; then
 	KEYWORDS="~amd64 ~arm64"
 else
-	CROS_WORKON_COMMIT="de4e6cc9bbba4c801424d74c7f271291766aad7a" # flatcar-master
+	CROS_WORKON_COMMIT="e2a714474441b416693430e6080e7900d8dd14f0" # main
 	KEYWORDS="amd64 arm64"
 fi
 
@@ -46,7 +46,7 @@ PATCHES=(
 
 src_compile() {
 	export GO15VENDOREXPERIMENT="1"
-	GO_LDFLAGS="-X github.com/flatcar-linux/ignition/internal/version.Raw=$(git describe --dirty)" || die
+	GO_LDFLAGS="-X github.com/flatcar-linux/ignition/v2/internal/version.Raw=${PV} -X github.com/flatcar-linux/ignition/v2/internal/distro.selinuxRelabel=false -X github.com/flatcar-linux/ignition/v2/internal/distro.writeAuthorizedKeysFragment=false" || die
 	go_build "${COREOS_GO_PACKAGE}/internal"
 }
 
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 5fffb461e0..6a1d5de1f9 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="d586e78111173bb0d9ebd4afa7efbc45f07dffb4" # flatcar-master
+	CROS_WORKON_COMMIT="820a5ad998832cfb06c17df0e61766028f7417eb" # flatcar-master
 	KEYWORDS="amd64 arm arm64 x86"
 fi
 
@@ -34,6 +34,7 @@ src_install() {
 		"${D}"/usr/lib/dracut/modules.d/30disk-uuid/disk-uuid.sh \
 		"${D}"/usr/lib/dracut/modules.d/30ignition/ignition-generator \
 		"${D}"/usr/lib/dracut/modules.d/30ignition/ignition-setup.sh \
+		"${D}"/usr/lib/dracut/modules.d/30ignition/ignition-kargs-helper \
 		"${D}"/usr/lib/dracut/modules.d/30ignition/retry-umount.sh \
 		"${D}"/usr/lib/dracut/modules.d/35torcx/torcx-profile-populate-generator \
 		"${D}"/usr/lib/dracut/modules.d/99setup-root/initrd-setup-root \