diff --git a/sdk_container/src/third_party/coreos-overlay/eclass/coreos-kernel.eclass b/sdk_container/src/third_party/coreos-overlay/eclass/coreos-kernel.eclass
index 70b0c72c21..678800a401 100644
--- a/sdk_container/src/third_party/coreos-overlay/eclass/coreos-kernel.eclass
+++ b/sdk_container/src/third_party/coreos-overlay/eclass/coreos-kernel.eclass
@@ -114,10 +114,10 @@ kmake() {
 	fi
 	# this can be removed once it is exported globally again
 	export CCACHE_BASEDIR="${S}"
-	emake \
+	emake "--directory=${S}/source" \
 		ARCH="${kernel_arch}" \
 		CROSS_COMPILE="${CHOST}-" \
-		KBUILD_OUTPUT="build" \
+		KBUILD_OUTPUT="../build" \
 		KCFLAGS="${kernel_cflags}" \
 		LDFLAGS="" \
 		"$@"
@@ -131,9 +131,50 @@ shred_keys() {
 	fi
 }
 
+# Populate /lib/modules/$(uname -r)/{build,source}
+prepare-lib-modules-release-dirs() {
+	# build and source must cleaned up to avoid referencing $ROOT
+	rm "${D}/usr/lib/modules/${version}"/{build,source} || die
+
+	# XXX: For some reason tc-arch-kernel is returning x86_64 on > 2.6.24
+	local kernel_arch=$(tc-arch-kernel)
+	if [ "${kernel_arch}" == "x86_64" ]; then
+		kernel_arch="x86"
+	fi
+
+	# Install a stripped source for out-of-tree module builds (Debian-derived)
+	{
+		echo source/Makefile
+		find source/arch/${kernel_arch} -follow -maxdepth 1 -name 'Makefile*' -print
+		find source/arch/${kernel_arch} -follow \( -name 'module.lds' -o -name 'Kbuild.platforms' -o -name 'Platform' \) -print
+		find $(find source/arch/${kernel_arch} -follow \( -name include -o -name scripts \) -follow -type d -print) -print
+		find source/include source/scripts -follow -print
+	} | cpio -pd \
+		--preserve-modification-time \
+		--owner=root:root \
+		--dereference \
+		"${D}/usr/lib/modules/${version}" || die
+
+	# Clean up the build tree and install for out-of-tree module builds
+	kmake clean
+	find "build/" -type d -empty -delete || die
+	rm --recursive \
+		"build/bootengine.cpio" \
+		"build/.config.old" \
+		"build/certs" \
+		|| die
+
+	find "build/" -print | cpio -pd \
+		--preserve-modification-time \
+		--owner=root:root \
+		"${D}/usr/lib/modules/${version}" || die
+}
+
 coreos-kernel_src_unpack() {
+	# we more or less reproduce the layout in /lib/modules/$(uname -r)/
 	mkdir -p "${S}/build" || die
-	ln -s "${KERNEL_DIR}"/* "${S}/" || die
+	mkdir -p "${S}/source" || die
+	ln -s "${KERNEL_DIR}"/* "${S}/source/" || die
 }
 
 coreos-kernel_src_prepare() {
@@ -211,16 +252,7 @@ coreos-kernel_src_install() {
 	dosym "vmlinuz-${version}" /usr/boot/vmlinuz
 	dosym "config-${version}" /usr/boot/config
 
-	# build and source must cleaned up to avoid referencing $ROOT
-	rm "${D}/usr/lib/modules/${version}"/{build,source} || die
-	dosym "../../../src/linux-${version}" "/usr/lib/modules/${version}/source"
-
-	# this is just here for linux-info.eclass, mask from prod images
-	dodir "/usr/lib/modules/${version}/build"
-	dosym "../../../../boot/config-${version}" \
-		"/usr/lib/modules/${version}/build/.config"
-
-	save_config build/defconfig
+	prepare-lib-modules-release-dirs
 
 	shred_keys
 }
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r1.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r2.ebuild
similarity index 86%
rename from sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r1.ebuild
rename to sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r2.ebuild
index ad6f2587f5..4cdc6203e3 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r1.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-kernel/coreos-kernel-4.3.0-r2.ebuild
@@ -2,7 +2,7 @@
 # Distributed under the terms of the GNU General Public License v2
 
 EAPI=5
-COREOS_SOURCE_REVISION=""
+COREOS_SOURCE_REVISION="-r1"
 inherit coreos-kernel
 
 DESCRIPTION="CoreOS Linux kernel"
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0-r1.ebuild
similarity index 96%
rename from sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0.ebuild
rename to sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0-r1.ebuild
index 2c76836baf..9c93e60e5d 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/coreos-sources-4.3.0-r1.ebuild
@@ -37,5 +37,6 @@ UNIPATCH_LIST="
         ${PATCH_DIR}/0019-net-wireless-wl18xx-Add-missing-MODULE_FIRMWARE.patch \
         ${PATCH_DIR}/0020-overlayfs-use-a-minimal-buffer-in-ovl_copy_xattr.patch \
         ${PATCH_DIR}/0021-net-switchdev-fix-return-code-of-fdb_dump-stub.patch \
+        ${PATCH_DIR}/0022-kbuild-derive-relative-path-for-KBUILD_SRC-from-CURD.patch \
 "
 
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/files/4.3/0022-kbuild-derive-relative-path-for-KBUILD_SRC-from-CURD.patch b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/files/4.3/0022-kbuild-derive-relative-path-for-KBUILD_SRC-from-CURD.patch
new file mode 100644
index 0000000000..4474091a94
--- /dev/null
+++ b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-sources/files/4.3/0022-kbuild-derive-relative-path-for-KBUILD_SRC-from-CURD.patch
@@ -0,0 +1,30 @@
+From 3348a15e9733c3ffb56ad7f9e9729a919f61eee9 Mon Sep 17 00:00:00 2001
+From: Vito Caputo <vito.caputo@coreos.com>
+Date: Wed, 25 Nov 2015 02:59:45 -0800
+Subject: [PATCH 22/22] kbuild: derive relative path for KBUILD_SRC from CURDIR
+
+This enables relocating source and build trees to different roots,
+provided they stay reachable relative to one another.  Useful for
+builds done within a sandbox where the eventual root is prefixed
+by some undesirable path component.
+---
+ Makefile | 3 ++-
+ 1 file changed, 2 insertions(+), 1 deletion(-)
+
+diff --git a/Makefile b/Makefile
+index d5b3739..f64d968 100644
+--- a/Makefile
++++ b/Makefile
+@@ -143,7 +143,8 @@ $(filter-out _all sub-make $(CURDIR)/Makefile, $(MAKECMDGOALS)) _all: sub-make
+ 	@:
+ 
+ sub-make: FORCE
+-	$(Q)$(MAKE) -C $(KBUILD_OUTPUT) KBUILD_SRC=$(CURDIR) \
++	$(Q)$(MAKE) -C $(KBUILD_OUTPUT) \
++	KBUILD_SRC=$(shell realpath --relative-to=$(KBUILD_OUTPUT) $(CURDIR)) \
+ 	-f $(CURDIR)/Makefile $(filter-out _all sub-make,$(MAKECMDGOALS))
+ 
+ # Leave processing to above invocation of make
+-- 
+2.4.6
+