diff --git a/changelog/changes/2025-10-30-kmod-build.md b/changelog/changes/2025-10-30-kmod-build.md
deleted file mode 100644
index 009254d3fd..0000000000
--- a/changelog/changes/2025-10-30-kmod-build.md
+++ /dev/null
@@ -1 +0,0 @@
-- The way that files for building custom kernel modules are installed has changed from a Ubuntu-inspired method to the standard upstream kernel method. In the unlikely event that this breaks your module builds, please let the Flatcar team know immediately.
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 56c2e64457..0ea1ee111b 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
@@ -117,10 +117,10 @@ kmake() {
 	if gcc-specs-pie; then
 		kernel_cflags="-nopie -fstack-check=no ${kernel_cflags}"
 	fi
-	emake "--directory=${KERNEL_DIR}" \
+	emake "--directory=${S}/source" \
 		ARCH="${kernel_arch}" \
 		CROSS_COMPILE="${CHOST}-" \
-		KBUILD_OUTPUT="${S}/build" \
+		KBUILD_OUTPUT="../build" \
 		KCFLAGS="${kernel_cflags}" \
 		LDFLAGS="" \
 		"V=1" \
@@ -184,6 +184,85 @@ shred_keys() {
 	cp certs/modules.pub.pem "${sig_key}" || die
 }
 
+# Populate /lib/modules/$(uname -r)/{build,source}
+install_build_source() {
+	local kernel_arch=$(tc-arch-kernel)
+	local host_kernel_arch=$(tc-ninja_magic_to_arch kern "${CBUILD}")
+
+	# NOTE: We have to get ${archabspaths} before removing symlinks under
+	# /usr/lib/modules. However, do not exclude "dt-bindings" for now,
+	# as it looks architecture-independent.
+	local archabspaths=($(ls -1d ${D}/usr/lib/modules/${KV_FULL}/source/scripts/dtc/include-prefixes/* \
+		| grep -v dt-bindings ))
+
+	# remove the broken symlinks referencing $ROOT
+	rm "${D}/usr/lib/modules/${KV_FULL}/build" || die
+
+	# Compose list of architectures to be excluded from the kernel modules
+	# tree in the final image. It is an array to be used as a pattern for
+	# grep command below at the end of "find source/scripts" command for
+	# fetching kernel modules list, e.g.:
+	#   find source/scripts -follow -print \
+	#   | grep -E -v -w "include-prefixes/arc|include-prefixes/xtensa"
+	declare -a excarchlist
+	local excarchstr
+
+	for apath in "${archabspaths[@]}"; do
+		local arch
+		arch=$(basename "${apath}")
+		if [[ "${arch}" != "${kernel_arch}" ]]; then
+			excarchlist+=("include-prefixes/${arch}")
+
+			# Do not append delimiter '|' in case of the last element.
+			if [[ "${apath}" != "${archabspaths[-1]}" ]]; then
+				excarchlist+=("|")
+			fi
+		fi
+	done
+
+	# Remove every whitespace from the grep pattern string, to make pattern
+	# matching work well.
+	excarchstr=$(echo "${excarchlist[@]}" | sed -e 's/[[:space:]]*//g')
+
+	# Install a stripped source for out-of-tree module builds (Debian-derived)
+	#
+	# NOTE: we need to exclude unsupported architectures from source/scripts,
+	# to prevent the final image from having unnecessary directories under
+	# /usr/lib/modules/${KV_FULL}/source/scripts/dtc/include-prefixes.
+	# The grep must run with "-w" to exclude exact patterns like either arm
+	# or arm64.
+	{
+		echo source/Makefile
+		find source/arch/${host_kernel_arch} -follow -maxdepth 1 -name 'Makefile*' -print
+		find source/arch/${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 -follow -print
+		find source/scripts -follow -print | grep -E -v -w "${excarchstr}"
+		find build/ -print
+	} | cpio -pd \
+		--preserve-modification-time \
+		--owner=root:root \
+		--dereference \
+		"${D}/usr/lib/modules/${KV_FULL}" || die
+	# ./build/source is a symbolic link so cpio ends up creating an empty dir.
+	# Restore the symlink.
+	pushd "${D}/usr/lib/modules/${KV_FULL}"
+	rmdir build/source || die
+	ln -sr source build || die
+	# Symlink includes into the build directory to resemble Ubuntu's /lib/modules
+	# layout. This lets the Nvidia driver build when passing SYSSRC=/lib/modules/../build
+	# instead of requiring SYSOUT/SYSSRC.
+	{
+		find source/include -mindepth 1 -maxdepth 1 -type d
+		find source/arch/${kernel_arch}/include -mindepth 1 -maxdepth 1 -type d
+	} | while read src; do
+		dst="${src/source/build}"
+		ln -sr "${src}" "${dst}" || die
+	done || die
+	popd
+}
+
 coreos-kernel_pkg_pretend() {
 	[[ "${MERGE_TYPE}" == binary ]] && return
 
@@ -201,7 +280,10 @@ coreos-kernel_pkg_setup() {
 }
 
 coreos-kernel_src_unpack() {
+	# we more or less reproduce the layout in /lib/modules/$(uname -r)/
 	mkdir -p "${S}/build" || die
+	mkdir -p "${S}/source" || die
+	ln -s "${KERNEL_DIR}"/* "${S}/source/" || die
 }
 
 coreos-kernel_src_configure() {
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-modules/coreos-modules-6.6.127.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-modules/coreos-modules-6.6.127.ebuild
index 2b18927fa2..910bceba94 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-modules/coreos-modules-6.6.127.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-kernel/coreos-modules/coreos-modules-6.6.127.ebuild
@@ -35,28 +35,34 @@ src_compile() {
 }
 
 src_install() {
-	local build="lib/modules/${KV_FULL}/build"
-
 	# Install modules to /usr, assuming USE=symlink-usr
+	# Install firmware to a temporary (bogus) location.
+	# The linux-firmware package will be used instead.
 	# Stripping must be done here, not portage, to preserve sigs.
-	kmake INSTALL_MOD_PATH="${ED}/usr" \
+	kmake INSTALL_MOD_PATH="${D}/usr" \
 		  INSTALL_MOD_STRIP="--strip-debug" \
+		  INSTALL_FW_PATH="${T}/fw" \
 		  modules_install
 
 	# Install to /usr/lib/debug with debug symbols intact
-	kmake INSTALL_MOD_PATH="${ED}/usr/lib/debug/usr" \
+	kmake INSTALL_MOD_PATH="${D}/usr/lib/debug/usr" \
+		  INSTALL_FW_PATH="${T}/fw" \
 		  modules_install
-	rm "${ED}/usr/lib/debug/usr/lib/modules/${KV_FULL}"/{build,modules.*} || die
+	rm "${D}/usr/lib/debug/usr/lib/modules/${KV_FULL}/"modules.* || die
+	rm "${D}/usr/lib/debug/usr/lib/modules/${KV_FULL}/build" || die
 
-	# Replace the broken /lib/modules/${KV_FULL}/build symlink with a copy of
-	# the files needed to build out-of-tree modules.
-	rm "${ED}/usr/${build}" || die
-	kmake run-command KBUILD_RUN_COMMAND="${KERNEL_DIR}/scripts/package/install-extmod-build ${ED}/usr/${build}"
+	# Clean up the build tree
+	shred_keys
+	kmake clean
+	find "build/" -type d -empty -delete || die
+	rm "build/.config.old" || die
+
+	# Install /lib/modules/${KV_FULL}/{build,source}
+	install_build_source
 
 	# Not strictly required but this is where we used to install the config.
+	dodir "/usr/boot"
+	local build="lib/modules/${KV_FULL}/build"
 	dosym "../${build}/.config" "/usr/boot/config-${KV_FULL}"
 	dosym "../${build}/.config" "/usr/boot/config"
-
-	# Symlink "source" to "build" for compatibility. Fedora does this.
-	dosym build "/usr/${build}/../source"
 }