diff --git a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/make.defaults b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/make.defaults
index 60494bf9f27..34e2a6cbbbe 100644
--- a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/make.defaults
+++ b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/make.defaults
@@ -91,13 +91,11 @@ CONFIG_PROTECT="
 
 # Remove libtool .la files for non-plugin libraries.
 # Remove Gentoo init files since we use systemd.
-# Remove build-id, there is some issue with it causing collisions.
 # Remove default files from sys-power/acpid.
 # Do not install default repos.conf, we always put repository configuration in /etc.
 INSTALL_MASK="
   /usr/lib*/*.la
   /etc/init.d /etc/conf.d /etc/user/conf.d /etc/user/init.d
-  /usr/lib/debug/.build-id
   /etc/acpi
   /usr/share/portage/config/repos.conf
 "
diff --git a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/profile.bashrc b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/profile.bashrc
index 6165f45d053..c3299e99058 100644
--- a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/profile.bashrc
+++ b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/base/profile.bashrc
@@ -124,6 +124,19 @@ cros_pre_pkg_setup_sysroot_build_bin_dir() {
 	PATH+=":${CROS_BUILD_BOARD_BIN}"
 }
 
+# Remove any debug build-id symlinks that are broken because of INSTALL_MASK,
+# and also remove their associated debug files to avoid wasting space.
+cros_post_pkg_preinst_rm_masked_debug_files() {
+	local link debug dir=${ED}/usr/lib/debug
+	[[ -d ${dir}/.build-id ]] || return
+	while read -d $'\n' -r link; do
+		debug=$(realpath "${link}.debug") || die
+		rm -f -- "${link}" "${link}.debug" "${debug}" || die
+	done < <(find "${dir}"/.build-id -xtype l ! -name "*.debug")
+	# -delete implies -depth so entire empty trees are deleted.
+	find "${dir}" -type d -empty -delete || die
+}
+
 # Avoid modifications of the preexisting users - these are provided by
 # our baselayout and usermod can't change anything there anyway (it
 # complains that the user is not in /etc/passwd).
diff --git a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/targets/sdk/make.defaults b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/targets/sdk/make.defaults
index 3fb2f4e9a72..a73848f3615 100644
--- a/sdk_container/src/third_party/coreos-overlay/profiles/coreos/targets/sdk/make.defaults
+++ b/sdk_container/src/third_party/coreos-overlay/profiles/coreos/targets/sdk/make.defaults
@@ -2,6 +2,11 @@ FLATCAR_TYPE=sdk
 
 USE="cros_host expat man -pam"
 
+# We don't include -g in the SDK CFLAGS, so don't waste time and space on
+# splitdebug. Other compilers like Rust still generate debug symbols, but we
+# don't need these either.
+FEATURES="-splitdebug"
+
 # Enable CPU architectures needed by Rust builds
 LLVM_TARGETS="X86 AArch64"
 
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/Manifest b/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/Manifest
index 8c30e5b987e..d8f595d3bdf 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/Manifest
+++ b/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/Manifest
@@ -1 +1 @@
-DIST flatcar-baselayout-bb76459c3338ce0e76c4e48d545795bfbc9dbfd9.tar.gz 37869 BLAKE2B 2d7ca48708e4eb3dc2f68ed6fb2b86bb9a903031e3249f55f8b8a0e1d6d08ef35caa40a50560c87bd0bad2c69fc9089425469a56b66a9c9ac9eee69bc83fbe5d SHA512 4f294d82eec5d53b1b444561f01b33b768e88c44ef7d8d3d7a5ce12a42c06048656a9f8bbdcb3a2c4751eb3f92639ccbdbb6a316e35b85a242476e1de5cd3fe1
+DIST flatcar-baselayout-9af25c8fed49fc58467ff82b452d6c0fe20188e6.tar.gz 38224 BLAKE2B 9f229b588b8a1b2584d038e83a647107acffa851b0f746dae9b0d3cb33537b6626dde5adbf904470a2be86ec89a5a5de5ad84c82d334837c75152b85cd9f621f SHA512 a32da0a455af0d52d3d0c32b11ab4fdf8b3482fb47040c2e9ac28a1f3d978fe96ce53d288f4a33f7b28999b1f72f01e1265c17986c595f203a23f44cf82c68e6
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-3.6.8-r20.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-3.6.8-r21.ebuild
similarity index 100%
rename from sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-3.6.8-r20.ebuild
rename to sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-3.6.8-r21.ebuild
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-9999.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-9999.ebuild
index 403d3bf4979..3bdaf2afaf6 100644
--- a/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-9999.ebuild
+++ b/sdk_container/src/third_party/coreos-overlay/sys-apps/baselayout/baselayout-9999.ebuild
@@ -12,7 +12,7 @@ if [[ ${PV} == 9999 ]]; then
 	EGIT_REPO_URI="https://github.com/flatcar/baselayout.git"
 	inherit git-r3
 else
-	EGIT_VERSION="bb76459c3338ce0e76c4e48d545795bfbc9dbfd9" # flatcar-master
+	EGIT_VERSION="9af25c8fed49fc58467ff82b452d6c0fe20188e6" # flatcar-master
 	SRC_URI="https://github.com/flatcar/baselayout/archive/${EGIT_VERSION}.tar.gz -> flatcar-${PN}-${EGIT_VERSION}.tar.gz"
 	S="${WORKDIR}/${PN}-${EGIT_VERSION}"
 	KEYWORDS="amd64 arm64"