diff --git a/build_library/build_image_util.sh b/build_library/build_image_util.sh
index 95714c373a2..570743c2393 100755
--- a/build_library/build_image_util.sh
+++ b/build_library/build_image_util.sh
@@ -737,9 +737,16 @@ EOF
   done
   sudo "${root_fs_dir}"/usr/sbin/flatcar-tmpfiles "${root_fs_dir}"
   # Now that we used the tmpfiles for creating /etc we delete them because
-  # the L, d, and C entries cause upcopies. Also filter out rules with ! or - but no other modifiers
+  # the L, d, D, and C entries cause upcopies. Also filter out rules with ! or - but no other modifiers
   # like + or = which explicitly recreate files.
-  sudo sed -i '/^[CLd]-*!*-*[ \t]*\/etc\//d' "${root_fs_dir}"/usr/lib/tmpfiles.d/*
+  # But before filtering, first store rules that would recreate missing files
+  # to /usr/share/flatcar/etc-no-whiteouts so that we can ensure that
+  # no overlayfs whiteouts exist for these files (example: /etc/resolv.conf).
+  # These rules are combined with the + modifier in addition.
+  # Other rules like w, e, x, do not create files that don't exist.
+  # Note: '-' must come first in the modifier pattern.
+  grep -Ph '^[fcCdDLvqQpb][-=~^!+]*[ \t]*/etc' "${root_fs_dir}"/usr/lib/tmpfiles.d/* | grep -oP '/etc[^ \t]*' | sudo_clobber "${root_fs_dir}"/usr/share/flatcar/etc-no-whiteouts
+  sudo sed -i '/^[CdDL][-=~^!]*[ \t]*\/etc\//d' "${root_fs_dir}"/usr/lib/tmpfiles.d/*
 
   # SELinux: Label the root filesystem for using 'file_contexts'.
   # The labeling has to be done before moving /etc to /usr/share/flatcar/etc to prevent wrong labels for these files and as
diff --git a/changelog/bugfixes/2023-11-29-recreate-etc-files.md b/changelog/bugfixes/2023-11-29-recreate-etc-files.md
new file mode 100644
index 00000000000..46ba8afaccf
--- /dev/null
+++ b/changelog/bugfixes/2023-11-29-recreate-etc-files.md
@@ -0,0 +1 @@
+- Deleted files in `/etc` that have a tmpfiles rule that normally would recreate them will now show up again through the `/etc` lowerdir ([Flatcar#1265](https://github.com/flatcar/Flatcar/issues/1265), [bootengine#79](https://github.com/flatcar/bootengine/pull/79))
diff --git a/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-0.0.38-r25.ebuild b/sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-0.0.38-r26.ebuild
similarity index 100%
rename from sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-0.0.38-r25.ebuild
rename to sdk_container/src/third_party/coreos-overlay/sys-kernel/bootengine/bootengine-0.0.38-r26.ebuild
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 4fcc7d98a94..ab889033303 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="10cea163fa12a5686e367041bc9254b30461f261" # flatcar-master
+	CROS_WORKON_COMMIT="31d24b87717e6ee3b2970af5926a481d6bbff933" # flatcar-master
 	KEYWORDS="amd64 arm arm64 x86"
 fi