diff --git a/packages/cos-setup/02-cos-setup-initramfs.conf b/packages/cos-setup/02-cos-setup-initramfs.conf
new file mode 100644
index 00000000000..4c2c1015844
--- /dev/null
+++ b/packages/cos-setup/02-cos-setup-initramfs.conf
@@ -0,0 +1,3 @@
+install_items+=" /lib/systemd/system/cos-setup-initramfs.service /etc/systemd/system/initrd.target.requires/cos-setup-initramfs.service "
+install_items+=" /lib/systemd/system/cos-setup-rootfs.service /etc/systemd/system/initrd-fs.target.requires/cos-setup-rootfs.service "
+add_dracutmodules+=" network "
diff --git a/packages/cos-setup/build.yaml b/packages/cos-setup/build.yaml
index 0408298cff4..c1ec2fd4ccb 100644
--- a/packages/cos-setup/build.yaml
+++ b/packages/cos-setup/build.yaml
@@ -4,11 +4,15 @@ requires:
   version: ">=0"
 steps:
 - mkdir -p /lib/systemd/system
+- mkdir -p /etc/dracut.conf.d
+- cp 02-cos-setup-initramfs.conf /etc/dracut.conf.d
 - cp -rfv *.service /lib/systemd/system
 - cp -rfv *.timer /lib/systemd/system
 - cp -rfv cos-setup /usr/bin/
 - chmod +x /usr/bin/cos-setup
+- systemctl enable cos-setup-rootfs.service
+- systemctl enable cos-setup-initramfs.service
 - systemctl enable cos-setup-reconcile.timer
 - systemctl enable cos-setup-fs.service
 - systemctl enable cos-setup-boot.service
-- systemctl enable cos-setup-network.service
\ No newline at end of file
+- systemctl enable cos-setup-network.service
diff --git a/packages/cos-setup/cos-setup-initramfs.service b/packages/cos-setup/cos-setup-initramfs.service
new file mode 100644
index 00000000000..7e6e5798427
--- /dev/null
+++ b/packages/cos-setup/cos-setup-initramfs.service
@@ -0,0 +1,16 @@
+[Unit]
+Description=cOS system initramfs setup before swith root
+DefaultDependencies=no
+After=initrd-fs.target
+Requires=initrd-fs.target
+Before=initrd.target
+
+[Service]
+RootDirectory=/sysroot
+MountAPIVFS=true
+Type=oneshot
+RemainAfterExit=yes
+ExecStart=/usr/bin/cos-setup initramfs
+
+[Install]
+RequiredBy=initrd.target
diff --git a/packages/cos-setup/cos-setup-rootfs.service b/packages/cos-setup/cos-setup-rootfs.service
new file mode 100644
index 00000000000..0d7044a20b0
--- /dev/null
+++ b/packages/cos-setup/cos-setup-rootfs.service
@@ -0,0 +1,14 @@
+[Unit]
+Description=cOS system early rootfs setup
+DefaultDependencies=no
+After=initrd-root-fs.target
+Requires=initrd-root-fs.target
+Conflicts=initrd-switch-root.target
+
+[Service]
+Type=oneshot
+ExecStartPre=/usr/bin/ln -s /sysroot/system /system
+ExecStart=/usr/bin/cos-setup rootfs
+
+[Install]
+RequiredBy=initrd-fs.target
diff --git a/packages/cos-setup/definition.yaml b/packages/cos-setup/definition.yaml
index ac12032a9d9..39af94b9b45 100644
--- a/packages/cos-setup/definition.yaml
+++ b/packages/cos-setup/definition.yaml
@@ -1,6 +1,6 @@
 name: cos-setup
 category: system
-version: 0.2.11+3
+version: "0.2.16"
 requires:
   - name: "yip"
     category: "toolchain"
diff --git a/packages/cos/50-cos-initrd.conf b/packages/cos/50-cos-initrd.conf
new file mode 100644
index 00000000000..dd5bfdc7d6d
--- /dev/null
+++ b/packages/cos/50-cos-initrd.conf
@@ -0,0 +1,5 @@
+hostonly_cmdline="no"
+hostonly="no"
+compress="xz"
+omit_dracutmodules+=" multipath "
+add_dracutmodules+=" dmsquash-live "
diff --git a/packages/cos/build.yaml b/packages/cos/build.yaml
index d57ab41d0f0..ff90b632e41 100644
--- a/packages/cos/build.yaml
+++ b/packages/cos/build.yaml
@@ -64,6 +64,13 @@ steps:
 - sed -i 's/:PRETTY_NAME:/{{.Values.brand_name}} v{{.Values.version}}/g' setup.yaml
 - yip setup.yaml
 
+# Create initrd
+- |
+    cp 50-cos-initrd.conf /etc/dracut.conf.d && \
+    kernel=$(ls /lib/modules | head -n1) && \
+    dracut -f "/boot/initrd-${kernel}" "${kernel}" && \
+    ln -sf "initrd-${kernel}" /boot/initrd
+
 # See https://luet-lab.github.io/docs/docs/concepts/packages/specfile/#package-by-container-content
 unpack: true
 
diff --git a/packages/cos/collection.yaml b/packages/cos/collection.yaml
index 9fc3e94568d..74138109cca 100644
--- a/packages/cos/collection.yaml
+++ b/packages/cos/collection.yaml
@@ -1,15 +1,14 @@
 packages:
   - name: "cos"
     category: "system"
-    version: 0.5.3+3
+    version: 0.5.3+5
     brand_name: "cOS"
     labels:
       autobump.revdeps: "true"
       autobump.revbump_related: "recovery/cos-img recovery/cos-squash"
   - name: "cos"
     category: "recovery"
-    version: 0.5.3+3
-    version: 0.5.3+3
+    version: 0.5.3+5
     brand_name: "cOS recovery"
     labels:
       autobump.revdeps: "true"
diff --git a/packages/grub-config/config/bootargs.cfg b/packages/grub-config/config/bootargs.cfg
index 374dfe0c1d6..a79dba77849 100644
--- a/packages/grub-config/config/bootargs.cfg
+++ b/packages/grub-config/config/bootargs.cfg
@@ -2,7 +2,7 @@ set kernel=/boot/vmlinuz
 if [ -n "$recoverylabel" ]; then
     set kernelcmd="console=tty1 root=live:LABEL=$recoverylabel rd.live.dir=/ rd.live.squashimg=$img panic=5"
 else
-    set kernelcmd="console=tty1 root=LABEL=$label iso-scan/filename=$img panic=5 security=selinux selinux=1"
+    set kernelcmd="console=tty1 root=LABEL=$label cos-img/filename=$img panic=5 security=selinux selinux=1"
 fi
 
 set initramfs=/boot/initrd
diff --git a/packages/grub-config/definition.yaml b/packages/grub-config/definition.yaml
index 74d306f5db7..6e3d2110705 100644
--- a/packages/grub-config/definition.yaml
+++ b/packages/grub-config/definition.yaml
@@ -1,3 +1,3 @@
 name: "grub-config"
 category: "system"
-version: 0.0.6+2
+version: "0.0.7"
diff --git a/packages/immutable-rootfs/02-cos-immutable-rootfs.conf b/packages/immutable-rootfs/02-cos-immutable-rootfs.conf
new file mode 100644
index 00000000000..67271e31a42
--- /dev/null
+++ b/packages/immutable-rootfs/02-cos-immutable-rootfs.conf
@@ -0,0 +1 @@
+add_dracutmodules+=" cos-immutable-rootfs "
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-config-launcher.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-config-launcher.sh
deleted file mode 100644
index 5056df896f9..00000000000
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-config-launcher.sh
+++ /dev/null
@@ -1,30 +0,0 @@
-#!/bin/bash
-
-type getarg >/dev/null 2>&1 || . /lib/dracut-lib.sh
-
-#======================================
-# Functions
-#--------------------------------------
-function chroot_mounts {
-    local mountpoint=$1
-    mount -t proc /proc "${mountpoint}/proc/"
-    mount -t sysfs /sys "${mountpoint}/sys/"
-    mount --bind /dev "${mountpoint}/dev/"
-}
-
-function chroot_umounts {
-    local mountpoint=$1
-    umount "${mountpoint}/proc/"
-    umount "${mountpoint}/sys/"
-    umount "${mountpoint}/dev/"
-}
-
-#======================================
-# Trigger pre-pivot config stage
-#--------------------------------------
-
-if ismounted /sysroot; then
-    chroot_mounts /sysroot
-    chroot /sysroot /usr/bin/cos-setup initramfs
-    chroot_umounts /sysroot
-fi
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-generator.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-generator.sh
index 53946da36b5..a3b7cf34d11 100755
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-generator.sh
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-generator.sh
@@ -2,11 +2,57 @@
 
 type getarg >/dev/null 2>&1 || . /lib/dracut-lib.sh
 
+cos_unit="cos-immutable-rootfs.service"
+cos_layout="/run/cos/cos-layout.env"
+
+# Disable the service unless we override it
+mkdir -p "/run/systemd/system/${cos_unit}.d"
+
 [ -z "${root}" ] && root=$(getarg root=)
 
-root_perm="ro"
-if getargbool 0 rd.cos.debug.rw; then
-    root_perm="rw"
+cos_root_perm="ro"
+if getargbool 0 rd.cos.debugrw; then
+    cos_root_perm="rw"
+fi
+
+oem_timeout=$(getarg rd.cos.oemtimeout=)
+[ -z "${oem_timeout}" ] && oem_timeout="10"
+cos_overlay=$(getarg rd.cos.overlay=)
+[ -z "${cos_overlay}" ] && cos_overlay="tmpfs:20%"
+
+GENERATOR_DIR="$2"
+[ -z "$GENERATOR_DIR" ] && exit 1
+[ -d "$GENERATOR_DIR" ] || mkdir "$GENERATOR_DIR"
+
+dev=$(dev_unit_name /dev/disk/by-label/COS_OEM)
+{
+    echo "[Unit]"
+    echo "DefaultDependencies=no"
+    echo "Before=cos-setup-rootfs.service"
+    echo "Conflicts=initrd-switch-root.target"
+    echo "[Mount]"
+    echo "Where=/oem"
+    echo "What=/dev/disk/by-label/COS_OEM"
+    echo "Options=rw,suid,dev,exec,noauto,nouser,async"
+} > "$GENERATOR_DIR"/oem.mount
+
+if [ ! -e "$GENERATOR_DIR/cos-setup-rootfs.service.wants/oem.mount" ]; then
+    mkdir -p "$GENERATOR_DIR"/cos-setup-rootfs.service.wants
+    ln -s "$GENERATOR_DIR"/oem.mount \
+        "$GENERATOR_DIR"/cos-setup-rootfs.service.wants/oem.mount
+fi
+
+mkdir -p "$GENERATOR_DIR/$dev.device.d"
+{
+    echo "[Unit]"
+    echo "Before=initrd-root-fs.target"
+    echo "JobRunningTimeoutSec=${oem_timeout}"
+} > "$GENERATOR_DIR/$dev.device.d/timeout.conf"
+
+if [ ! -e "$GENERATOR_DIR/initrd-root-fs.target.wants/$dev.device" ]; then
+    mkdir -p "$GENERATOR_DIR"/initrd-root-fs.target.wants
+    ln -s "$GENERATOR_DIR"/"$dev".device \
+        "$GENERATOR_DIR"/initrd-root-fs.target.wants/"$dev".device
 fi
 
 case "${root}" in
@@ -23,12 +69,7 @@ esac
 
 [ "${rootok}" != "1" ] && exit 0
 
-GENERATOR_DIR="$2"
-[ -z "$GENERATOR_DIR" ] && exit 1
-[ -d "$GENERATOR_DIR" ] || mkdir "$GENERATOR_DIR"
-
-dev="${root//-/\\x2d}"
-dev="${_dev//\//-}"
+dev=$(dev_unit_name "${root}")
 {
     echo "[Unit]"
     echo "Before=initrd-root-fs.target"
@@ -36,7 +77,7 @@ dev="${_dev//\//-}"
     echo "[Mount]"
     echo "Where=/sysroot"
     echo "What=${root}"
-    echo "Options=${root_perm},suid,dev,exec,auto,nouser,async"
+    echo "Options=${cos_root_perm},suid,dev,exec,auto,nouser,async"
 } > "$GENERATOR_DIR"/sysroot.mount
 
 if [ ! -e "$GENERATOR_DIR/initrd-root-fs.target.requires/sysroot.mount" ]; then
@@ -48,6 +89,40 @@ fi
 mkdir -p "$GENERATOR_DIR/$dev.device.d"
 {
     echo "[Unit]"
-    echo "JobTimeoutSec=3000"
-    echo "JobRunningTimeoutSec=3000"
+    echo "JobTimeoutSec=300"
+    echo "JobRunningTimeoutSec=300"
 } > "$GENERATOR_DIR/$dev.device.d/timeout.conf"
+
+case "${cos_overlay}" in
+    UUID=*) \
+        cos_overlay="block:/dev/disk/by-uuid/${cos_overlay#UUID=}"
+    ;;
+    LABEL=*) \
+        cos_overlay="block:/dev/disk/by-label/${cos_overlay#LABEL=}"
+    ;;
+esac
+
+cos_mounts=()
+for mount in $(getargs rd.cos.mount=); do
+    case "${mount}" in
+        UUID=*) \
+            mount="/dev/disk/by-uuid/${mount#UUID=}"
+        ;;
+        LABEL=*) \
+            mount="/dev/disk/by-label/${mount#LABEL=}"
+        ;;
+    esac
+    cos_mounts+=("${mount}")
+done
+
+mkdir -p "${cos_layout%/*}"
+#> "${cos_layout}"
+
+{
+    echo "[Service]"
+    echo "Environment=\"cos_mounts=${cos_mounts[@]}\""
+    echo "Environment=\"cos_overlay=${cos_overlay}\""
+    echo "Environment=\"cos_root_perm=${cos_root_perm}\""
+    echo "Environment=\"root=${root}\""
+    echo "EnvironmentFile=${cos_layout}"
+} > "/run/systemd/system/${cos_unit}.d/override.conf"
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-immutable-rootfs.service b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-immutable-rootfs.service
new file mode 100644
index 00000000000..4125e753ebd
--- /dev/null
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-immutable-rootfs.service
@@ -0,0 +1,13 @@
+[Unit]
+Description=cOS system immutable rootfs mounts
+DefaultDependencies=no
+After=initrd-root-fs.target cos-setup-rootfs.service
+Requires=initrd-root-fs.target
+Before=initrd-fs.target
+Conflicts=initrd-switch-root.target
+
+[Service]
+Type=oneshot
+RemainAfterExit=yes
+ExecStartPre=-/usr/bin/systemctl stop oem.mount
+ExecStart=/sbin/cos-mount-layout
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-loop-img.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-loop-img.sh
new file mode 100755
index 00000000000..1bf8f4f441f
--- /dev/null
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-loop-img.sh
@@ -0,0 +1,42 @@
+#!/bin/bash
+
+function doLoopMount {
+    local label
+
+    for label in "${dev_labels[@]}"; do
+        [ -e "/tmp/cosloop-${label}" ] && continue
+        [ -e "/dev/disk/by-label/${label}" ] || continue
+        > "/tmp/cosloop-${label}" 
+        mount -t auto -o "${cos_root_perm}" "/dev/disk/by-label/${label}" "${cos_state}" || continue
+        if [ -f "${cos_state}/${cos_img}" ]; then
+            losetup -f "${cos_state}/${cos_img}"
+            exit 0
+        else
+            umount "${cos_state}"
+        fi
+    done
+}
+
+type getarg > /dev/null 2>&1 || . /lib/dracut-lib.sh
+
+PATH=/usr/sbin:/usr/bin:/sbin:/bin
+
+declare cos_img=$1
+declare cos_root_perm="ro"
+declare cos_state="/run/initramfs/cos-state"
+declare dev_labels=("COS_STATE" "COS_RECOVERY")
+
+[ -z "${cos_img}" ] && exit 1
+
+if getargbool 0 rd.cos.debugrw; then
+    cos_root_perm="rw"
+fi
+
+ismounted "${cos_state}" && exit 0
+
+mkdir -p "${cos_state}"
+
+doLoopMount
+
+rm -r "${cos_state}"
+exit 1
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-mount-layout.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-mount-layout.sh
old mode 100644
new mode 100755
index 2bb65a19f93..48cbe806fd8
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-mount-layout.sh
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-mount-layout.sh
@@ -1,5 +1,5 @@
 #!/bin/bash
-# cos_root_perm, cos_mounts and cos_overlay variables are already processed
+# cos_root_perm, cos_mounts and cos_overlay variables already processsed
 
 #======================================
 # Functions
@@ -57,38 +57,9 @@ function parseCOSMount {
     echo "${mount}"
 }
 
-function setupLayout {
-    local o_mnt=0
-    local so_mnt=0
-
-    if [ -e "/dev/disk/by-label/${oem_label}" ]; then
-        info "Mounting ${oem_mount}"
-        mkdir -p "${oem_mount}"
-        mount -t auto  "/dev/disk/by-label/${oem_label}" "${oem_mount}"
-        o_mnt=1
-    fi
-
-    if [ -d "/sysroot/system/oem" ]; then
-        ln -s /sysroot/system /system
-    fi
-
-    mkdir -p "${cos_layout%/*}"
-    cos-setup rootfs
-
-    [ "${o_mnt}" = 1 ] && umount "${oem_mount}"
-}
-
 function readCOSLayoutConfig {
     local mounts=()
-    local MERGE="true"
-    local VOLUMES
-    local OVERLAY
-    local DEBUG_RW
-
-    [ ! -f "${cos_layout}" ] && return
-
-    info "Loading ${cos_layout}"
-    . "${cos_layout}"
+    : "${MERGE:=true}"
 
     if [ "${DEBUG_RW}" = "true" ]; then
         cos_root_perm="rw"
@@ -101,8 +72,8 @@ function readCOSLayoutConfig {
     fi
 
     if [ "${MERGE}" = "true" ]; then
-        if [ ${#mounts[@]} -gt 0 ]; then
-            for mount in "${cos_mounts[@]}"; do
+        if [ -n "${cos_mounts}" ]; then
+            for mount in ${cos_mounts}; do
                 if ! hasMountpoint "${mount#*:}" "${mounts[@]}"; then
                     mounts+=("${mount}")
                 fi
@@ -169,10 +140,10 @@ function mountOverlay {
 function mountPersistent {
     local mount=$1
 
-    if [ -e "${mount#*:}" ]; then
+    if [ -e "${mount#*:}" ] && ! findmnt -rno SOURCE "${mount#*:}" > /dev/null; then
         mount -t auto "${mount#*:}" "/sysroot${mount%%:*}"
     else
-        warn "${mount#*:} not mounted, device not found"
+        echo "Warning: ${mount#*:} already mounted or device not found" >&2
     fi
     echo "${mount#*:} ${mount%%:*} auto defaults 0 0\n"
 }
@@ -181,36 +152,32 @@ function mountPersistent {
 # Mount the rootfs layout
 #--------------------------------------
 
-type info >/dev/null 2>&1 || . /lib/dracut-lib.sh
 PATH=/usr/sbin:/usr/bin:/sbin:/bin
 
 declare root=${root}
-declare cos_mounts=("${cos_mounts[@]}")
+declare cos_mounts=${cos_mounts}
 declare cos_overlay=${cos_overlay}
-declare oem_label="COS_OEM"
-declare oem_mount="/oem"
+declare cos_root_perm=${cos_root_perm}
+declare state_label="COS_STATE"
 declare overlay_base="/run/overlay"
 declare rw_paths=("/etc" "/root" "/home" "/opt" "/srv" "/usr/local" "/var")
 declare etc_conf="/sysroot/etc/systemd/system/etc.mount.d"
 declare cos_layout="/run/cos/cos-layout.env"
 declare fstab
 
-[ ! "${root%%:*}" = "cos" ] && return 0
-
-setupLayout
-
 readCOSLayoutConfig
 
-[ -z "${cos_overlay}" ] && return 0
+[ -z "${root}" ] && exit 0
+[ -z "${cos_overlay}" ] && exit 0
 
-fstab="${root#cos:} / auto ${cos_root_perm},suid,dev,exec,auto,nouser,async 0 0\n"
+fstab="/dev/disk/by-label/${state_label} /run/initramfs/cos-state auto ${cos_root_perm} 0 0\n"
+fstab+="${root} / auto ${cos_root_perm} 0 0\n"
 
 fstab+=$(mountOverlayBase)
 
 mountpoints=($(getCOSMounts))
 
 for mount in "${mountpoints[@]}"; do
-    info "Mounting ${mount%%:*}"
     if [ "${mount#*:}" = "overlay" ]; then
         fstab+=$(mountOverlay "${mount%%:*}")
     else
@@ -228,4 +195,4 @@ if [ ! -f "${etc_conf}/override.conf" ]; then
     } > "${etc_conf}/override.conf"
 fi
 
-return 0
+exit 0
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-wait-oem.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/cos-wait-oem.sh
deleted file mode 100644
index fd61d94ea51..00000000000
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/cos-wait-oem.sh
+++ /dev/null
@@ -1,36 +0,0 @@
-#!/bin/bash
-
-#======================================
-# Functions
-#--------------------------------------
-
-function waitForOEM {
-    local timeout="$1"
-    local timeout_file="/tmp/cos-oem-timestamp"
-    local current_time
-
-    current_time="$(cat /proc/uptime)"
-    current_time="${current_time%%.*}"
-
-    if [ ! -f "${timeout_file}" ]; then
-        echo "$((current_time + $timeout))" > "${timeout_file}"
-    fi
-
-    if [ ! -e "/dev/disk/by-label/${oem_label}" ] && [ "${current_time}" -lt "$(cat ${timeout_file})" ]; then
-        info "Waiting for COS_OEM device"
-        return 1
-    fi
-}
-
-type info >/dev/null 2>&1 || . /lib/dracut-lib.sh
-PATH=/usr/sbin:/usr/bin:/sbin:/bin
-
-declare root=${root}
-declare cos_oem_timeout=${cos_oem_timeout}
-declare oem_label="COS_OEM"
-
-[ ! "${root%%:*}" = "cos" ] && return 0
-
-waitForOEM "${cos_oem_timeout}" || return 1
-
-return 0
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/module-setup.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/module-setup.sh
index 6a0ffa91287..04df60a5aa9 100755
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/module-setup.sh
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/module-setup.sh
@@ -20,13 +20,20 @@ installkernel() {
 install() {
     declare moddir=${moddir}
     declare systemdutildir=${systemdutildir}
+    declare systemdsystemunitdir=${systemdsystemunitdir}
+    declare initdir="${initdir}"
+
     inst_multiple \
-        mount mountpoint yip cos-setup sort rmdir
-    inst_hook cmdline 30 "${moddir}/parse-cos-overlay.sh"
-    inst_hook initqueue/finished 30 "${moddir}/cos-wait-oem.sh"
-    inst_hook pre-pivot 10 "${moddir}/cos-mount-layout.sh"
-    inst_hook pre-pivot 20 "${moddir}/cos-config-launcher.sh"
+        mount mountpoint yip cos-setup sort findmnt rmdir
+    inst_hook cmdline 30 "${moddir}/parse-cos-cmdline.sh"
     inst_script "${moddir}/cos-generator.sh" \
         "${systemdutildir}/system-generators/dracut-cos-generator"
+    inst_script "${moddir}/cos-mount-layout.sh" "/sbin/cos-mount-layout"
+    inst_script "${moddir}/cos-loop-img.sh" "/sbin/cos-loop-img"
+    inst_simple "${moddir}/cos-immutable-rootfs.service" \
+        "${systemdsystemunitdir}/cos-immutable-rootfs.service"
+    mkdir -p "${initdir}/${systemdsystemunitdir}/initrd-fs.target.requires"
+    ln_r "../cos-immutable-rootfs.service" \
+        "${systemdsystemunitdir}/initrd-fs.target.requires/cos-immutable-rootfs.service"
     dracut_need_initqueue
 }
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-cmdline.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-cmdline.sh
new file mode 100755
index 00000000000..e0190303cf5
--- /dev/null
+++ b/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-cmdline.sh
@@ -0,0 +1,45 @@
+#!/bin/bash
+# immutable root is specified with
+# rd.cos.mount=LABEL=<vol_label>:<mountpoint>
+# rd.cos.mount=UUID=<vol_uuid>:<mountpoint>
+# rd.cos.overlay=tmpfs:<size>
+# rd.cos.overlay=LABEL=<vol_label>
+# rd.cos.overlay=UUID=<vol_uuid>
+# rd.cos.oemtimeout=<seconds>
+# rd.cos.debugrw
+# cos-img/filename=/cOS/active.img
+
+type getarg >/dev/null 2>&1 || . /lib/dracut-lib.sh
+
+cos_img=$(getarg cos-img/filename=)
+[ -z "${cos_img}" ] && return 0
+cos_overlay=$(getarg rd.cos.overlay=)
+[ -z "${cos_overlay}" ] && cos_overlay="tmpfs:20%"
+[ -z "${root}" ] && root=$(getarg root=)
+
+cos_root_perm="ro"
+if getargbool 0 rd.cos.debugrw; then
+    cos_root_perm="rw"
+fi
+
+case "${root}" in
+    LABEL=*) \
+        root="${root//\//\\x2f}"
+        root="/dev/disk/by-label/${root#LABEL=}"
+        rootok=1 ;;
+    UUID=*) \
+        root="/dev/disk/by-uuid/${root#UUID=}"
+        rootok=1 ;;
+    /dev/*) \
+        root="${root}"
+        rootok=1 ;;
+esac
+
+[ "${rootok}" != "1" ] && return 0
+
+info "root device set to root=${root}"
+
+wait_for_dev -n "${root}"
+/sbin/initqueue --settled --unique /sbin/cos-loop-img "${cos_img}"
+
+return 0
diff --git a/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-overlay.sh b/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-overlay.sh
deleted file mode 100755
index 11f0c6c0e8c..00000000000
--- a/packages/immutable-rootfs/30cos-immutable-rootfs/parse-cos-overlay.sh
+++ /dev/null
@@ -1,66 +0,0 @@
-#!/bin/bash
-# immutable root is specified with
-# rd.cos.mount=LABEL=<vol_label>:<mountpoint>
-# rd.cos.mount=UUID=<vol_uuid>:<mountpoint>
-# rd.cos.overlay=tmpfs:<size>
-# rd.cos.overlay=LABEL=<vol_label>
-# rd.cos.overlay=UUID=<vol_uuid>
-# rd.cos.oemtimeout=4
-# rd.cos.debugrw
-
-type getarg >/dev/null 2>&1 || . /lib/dracut-lib.sh
-
-[ -z "${cos_overlay}" ] && cos_overlay=$(getarg rd.cos.overlay=)
-[ -z "${root}" ] && root=$(getarg root=)
-cos_oem_timeout=$(getarg rd.cos.oemtimeout=)
-[ -z "$cos_oem_timeout" ] && cos_oem_timeout=4
-
-cos_root_perm="ro"
-if getargbool 0 rd.cos.debugrw; then
-    cos_root_perm="rw"
-fi
-
-case "${root}" in
-    LABEL=*) \
-        root="${root//\//\\x2f}"
-        root="cos:/dev/disk/by-label/${root#LABEL=}"
-        rootok=1 ;;
-    UUID=*) \
-        root="cos:/dev/disk/by-uuid/${root#UUID=}"
-        rootok=1 ;;
-    /dev/*) \
-        root="cos:${root}"
-        rootok=1 ;;
-esac
-
-[ "${rootok}" != "1" ] && return 0
-
-info "root device set to ${root}"
-
-wait_for_dev -n "${root#cos:}"
-
-case "${cos_overlay}" in
-    UUID=*) \
-        cos_overlay="block:/dev/disk/by-uuid/${cos_overlay#UUID=}"
-    ;;
-    LABEL=*) \
-        cos_overlay="block:/dev/disk/by-label/${cos_overlay#LABEL=}"
-    ;;
-esac
-
-info "overlay device set to ${cos_overlay}"
-
-cos_mounts=()
-for mount in $(getargs rd.cos.mount=); do
-    case "${mount}" in
-        UUID=*) \
-            mount="/dev/disk/by-uuid/${mount#UUID=}"
-        ;;
-        LABEL=*) \
-            mount="/dev/disk/by-label/${mount#LABEL=}"
-        ;;
-    esac
-    cos_mounts+=("${mount}")
-done
-
-export cos_mounts cos_overlay cos_root_perm root cos_oem_timeout
diff --git a/packages/immutable-rootfs/build.yaml b/packages/immutable-rootfs/build.yaml
index 9be5709c9fb..04cd3d7469b 100644
--- a/packages/immutable-rootfs/build.yaml
+++ b/packages/immutable-rootfs/build.yaml
@@ -25,9 +25,4 @@ steps:
 {{end}}
 {{end}}
 - cp -r 30cos-immutable-rootfs /usr/lib/dracut/modules.d
-- |
-    kernel=$(ls /lib/modules | head -n1) && \
-    dracut --verbose --no-hostonly --omit multipath --no-hostonly-cmdline --xz \
-        -f "/boot/initrd-${kernel}" --add " dmsquash-live cos-immutable-rootfs " \
-        "${kernel}" && \
-    ln -sf "initrd-${kernel}" /boot/initrd
+- cp 02-cos-immutable-rootfs.conf /etc/dracut.conf.d
diff --git a/packages/immutable-rootfs/definition.yaml b/packages/immutable-rootfs/definition.yaml
index c77911db07d..f43946fcdac 100644
--- a/packages/immutable-rootfs/definition.yaml
+++ b/packages/immutable-rootfs/definition.yaml
@@ -1,3 +1,3 @@
 name: "immutable-rootfs"
 category: "system"
-version: 0.0.19+16
+version: "0.0.31"
diff --git a/packages/installer/reset.sh b/packages/installer/reset.sh
index 6f18f0afddc..1e47325a441 100644
--- a/packages/installer/reset.sh
+++ b/packages/installer/reset.sh
@@ -43,7 +43,7 @@ do_mount()
     if is_booting_from_squashfs; then
         RECOVERYDIR=/run/initramfs/live
     else
-        RECOVERYDIR=/run/initramfs/isoscan
+        RECOVERYDIR=/run/initramfs/cos-state
     fi
 
     #mount -o remount,rw ${STATE} ${STATEDIR}
@@ -165,4 +165,4 @@ fi
 
 copy_active
 
-install_grub
\ No newline at end of file
+install_grub
diff --git a/packages/installer/upgrade.sh b/packages/installer/upgrade.sh
index aee24a32e01..ea240f15355 100644
--- a/packages/installer/upgrade.sh
+++ b/packages/installer/upgrade.sh
@@ -110,7 +110,7 @@ mount_state() {
 }
 
 mount_image() {
-    STATEDIR=/run/initramfs/isoscan
+    STATEDIR=/run/initramfs/cos-state
     TARGET=/tmp/upgrade
 
     mkdir -p $TARGET || true
diff --git a/packages/recovery-img/definition.yaml b/packages/recovery-img/definition.yaml
index 98c850b9176..49d8be6c74e 100644
--- a/packages/recovery-img/definition.yaml
+++ b/packages/recovery-img/definition.yaml
@@ -1,4 +1,4 @@
 name: "cos-img"
 category: "recovery"
-version: 0.5.3+3
+version: 0.5.3+5
 brand_name: "cOS"
diff --git a/packages/recovery-img/squash/definition.yaml b/packages/recovery-img/squash/definition.yaml
index 1507fb3b283..9c71e6e33e5 100644
--- a/packages/recovery-img/squash/definition.yaml
+++ b/packages/recovery-img/squash/definition.yaml
@@ -1,3 +1,3 @@
 name: "cos-squash"
 category: "recovery"
-version: "0.5.3+1"
+version: "0.5.3+5"
diff --git a/tests/fallback/fallback_test.go b/tests/fallback/fallback_test.go
index 3f45da27f82..4f2801086fc 100644
--- a/tests/fallback/fallback_test.go
+++ b/tests/fallback/fallback_test.go
@@ -21,9 +21,9 @@ var _ = Describe("cOS booting fallback tests", func() {
 			It("fallbacks by booting into passive", func() {
 				Expect(s.BootFrom()).To(Equal(sut.Active))
 
-				_, err := s.Command("mount -o rw,remount /run/initramfs/isoscan")
+				_, err := s.Command("mount -o rw,remount /run/initramfs/cos-state")
 				Expect(err).ToNot(HaveOccurred())
-				_, err = s.Command("rm -rf /run/initramfs/isoscan/cOS/active.img")
+				_, err = s.Command("rm -rf /run/initramfs/cos-state/cOS/active.img")
 				Expect(err).ToNot(HaveOccurred())
 
 				s.Reboot()
@@ -35,11 +35,11 @@ var _ = Describe("cOS booting fallback tests", func() {
 			It("fallbacks by booting into recovery", func() {
 				Expect(s.BootFrom()).To(Equal(sut.Active))
 
-				_, err := s.Command("mount -o rw,remount /run/initramfs/isoscan")
+				_, err := s.Command("mount -o rw,remount /run/initramfs/cos-state")
 				Expect(err).ToNot(HaveOccurred())
-				_, err = s.Command("rm -rf /run/initramfs/isoscan/cOS/active.img")
+				_, err = s.Command("rm -rf /run/initramfs/cos-state/cOS/active.img")
 				Expect(err).ToNot(HaveOccurred())
-				_, err = s.Command("rm -rf /run/initramfs/isoscan/cOS/passive.img")
+				_, err = s.Command("rm -rf /run/initramfs/cos-state/cOS/passive.img")
 				Expect(err).ToNot(HaveOccurred())
 				s.Reboot()
 
diff --git a/tests/upgrades-images-signed/upgrade_test.go b/tests/upgrades-images-signed/upgrade_test.go
index 6971ac6bc20..d689d97eeb0 100644
--- a/tests/upgrades-images-signed/upgrade_test.go
+++ b/tests/upgrades-images-signed/upgrade_test.go
@@ -60,12 +60,8 @@ var _ = Describe("cOS Upgrade tests - Images signed", func() {
 			It("fails if verify is enabled on an unsigned/malformed version", func() {
 				out, err := s.Command("cos-upgrade --docker-image raccos/releases-opensuse:cos-system-0.5.0")
 				Expect(err).To(HaveOccurred())
-				Expect(out).Should(ContainSubstring("image-mtree-check"))
+				Expect(out).Should(ContainSubstring("luet-mtree"))
 				Expect(out).Should(ContainSubstring("error while executing plugin"))
-				out, err = s.Command("cat /tmp/image-mtree-check.log")
-				Expect(out).Should(ContainSubstring("Got cos-system-0.5.0, continue..."))
-				Expect(out).Should(ContainSubstring("Finished all checks with errors"))
-
 			})
 		})
 	})