diff --git a/config/functions b/config/functions
index 956c8f790d..dea1198531 100644
--- a/config/functions
+++ b/config/functions
@@ -143,17 +143,24 @@ kernel_version() {
 
 # get kernel module dir
 get_module_dir() {
-  basename $(ls -d $(get_build_dir linux)/.install_pkg/usr/lib/modules/*)
+  basename $(ls -d $(get_build_dir linux)/.install_pkg/usr/lib/kernel-overlays/base/lib/modules/*)
+}
+
+# get base path to kernel modules and firmware
+get_kernel_overlay_dir() {
+  echo "/usr/lib/kernel-overlays/${1:-base}"
 }
 
 # get full path to kernel module dir
+# optional parameter specifies overlay level (default is base)
 get_full_module_dir() {
-  echo "/usr/lib/modules/$(get_module_dir)"
+  echo "$(get_kernel_overlay_dir $1)/lib/modules/$(get_module_dir)"
 }
 
 # get full path to firmware dir
+# optional parameter specifies overlay level (default is base)
 get_full_firmware_dir() {
-  echo "/usr/lib/firmware"
+  echo "$(get_kernel_overlay_dir $1)/lib/firmware"
 }
 
 # get package's build dir
@@ -192,6 +199,11 @@ install_binary_addon() {
     cp -L $PKG_BUILD/.install_pkg/usr/lib/$MEDIACENTER/addons/$addon_id/$addon_so $ADDON_BUILD/$addon_id/
     chmod +x $ADDON_BUILD/$addon_id/$addon_so
   fi
+
+  if [ -d $PKG_BUILD/.install_pkg/usr/lib/kernel-overlays/$addon_id ] ; then
+    mkdir -p $ADDON_BUILD/$addon_id/kernel-overlay
+    cp -PR $PKG_BUILD/.install_pkg/usr/lib/kernel-overlays/$addon_id/* $ADDON_BUILD/$addon_id/kernel-overlay
+  fi
 }
 
 install_addon_source() {
diff --git a/packages/linux-firmware/brcmfmac_sdio-firmware-rpi/package.mk b/packages/linux-firmware/brcmfmac_sdio-firmware-rpi/package.mk
index c11f7b6fd5..c8511dee00 100644
--- a/packages/linux-firmware/brcmfmac_sdio-firmware-rpi/package.mk
+++ b/packages/linux-firmware/brcmfmac_sdio-firmware-rpi/package.mk
@@ -36,7 +36,7 @@ make_target() {
 }
 
 makeinstall_target() {
-  DESTDIR=$INSTALL/usr ./install
+  DESTDIR=$INSTALL/$(get_kernel_overlay_dir) ./install
 }
 
 post_makeinstall_target() {
diff --git a/packages/linux-firmware/dvb-firmware/package.mk b/packages/linux-firmware/dvb-firmware/package.mk
index 69f623f96e..5ace21de9a 100644
--- a/packages/linux-firmware/dvb-firmware/package.mk
+++ b/packages/linux-firmware/dvb-firmware/package.mk
@@ -35,5 +35,5 @@ make_target() {
 }
 
 makeinstall_target() {
-  DESTDIR=$INSTALL/usr ./install
+  DESTDIR=$INSTALL/$(get_kernel_overlay_dir) ./install
 }
diff --git a/packages/linux-firmware/iwlwifi-firmware/package.mk b/packages/linux-firmware/iwlwifi-firmware/package.mk
index da732181f4..26caafbefb 100644
--- a/packages/linux-firmware/iwlwifi-firmware/package.mk
+++ b/packages/linux-firmware/iwlwifi-firmware/package.mk
@@ -36,5 +36,5 @@ make_target() {
 }
 
 makeinstall_target() {
-  DESTDIR=$INSTALL/usr ./install
+  DESTDIR=$INSTALL/$(get_kernel_overlay_dir) ./install
 }
diff --git a/packages/linux-firmware/misc-firmware/package.mk b/packages/linux-firmware/misc-firmware/package.mk
index 5bb1b688a8..fc2519be76 100644
--- a/packages/linux-firmware/misc-firmware/package.mk
+++ b/packages/linux-firmware/misc-firmware/package.mk
@@ -36,5 +36,5 @@ make_target() {
 }
 
 makeinstall_target() {
-  DESTDIR=$INSTALL/usr ./install
+  DESTDIR=$INSTALL/$(get_kernel_overlay_dir) ./install
 }
diff --git a/packages/linux-firmware/wlan-firmware/package.mk b/packages/linux-firmware/wlan-firmware/package.mk
index 65e2b63f9b..87e8df52f4 100644
--- a/packages/linux-firmware/wlan-firmware/package.mk
+++ b/packages/linux-firmware/wlan-firmware/package.mk
@@ -36,5 +36,5 @@ make_target() {
 }
 
 makeinstall_target() {
-  DESTDIR=$INSTALL/usr ./install
+  DESTDIR=$INSTALL/$(get_kernel_overlay_dir) ./install
 }
diff --git a/packages/linux/package.mk b/packages/linux/package.mk
index abedea8388..9bc0e1d766 100644
--- a/packages/linux/package.mk
+++ b/packages/linux/package.mk
@@ -194,9 +194,9 @@ pre_make_target() {
 
 make_target() {
   LDFLAGS="" make modules
-  LDFLAGS="" make INSTALL_MOD_PATH=$INSTALL/usr DEPMOD="$TOOLCHAIN/bin/depmod" modules_install
-  rm -f $INSTALL/usr/lib/modules/*/build
-  rm -f $INSTALL/usr/lib/modules/*/source
+  LDFLAGS="" make INSTALL_MOD_PATH=$INSTALL/$(get_kernel_overlay_dir) DEPMOD="$TOOLCHAIN/bin/depmod" modules_install
+  rm -f $INSTALL/$(get_kernel_overlay_dir)/lib/modules/*/build
+  rm -f $INSTALL/$(get_kernel_overlay_dir)/lib/modules/*/source
 
   ( cd $ROOT
     rm -rf $BUILD/initramfs
diff --git a/packages/sysutils/busybox/scripts/init b/packages/sysutils/busybox/scripts/init
index 69170c6986..4f72249796 100755
--- a/packages/sysutils/busybox/scripts/init
+++ b/packages/sysutils/busybox/scripts/init
@@ -1011,7 +1011,7 @@
     mount --move /flash /sysroot/flash
     mount --move /storage /sysroot/storage
 
-    if [ ! -d "/sysroot/usr/lib/modules/$(uname -r)/" -a -f "/sysroot/usr/lib/systemd/systemd" ]; then
+    if [ ! -d "/sysroot/usr/lib/kernel-overlays/base/lib/modules/$(uname -r)/" -a -f "/sysroot/usr/lib/systemd/systemd" ]; then
       echo ""
       echo "NEVER TOUCH boot= in extlinux.conf / cmdline.txt!"
       echo "If you don't know what you are doing,"
diff --git a/packages/sysutils/systemd/package.mk b/packages/sysutils/systemd/package.mk
index b57864f6e6..c08ac6e746 100644
--- a/packages/sysutils/systemd/package.mk
+++ b/packages/sysutils/systemd/package.mk
@@ -205,8 +205,10 @@ post_makeinstall_target() {
   cp $PKG_DIR/scripts/systemd-machine-id-setup $INSTALL/usr/bin
   cp $PKG_DIR/scripts/userconfig-setup $INSTALL/usr/bin
 
-  # provide 'halt', 'shutdown', 'reboot' & co.
   mkdir -p $INSTALL/usr/sbin
+  cp $PKG_DIR/scripts/kernel-overlays-setup $INSTALL/usr/sbin
+
+  # provide 'halt', 'shutdown', 'reboot' & co.
   ln -sf /usr/bin/systemctl $INSTALL/usr/sbin/halt
   ln -sf /usr/bin/systemctl $INSTALL/usr/sbin/poweroff
   ln -sf /usr/bin/systemctl $INSTALL/usr/sbin/reboot
@@ -255,5 +257,6 @@ post_install() {
   enable_service machine-id.service
   enable_service debugconfig.service
   enable_service userconfig.service
+  enable_service kernel-overlays.service
   enable_service hwdb.service
 }
diff --git a/packages/sysutils/systemd/scripts/kernel-overlays-setup b/packages/sysutils/systemd/scripts/kernel-overlays-setup
new file mode 100755
index 0000000000..27326a46c7
--- /dev/null
+++ b/packages/sysutils/systemd/scripts/kernel-overlays-setup
@@ -0,0 +1,90 @@
+#!/bin/sh
+################################################################################
+#      This file is part of LibreELEC - https://libreelec.tv
+#      Copyright (C) 2017-present Team LibreELEC
+#
+#  LibreELEC is free software: you can redistribute it and/or modify
+#  it under the terms of the GNU General Public License as published by
+#  the Free Software Foundation, either version 2 of the License, or
+#  (at your option) any later version.
+#
+#  LibreELEC is distributed in the hope that it will be useful,
+#  but WITHOUT ANY WARRANTY; without even the implied warranty of
+#  MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+#  GNU General Public License for more details.
+#
+#  You should have received a copy of the GNU General Public License
+#  along with LibreELEC.  If not, see <http://www.gnu.org/licenses/>.
+################################################################################
+
+SYSTEM_OVERLAYS_DIR=/usr/lib/kernel-overlays
+OVERLAY_CONFIG_DIR=/storage/.cache/kernel-overlays
+KVER=$(uname -r)
+MODULES_DIR="/var/lib/modules/${KVER}"
+FIRMWARE_DIR="/var/lib/firmware"
+
+mkdir -p "${MODULES_DIR}"
+mkdir -p "${FIRMWARE_DIR}"
+mkdir -p "${OVERLAY_CONFIG_DIR}"
+
+log() {
+  echo "kernel-overlays-setup: $@" > /dev/kmsg
+}
+
+apply_overlay() {
+  case "$1" in
+    /*)
+      modules_overlay_dir="${1}/lib/modules/${KVER}"
+      firmware_overlay_dir="${1}/lib/firmware"
+      ;;
+    *)
+      modules_overlay_dir="${SYSTEM_OVERLAYS_DIR}/${1}/lib/modules/${KVER}"
+      firmware_overlay_dir="${SYSTEM_OVERLAYS_DIR}/${1}/lib/firmware"
+      ;;
+  esac
+
+  if [ -d "${modules_overlay_dir}" ] ; then
+    GOT_MODULE_OVERLAY="yes"
+
+    if cp -rfs "${modules_overlay_dir}"/* "${MODULES_DIR}" ; then
+      log "added modules from $modules_overlay_dir"
+    else
+      log "failed to add modules from $modules_overlay_dir"
+    fi
+  fi
+
+  if [ -d "${firmware_overlay_dir}" ] ; then
+    if cp -rfs "${firmware_overlay_dir}"/* "${FIRMWARE_DIR}" ; then
+      log "added firmware from $firmware_overlay_dir"
+    else
+      log "failed to add firmware from $firmware_overlay_dir"
+    fi
+  fi
+}
+
+# setup system base modules
+
+log "setup base modules"
+apply_overlay base
+
+# apply user-configured module overlays
+
+if [ -d "${OVERLAY_CONFIG_DIR}" ] ; then
+  log "adding overlays from ${OVERLAY_CONFIG_DIR}"
+  GOT_MODULE_OVERLAY="no"
+
+  for conf in "${OVERLAY_CONFIG_DIR}/"*.conf ; do
+    if [ -e "$conf" ] ; then
+      log "processing conf $conf"
+      overlay=$(cat "$conf")
+      [ -n "$overlay" ] && apply_overlay "$overlay"
+    fi
+  done
+
+  if [ "yes" = "$GOT_MODULE_OVERLAY" ] ; then
+    log "running depmod"
+    /usr/sbin/depmod -a
+  fi
+fi
+
+log "done"
diff --git a/packages/sysutils/systemd/system.d/kernel-overlays.service b/packages/sysutils/systemd/system.d/kernel-overlays.service
new file mode 100644
index 0000000000..5d771ac3a0
--- /dev/null
+++ b/packages/sysutils/systemd/system.d/kernel-overlays.service
@@ -0,0 +1,12 @@
+[Unit]
+Description=Create kernel modules tree from overlays
+DefaultDependencies=no
+After=var.mount
+Before=systemd-udevd.service systemd-udev-trigger.service systemd-modules-load.service systemd-remount-fs.service swap.service machine-id.service kmod-static-nodes.service
+
+[Service]
+Type=oneshot
+ExecStart=/usr/sbin/kernel-overlays-setup
+
+[Install]
+WantedBy=local-fs.target
diff --git a/scripts/image b/scripts/image
index e1674fbbd1..491f38dc72 100755
--- a/scripts/image
+++ b/scripts/image
@@ -215,20 +215,27 @@ if [ -n "$DEVICE" -a -d "$PROJECT_DIR/$PROJECT/devices/$DEVICE/filesystem" ]; th
   done
 fi
 
-# run depmod
-MODVER=$(basename $(ls -d $INSTALL/usr/lib/modules/*))
-find $INSTALL/usr/lib/modules/$MODVER/ -name *.ko | \
-  sed -e "s,$INSTALL/usr/lib/modules/$MODVER/,," > $INSTALL/usr/lib/modules/$MODVER/modules.order
-$TOOLCHAIN/bin/depmod -b $INSTALL/usr -a -e -F "$BUILD/linux-$(kernel_version)/System.map" $MODVER
+# run depmod for base overlay modules
+MODVER=$(basename $(ls -d $INSTALL/usr/lib/kernel-overlays/base/lib/modules/*))
+find $INSTALL/usr/lib/kernel-overlays/base/lib/modules/$MODVER/ -name *.ko | \
+  sed -e "s,$INSTALL/usr/lib/kernel-overlays/base/lib/modules/$MODVER/,," \
+    > $INSTALL/usr/lib/kernel-overlays/base/lib/modules/$MODVER/modules.order
+$TOOLCHAIN/bin/depmod -b $INSTALL/usr/lib/kernel-overlays/base -a -e -F "$BUILD/linux-$(kernel_version)/System.map" $MODVER
 
 # strip kernel modules
 if [ "$TARGET_KERNEL_ARCH" = "arm64" -a "$TARGET_ARCH" = "arm" ]; then
   STRIP=$TOOLCHAIN/lib/gcc-linaro-aarch64-elf/bin/aarch64-elf-strip
 fi
-for MOD in `find $INSTALL/usr/lib/modules/ -type f -name *.ko`; do
+for MOD in `find $INSTALL/usr/lib/kernel-overlays/ -type f -name *.ko`; do
   $STRIP --strip-debug $MOD
 done
 
+# symlink overlayed modules to /usr/lib/modules
+ln -sT /var/lib/modules $INSTALL/usr/lib/modules
+
+# symlink overlayed firmware to /usr/lib/firmware
+ln -sT /var/lib/firmware $INSTALL/usr/lib/firmware
+
 # make target dir
 mkdir -p $TARGET_IMG
 rm -rf $TARGET_IMG/$IMAGE_NAME.kernel