diff --git a/features/consolidated_resource.feature b/features/consolidated_resource.feature
index bb74d8fa7..977d2a2a9 100644
--- a/features/consolidated_resource.feature
+++ b/features/consolidated_resource.feature
@@ -891,3 +891,8 @@ Feature: Consolidated Resource
     When I load the resource type via from_yaml
     Then the loaded schema should have parent type "custom-parent"
 
+
+  Scenario: Schema accepts overlay sandbox strategy
+    Given a resource type YAML with sandbox_strategy "overlay"
+    When I load the resource type via from_yaml
+    Then the loaded schema sandbox_strategy should be "overlay"
diff --git a/features/steps/resource_type_model_steps.py b/features/steps/resource_type_model_steps.py
index 9c8e64efc..b0eafafac 100644
--- a/features/steps/resource_type_model_steps.py
+++ b/features/steps/resource_type_model_steps.py
@@ -598,3 +598,19 @@ def step_try_load_none_file_path(context):
 @then('the loaded schema should have parent type "{parent}"')
 def step_loaded_schema_parent_type(context, parent):
     assert parent in context.rt_schema.parent_types
+
+
+@given('a resource type YAML with sandbox_strategy "{strategy}"')
+def step_yaml_with_sandbox_strategy(context, strategy):
+    context.rt_yaml = f"""
+name: myorg/test
+resource_kind: physical
+sandbox_strategy: {strategy}
+"""
+
+
+@then('the loaded schema sandbox_strategy should be "{strategy}"')
+def step_loaded_schema_sandbox_strategy(context, strategy):
+    assert context.rt_schema.sandbox_strategy == strategy, (
+        f"Expected sandbox_strategy '{strategy}', got '{context.rt_schema.sandbox_strategy}'"
+    )
diff --git a/src/cleveragents/resource/schema.py b/src/cleveragents/resource/schema.py
index da0dfe5cd..39b3cb1eb 100644
--- a/src/cleveragents/resource/schema.py
+++ b/src/cleveragents/resource/schema.py
@@ -53,6 +53,7 @@ _VALID_STRATEGIES = frozenset(
         "copy_on_write",
         "transaction_rollback",
         "snapshot",
+        "overlay",
         "none",
     }
 )