diff --git a/images/capi/Makefile b/images/capi/Makefile
index 92711544ee..7dec9c232f 100644
--- a/images/capi/Makefile
+++ b/images/capi/Makefile
@@ -143,7 +143,7 @@ deps-powervs: deps-common
 deps-ignition: ## Installs/checks dependencies for generating Ignition files
 deps-ignition:
 	hack/ensure-jq.sh
-	hack/ensure-ct.sh
+	hack/ensure-butane.sh
 
 .PHONY: deps-nutanix
 deps-nutanix: ## Installs/checks dependencies for Nutanix builds
@@ -1155,7 +1155,7 @@ json-sort: ## Sort all JSON files alphabetically
 .PHONY: gen-ignition
 ignition_files = bootstrap-pass-auth bootstrap-cloud
 gen-ignition: deps-ignition ## Generates Ignition files from CLC
-	for f in $(ignition_files); do (ct < packer/files/flatcar/clc/$$f.yaml | jq '.' > packer/files/flatcar/ignition/$$f.json) || exit 1; done
+	for f in $(ignition_files); do (butane --pretty --strict < packer/files/flatcar/clc/$$f.yaml | jq '.' > packer/files/flatcar/ignition/$$f.json) || exit 1; done
 
 ## --------------------------------------
 ## ISO checksum updates
diff --git a/images/capi/hack/ensure-ct.sh b/images/capi/hack/ensure-butane.sh
similarity index 73%
rename from images/capi/hack/ensure-ct.sh
rename to images/capi/hack/ensure-butane.sh
index b58474acb1..40f9a3e67d 100755
--- a/images/capi/hack/ensure-ct.sh
+++ b/images/capi/hack/ensure-butane.sh
@@ -20,7 +20,7 @@ set -o pipefail
 
 [[ -n ${DEBUG:-} ]] && set -o xtrace
 
-_version="v0.9.3"
+_version="v0.25.1"
 
 # Change directories to the parent directory of the one in which this
 # script is located.
@@ -33,11 +33,11 @@ if command -v ct >/dev/null 2>&1; then exit 0; fi
 mkdir -p .local/bin && cd .local/bin
 
 if [[ ${HOSTOS} == "linux" ]]; then
-  _binfile="ct-${_version}-x86_64-unknown-linux-gnu"
+  _binfile="butane-x86_64-unknown-linux-gnu"
 elif [[ ${HOSTOS} == "darwin" ]]; then
-  _binfile="ct-${_version}-x86_64-apple-darwin"
+  _binfile="butane-x86_64-apple-darwin"
 fi
-_bin_url="https://github.com/flatcar/container-linux-config-transpiler/releases/download/${_version}/${_binfile}"
-curl -SsL "${_bin_url}" -o ct
-chmod 0755 ct
-echo "'ct' has been installed to $(pwd), make sure this directory is in your \$PATH"
+_bin_url="https://github.com/coreos/butane/releases/download/${_version}/${_binfile}"
+curl -SsL "${_bin_url}" -o butane
+chmod 0755 butane
+echo "'butane' has been installed to $(pwd), make sure this directory is in your \$PATH"
diff --git a/images/capi/packer/files/flatcar/clc/bootstrap-cloud.yaml b/images/capi/packer/files/flatcar/clc/bootstrap-cloud.yaml
index 6f04aa040e..8594349eb3 100644
--- a/images/capi/packer/files/flatcar/clc/bootstrap-cloud.yaml
+++ b/images/capi/packer/files/flatcar/clc/bootstrap-cloud.yaml
@@ -2,10 +2,12 @@
 # authorize SSH keys (typically cloud providers such as AWS or Azure). On such platforms, no SSH
 # configuration needs to be done via Ignition. The actions in this file are performed before Packer
 # provisioners (e.g. Ansible) are executed.
+variant: flatcar
+version: 1.1.0
 systemd:
   units:
   - name: docker.service
-    enable: true
+    enabled: true
   # Mask update-engine and locksmithd to disable automatic updates during image creation.
   - name: update-engine.service
     mask: true
diff --git a/images/capi/packer/files/flatcar/clc/bootstrap-pass-auth.yaml b/images/capi/packer/files/flatcar/clc/bootstrap-pass-auth.yaml
index 13b364452d..3aef9d32f3 100644
--- a/images/capi/packer/files/flatcar/clc/bootstrap-pass-auth.yaml
+++ b/images/capi/packer/files/flatcar/clc/bootstrap-pass-auth.yaml
@@ -1,6 +1,8 @@
 # This file is used for initial provisioning of a Flatcar machine on platforms which use SSH
 # password authentication during the build process. The actions in this file are performed before
 # Packer provisioners (e.g. Ansible) are executed.
+variant: flatcar
+version: 1.1.0
 passwd:
   users:
   - name: builder
@@ -13,7 +15,7 @@ passwd:
 systemd:
   units:
   - name: docker.service
-    enable: true
+    enabled: true
   # Mask update-engine and locksmithd to disable automatic updates during image creation.
   - name: update-engine.service
     mask: true
diff --git a/images/capi/packer/files/flatcar/ignition/bootstrap-cloud.json b/images/capi/packer/files/flatcar/ignition/bootstrap-cloud.json
index 58ee4eef34..8a937079d8 100644
--- a/images/capi/packer/files/flatcar/ignition/bootstrap-cloud.json
+++ b/images/capi/packer/files/flatcar/ignition/bootstrap-cloud.json
@@ -1,19 +1,11 @@
 {
   "ignition": {
-    "config": {},
-    "security": {
-      "tls": {}
-    },
-    "timeouts": {},
-    "version": "2.3.0"
+    "version": "3.4.0"
   },
-  "networkd": {},
-  "passwd": {},
-  "storage": {},
   "systemd": {
     "units": [
       {
-        "enable": true,
+        "enabled": true,
         "name": "docker.service"
       },
       {
diff --git a/images/capi/packer/files/flatcar/ignition/bootstrap-pass-auth.json b/images/capi/packer/files/flatcar/ignition/bootstrap-pass-auth.json
index 64b5030d89..418b6187e4 100644
--- a/images/capi/packer/files/flatcar/ignition/bootstrap-pass-auth.json
+++ b/images/capi/packer/files/flatcar/ignition/bootstrap-pass-auth.json
@@ -1,13 +1,7 @@
 {
   "ignition": {
-    "config": {},
-    "security": {
-      "tls": {}
-    },
-    "timeouts": {},
-    "version": "2.3.0"
+    "version": "3.4.0"
   },
-  "networkd": {},
   "passwd": {
     "users": [
       {
@@ -21,11 +15,10 @@
       }
     ]
   },
-  "storage": {},
   "systemd": {
     "units": [
       {
-        "enable": true,
+        "enabled": true,
         "name": "docker.service"
       },
       {