diff --git a/SPECS/moby-engine/daemon.json b/SPECS/moby-engine/daemon.json
new file mode 100644
index 0000000000..bc50a57e94
--- /dev/null
+++ b/SPECS/moby-engine/daemon.json
@@ -0,0 +1,4 @@
+{
+  "data-root": "/opt/docker-data",
+  "storage-driver": "overlay2"
+}
diff --git a/SPECS/moby-engine/moby-engine.signatures.json b/SPECS/moby-engine/moby-engine.signatures.json
index dcca0b84dd..7fe15377d5 100644
--- a/SPECS/moby-engine/moby-engine.signatures.json
+++ b/SPECS/moby-engine/moby-engine.signatures.json
@@ -1,5 +1,6 @@
 {
  "Signatures": {
+  "daemon.json": "b4995b275fd2a7ffe2533360832f81b452c38b90e0bd1126d8af6e02fc6ed4a2",
   "docker.service": "b150b3ce0947a65c655ed09dfe4e48b7464c60542f9f9902330288bbf87af38e",
   "docker.socket": "51a06786cae46bc63b7314c25d0bd5bb2e676120d80874b99e35bf60d0b0ffa8",
   "moby-engine-25.0.3.tar.gz": "4cdb516f5d6f5caf8b3bcf93c2962277ba727cfd2d1620176a3bb0cf153b3590"
diff --git a/SPECS/moby-engine/moby-engine.spec b/SPECS/moby-engine/moby-engine.spec
index 03ce27f21f..e00c0e28ba 100644
--- a/SPECS/moby-engine/moby-engine.spec
+++ b/SPECS/moby-engine/moby-engine.spec
@@ -3,7 +3,7 @@
 Summary: The open-source application container engine
 Name:    moby-engine
 Version: 25.0.3
-Release: 13%{?dist}
+Release: 14%{?dist}
 License: ASL 2.0
 Group:   Tools/Container
 URL: https://mobyproject.org
@@ -13,6 +13,7 @@ Distribution: Azure Linux
 Source0: https://github.com/moby/moby/archive/v%{version}.tar.gz#/%{name}-%{version}.tar.gz
 Source1: docker.service
 Source2: docker.socket
+Source3: daemon.json
 
 Patch0:  CVE-2022-2879.patch
 Patch1:  enable-docker-proxy-libexec-search.patch
@@ -103,11 +104,23 @@ mkdir -p %{buildroot}%{_unitdir}
 install -p -m 644 %{SOURCE1} %{buildroot}%{_unitdir}/docker.service
 install -p -m 644 %{SOURCE2} %{buildroot}%{_unitdir}/docker.socket
 
+mkdir -p %{buildroot}/opt/docker-data
+chmod 0700 %{buildroot}/opt/docker-data
+
+mkdir -p -m 755 %{buildroot}%{_sysconfdir}/docker
+install -p -m 644 %{SOURCE3} %{buildroot}%{_sysconfdir}/docker/daemon.json
+
 %post
 if ! grep -q "^docker:" /etc/group; then
     groupadd --system docker
 fi
 
+mkdir -p /opt/docker-data
+chmod 0700 /opt/docker-data
+if [ -d /var/lib/docker ] && [ ! -d /opt/docker-data/image ]; then
+    rsync -a /var/lib/docker/ /opt/docker-data/
+fi
+
 %preun
 %systemd_preun docker.service
 
@@ -118,10 +131,16 @@ fi
 %license LICENSE NOTICE
 %{_bindir}/dockerd
 %{_libexecdir}/docker-proxy
+%dir /opt/docker-data
+%dir %{_sysconfdir}/docker
+%config(noreplace) %{_sysconfdir}/docker/daemon.json
 %{_sysconfdir}/*
 %{_unitdir}/*
 
 %changelog
+* Tue Jul 28 2025 Polmoorx Shiva Kumar <polmoorx.shiva.kumar@intel.com> - 25.0.3-14
+- Add daemon.json with overlay2 to fix container startup issue
+
 * Fri May 30 2025 Ranjan Dutta <ranjan.dutta@intel.com> - 25.0.3-13
 - merge from Azure Linux 3.0.20250521-3.0
 - Patch CVE-2025-30204