diff --git a/devspaces-udi/Dockerfile b/devspaces-udi/Dockerfile
index 5a7529667a..dd26380e99 100644
--- a/devspaces-udi/Dockerfile
+++ b/devspaces-udi/Dockerfile
@@ -127,7 +127,9 @@ RUN \
 RUN dnf -y module enable container-tools:rhel8 && \ 
     dnf -y -q update --exclude=odo && \
     dnf -y reinstall shadow-utils && \
-    dnf -y install podman buildah skopeo fuse-overlayfs
+    # CRW-3397 ensure fuse-overlayfs is installed BEFORE podman - https://github.com/containers/podman/blob/main/docs/tutorials/rootless_tutorial.md#ensure-fuse-overlayfs-is-installed
+    dnf -y install fuse-overlayfs && fuse-overlayfs -V && \
+    dnf -y install podman buildah skopeo
 
 ## Rootless podman install #2
 # Set up environment variables to note that this is
@@ -149,11 +151,6 @@ RUN mkdir -p /var/lib/shared/overlay-images /var/lib/shared/overlay-layers; \
     touch /var/lib/shared/overlay-images/images.lock; \
     touch /var/lib/shared/overlay-layers/layers.lock
 
-## Rootless podman install #5
-# But use VFS since we were not able to make Fuse work yet...
-RUN mkdir -p "${HOME}"/.config/containers && \
-   (echo '[storage]';echo 'driver = "vfs"') > "${HOME}"/.config/containers/storage.conf
-
 RUN \
     ########################################################################
     # Java 8 11 17