diff --git a/pkg/daemon/update.go b/pkg/daemon/update.go
index 3a35a9cc33..e5a1b8e18a 100644
--- a/pkg/daemon/update.go
+++ b/pkg/daemon/update.go
@@ -840,6 +840,32 @@ func restorePath(path string) error {
 	return nil
 }
 
+// parse path to find out if its a systemd dropin
+// Returns is dropin (true/false), service name, dropin name
+func isSystemdDropin(path string) (bool, string, string) {
+	glog.V(2).Infof("DEBUG isSystemdDropin path=%v", path)
+	if !strings.HasPrefix(path, "/etc/systemd/system") {
+		return false, "", ""
+	}
+	pathSegments := strings.Split(path, "/")
+	glog.V(2).Infof("DEBUG isSystemdDropin pathSegments=%v", pathSegments)
+	if len(pathSegments) != 5 {
+		return false, "", ""
+	}
+	dropinName := pathSegments[len(pathSegments)-1]
+	glog.V(2).Infof("DEBUG isSystemdDropin dropinName=%v", dropinName)
+	servicePart := pathSegments[len(pathSegments)-2]
+	glog.V(2).Infof("DEBUG isSystemdDropin servicePart=%v", servicePart)
+	allServiceSegments := strings.Split(servicePart, ".")
+	glog.V(2).Infof("DEBUG isSystemdDropin allServiceSegments=%v", allServiceSegments)
+	if allServiceSegments[len(allServiceSegments)-1] != "d" {
+		return false, "", ""
+	}
+	serviceName := strings.Join(allServiceSegments[:len(allServiceSegments)-1], ".")
+	glog.V(2).Infof("DEBUG isSystemdDropin serviceName=%v", serviceName)
+	return true, serviceName, dropinName
+}
+
 // deleteStaleData performs a diff of the new and the old Ignition config. It then deletes
 // all the files, units that are present in the old config but not in the new one.
 // this function will error out if it fails to delete a file (with the exception
@@ -892,6 +918,34 @@ func (dn *Daemon) deleteStaleData(oldIgnConfig, newIgnConfig *igntypes.Config) e
 					continue
 				}
 
+				// Check Systemd.Units.Dropins - don't remove the file if configuration has been converted into a dropin
+				fileReplacedWithDropin := false
+				if ok, service, dropin := isSystemdDropin(f.Path); ok {
+					glog.V(2).Infof("DEBUG isSystemdDropin ok=%v service=%v dropin=%v", ok, service, dropin)
+					for _, u := range newIgnConfig.Systemd.Units {
+						glog.V(2).Infof("DEBUG isSystemdDropin service=%v", u.Name)
+						if u.Name == service {
+							glog.V(2).Infof("DEBUG isSystemdDropin found matching service")
+							for _, j := range u.Dropins {
+								glog.V(2).Infof("DEBUG isSystemdDropin dropin=%v", j.Name)
+								if j.Name == dropin {
+									glog.V(2).Infof("DEBUG isSystemdDropin found matching dropin")
+									fileReplacedWithDropin = true
+									break
+								}
+							}
+							if fileReplacedWithDropin {
+								break
+							}
+						}
+					}
+				}
+
+				if fileReplacedWithDropin {
+					glog.V(2).Infof("Not removing file %q: replaced with systemd dropin", f.Path)
+					continue
+				}
+
 				if err := os.Remove(origFileName(f.Path)); err != nil {
 					return errors.Wrapf(err, "deleting orig file %q: %v", origFileName(f.Path), err)
 				}