diff --git a/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers
new file mode 100755
index 0000000000..172b5a8e43
--- /dev/null
+++ b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers
@@ -0,0 +1,19 @@
+#!/usr/bin/env bash
+# Run systemd-sysusers for the target OSTree sysroot.
+
+set -euo pipefail
+
+main() {
+    coreos-sysroot-bwrap systemd-sysusers
+    coreos-relabel \
+        /etc/group \
+        /etc/group- \
+        /etc/gshadow \
+        /etc/gshadow- \
+        /etc/passwd \
+        /etc/passwd- \
+        /etc/shadow \
+        /etc/shadow-
+}
+
+main "$@"
diff --git a/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers.service b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers.service
new file mode 100644
index 0000000000..85c8e1b1ba
--- /dev/null
+++ b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/ignition-ostree-sysusers.service
@@ -0,0 +1,16 @@
+[Unit]
+Description=Populate OSTree sysusers
+DefaultDependencies=false
+ConditionKernelCommandLine=|ostree
+
+# Need to do this with all mount points active
+After=ignition-mount.service
+
+# But *before* we start dumping files in there
+Before=ignition-files.service
+Before=ignition-ostree-populate-var.service
+
+[Service]
+Type=oneshot
+RemainAfterExit=yes
+ExecStart=/usr/sbin/ignition-ostree-sysusers
diff --git a/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/module-setup.sh b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/module-setup.sh
index c50358cbd4..89eaed86d1 100755
--- a/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/module-setup.sh
+++ b/overlay.d/05core/usr/lib/dracut/modules.d/40ignition-ostree/module-setup.sh
@@ -60,6 +60,10 @@ install() {
         sgdisk    \
         find
 
+    inst_script "$moddir/ignition-ostree-sysusers" \
+        "/usr/sbin/ignition-ostree-sysusers"
+    install_ignition_unit ignition-ostree-sysusers.service
+
     for x in mount populate; do
         install_ignition_unit ignition-ostree-${x}-var.service
         inst_script "$moddir/ignition-ostree-${x}-var.sh" "/usr/sbin/ignition-ostree-${x}-var"