diff --git a/libfdt/fdt_overlay.c b/libfdt/fdt_overlay.c
index e97f12b..7fbf58c 100644
--- a/libfdt/fdt_overlay.c
+++ b/libfdt/fdt_overlay.c
@@ -733,8 +733,6 @@ static int overlay_symbol_update(void *fdt, void *fdto)
 		/* keep end marker to avoid strlen() */
 		e = path + path_len;
 
-		/* format: /<fragment-name>/__overlay__/<relative-subnode-path> */
-
 		if (*path != '/')
 			return -FDT_ERR_BADVALUE;
 
@@ -748,11 +746,18 @@ static int overlay_symbol_update(void *fdt, void *fdto)
 
 		/* verify format; safe since "s" lies in \0 terminated prop */
 		len = sizeof("/__overlay__/") - 1;
-		if ((e - s) < len || memcmp(s, "/__overlay__/", len))
+		if ((e - s) > len && (memcmp(s, "/__overlay__/", len) == 0)) {
+			/* /<fragment-name>/__overlay__/<relative-subnode-path> */
+			rel_path = s + len;
+			rel_path_len = e - rel_path;
+		} else if ((e - s) == len
+			   && (memcmp(s, "/__overlay__", len - 1) == 0)) {
+			/* /<fragment-name>/__overlay__ */
+			rel_path = "";
+			rel_path_len = 0;
+		} else {
 			return -FDT_ERR_BADOVERLAY;
-
-		rel_path = s + len;
-		rel_path_len = e - rel_path;
+		}
 
 		/* find the fragment index in which the symbol lies */
 		ret = fdt_subnode_offset_namelen(fdto, 0, frag_name,
diff --git a/tests/run_tests.sh b/tests/run_tests.sh
index d368ad5..2620332 100755
--- a/tests/run_tests.sh
+++ b/tests/run_tests.sh
@@ -949,6 +949,18 @@ fdtoverlay_tests() {
 
     # test that fdtoverlay manages to apply overlays with long target path
     run_fdtoverlay_test lpath "/test-node/sub-test-node/sub-test-node-with-very-long-target-path/test-0" "prop" "-ts" ${basedtb} ${target_long_pathdtb} ${overlay_long_pathdtb}
+
+    # test adding a label to the root of a fragment
+    stacked_base_nolabel=stacked_overlay_base_nolabel.dts
+    stacked_base_nolabeldtb=stacked_overlay_base_nolabel.test.dtb
+    stacked_addlabel=stacked_overlay_addlabel.dts
+    stacked_addlabeldtb=stacked_overlay_addlabel.test.dtb
+    stacked_addlabel_targetdtb=stacked_overlay_target_nolabel.fdtoverlay.test.dtb
+
+    run_dtc_test -@ -I dts -O dtb -o $stacked_base_nolabeldtb $stacked_base_nolabel
+    run_dtc_test -@ -I dts -O dtb -o $stacked_addlabeldtb $stacked_addlabel
+
+    run_fdtoverlay_test baz "/foonode/barnode/baznode" "baz-property" "-ts" ${stacked_base_nolabeldtb} ${stacked_addlabel_targetdtb} ${stacked_addlabeldtb} ${stacked_bardtb} ${stacked_bazdtb}
 }
 
 pylibfdt_tests () {
diff --git a/tests/stacked_overlay_addlabel.dts b/tests/stacked_overlay_addlabel.dts
new file mode 100644
index 0000000..e5c158f
--- /dev/null
+++ b/tests/stacked_overlay_addlabel.dts
@@ -0,0 +1,13 @@
+/dts-v1/;
+/plugin/;
+/ {
+	fragment@1 {
+		target-path = "/foonode";
+		foo: __overlay__ {
+			overlay-1-property;
+			bar: barnode {
+				bar-property = "bar";
+			};
+		};
+	};
+};
diff --git a/tests/stacked_overlay_base_nolabel.dts b/tests/stacked_overlay_base_nolabel.dts
new file mode 100644
index 0000000..0c47f0d
--- /dev/null
+++ b/tests/stacked_overlay_base_nolabel.dts
@@ -0,0 +1,6 @@
+/dts-v1/;
+/ {
+	foonode {
+		foo-property = "foo";
+	};
+};