diff --git a/pkg/machine/e2e/basic_test.go b/pkg/machine/e2e/basic_test.go
index 408096ed91..695327a56d 100644
--- a/pkg/machine/e2e/basic_test.go
+++ b/pkg/machine/e2e/basic_test.go
@@ -90,6 +90,13 @@ var _ = Describe("run basic podman commands", func() {
 		Expect(err).ToNot(HaveOccurred())
 		Expect(runAlp).To(Exit(0))
 
+		// Test overlay works on all platforms except Hyper-V (see #26210)
+		if !isVmtype(define.HyperVVirt) {
+			runAlp, err = mb.setCmd(bm.withPodmanCommand([]string{"run", "-v", tDir + ":/test:O", TESTIMAGE, "ls", "/test/attr-test-file"})).run()
+			Expect(err).ToNot(HaveOccurred())
+			Expect(runAlp).To(Exit(0))
+		}
+
 		// Test build with --volume option
 		cf := filepath.Join(tDir, "Containerfile")
 		err = os.WriteFile(cf, []byte("FROM "+TESTIMAGE+"\nRUN ls /test/attr-test-file\n"), 0o644)
diff --git a/pkg/specgenutil/volumes.go b/pkg/specgenutil/volumes.go
index d8d190578c..7fa497c75b 100644
--- a/pkg/specgenutil/volumes.go
+++ b/pkg/specgenutil/volumes.go
@@ -157,6 +157,11 @@ func parseVolumes(rtc *config.Config, volumeFlag, mountFlag, tmpfsFlag []string)
 	}
 	finalOverlayVolume := make([]*specgen.OverlayVolume, 0, len(overlayVolumes))
 	for _, volume := range overlayVolumes {
+		absSrc, err := specgen.ConvertWinMountPath(volume.Source)
+		if err != nil {
+			return nil, fmt.Errorf("getting absolute path of %s: %w", volume.Source, err)
+		}
+		volume.Source = absSrc
 		finalOverlayVolume = append(finalOverlayVolume, volume)
 	}
 	finalImageVolumes := make([]*specgen.ImageVolume, 0, len(unifiedContainerMounts.imageVolumes))