diff --git a/docs/plans/state.json b/docs/plans/state.json
index c0ff662..91c9b10 100644
--- a/docs/plans/state.json
+++ b/docs/plans/state.json
@@ -5669,6 +5669,20 @@
         "docs/plans/state.json"
       ],
       "test_status": "pnpm typecheck passing"
+    },
+    "overlay-aware-runtime-config-persistence": {
+      "status": "completed",
+      "date": "2026-02-19",
+      "updated": "2026-02-19",
+      "summary": "Made runtime config persistence overlay-aware: when `FLYNN_ENV` overlay file is active, daemon/gateway config.patch now persists to the effective overlay config path instead of always writing base config.yaml.",
+      "files_modified": [
+        "src/cli/shared.ts",
+        "src/cli/start.ts",
+        "src/cli/setup.ts",
+        "src/daemon/index.ts",
+        "docs/plans/state.json"
+      ],
+      "test_status": "pnpm typecheck passing"
     }
   },
   "overall_progress": {
diff --git a/src/cli/setup.ts b/src/cli/setup.ts
index a0c9fd5..862744f 100644
--- a/src/cli/setup.ts
+++ b/src/cli/setup.ts
@@ -3,7 +3,7 @@ import { existsSync, mkdirSync, writeFileSync, readFileSync } from 'fs';
 import { dirname } from 'path';
 import { createInterface } from 'readline/promises';
 import { parse } from 'yaml';
-import { getConfigPath } from './shared.js';
+import { getConfigPath, resolveEffectiveConfigPath } from './shared.js';
 import { createPrompter } from './setup/prompts.js';
 import { ConfigBuilder } from './setup/config.js';
 import { runFirstRunWizard, runMenu } from './setup/orchestrator.js';
@@ -47,7 +47,8 @@ export async function runSetup(configPath: string): Promise<void> {
         const { startDaemon } = await import('../daemon/index.js');
         const { loadConfig } = await import('../config/index.js');
         const config = loadConfig(configPath);
-        const daemon = await startDaemon(config, { configPath });
+        const persistConfigPath = resolveEffectiveConfigPath(configPath);
+        const daemon = await startDaemon(config, { configPath, persistConfigPath });
         await new Promise<void>(resolve => daemon.lifecycle.onShutdown(async () => resolve()));
         return;
       }
diff --git a/src/cli/shared.ts b/src/cli/shared.ts
index 95af5b3..b0dc384 100644
--- a/src/cli/shared.ts
+++ b/src/cli/shared.ts
@@ -58,6 +58,19 @@ export function resolveOverlayPath(basePath: string): string | undefined {
   return join(configDir, `${env}.yaml`);
 }
 
+/**
+ * Resolve the effective config source path for runtime persistence.
+ * When FLYNN_ENV is set and overlay file exists, persist to the overlay file.
+ * Otherwise persist to the base config path.
+ */
+export function resolveEffectiveConfigPath(basePath: string): string {
+  const overlayPath = resolveOverlayPath(basePath);
+  if (overlayPath && existsSync(overlayPath)) {
+    return overlayPath;
+  }
+  return basePath;
+}
+
 /** Load config without throwing. Returns { config } or { error }. */
 export function loadConfigSafe(configPath?: string): { config?: Config; error?: string } {
   const path = configPath ?? getConfigPath();
diff --git a/src/cli/start.ts b/src/cli/start.ts
index a26cf16..aa6e7a0 100644
--- a/src/cli/start.ts
+++ b/src/cli/start.ts
@@ -1,5 +1,5 @@
 import type { Command } from 'commander';
-import { loadConfigSafe, getConfigPath } from './shared.js';
+import { loadConfigSafe, getConfigPath, resolveEffectiveConfigPath } from './shared.js';
 import { existsSync } from 'fs';
 
 export function registerStartCommand(program: Command): void {
@@ -9,6 +9,7 @@ export function registerStartCommand(program: Command): void {
     .option('-c, --config <path>', 'Config file path')
     .action(async (opts: { config?: string }) => {
       const configPath = opts.config ?? getConfigPath();
+      const persistConfigPath = resolveEffectiveConfigPath(configPath);
 
       if (!existsSync(configPath)) {
         // Offer setup wizard
@@ -35,6 +36,9 @@ export function registerStartCommand(program: Command): void {
 
       console.log('Flynn starting...');
       console.log(`Loading config from: ${configPath}`);
+      if (persistConfigPath !== configPath) {
+        console.log(`Runtime config persistence target: ${persistConfigPath}`);
+      }
 
       const { config, error } = loadConfigSafe(configPath);
       if (!config) {
@@ -44,7 +48,7 @@ export function registerStartCommand(program: Command): void {
 
       // Dynamic import to avoid loading daemon code for other commands
       const { startDaemon } = await import('../daemon/index.js');
-      const daemon = await startDaemon(config, { configPath });
+      const daemon = await startDaemon(config, { configPath, persistConfigPath });
 
       if (config.telegram) {
         console.log(`Allowed Telegram chat IDs: ${config.telegram.allowed_chat_ids.join(', ')}`);
diff --git a/src/daemon/index.ts b/src/daemon/index.ts
index 53695f1..7be7990 100644
--- a/src/daemon/index.ts
+++ b/src/daemon/index.ts
@@ -108,6 +108,7 @@ export interface DaemonContext {
 
 export interface StartDaemonOptions {
   configPath?: string;
+  persistConfigPath?: string;
 }
 
 export async function startDaemon(config: Config, options?: StartDaemonOptions): Promise<DaemonContext> {
@@ -206,7 +207,7 @@ export async function startDaemon(config: Config, options?: StartDaemonOptions):
   let channelAgents: ReturnType<typeof createMessageRouter>['agents'] | null = null;
 
   const gateway = createGateway({
-    config, configPath: options?.configPath, sessionManager, modelRouter, systemPrompt, toolRegistry, toolExecutor,
+    config, configPath: options?.persistConfigPath ?? options?.configPath, sessionManager, modelRouter, systemPrompt, toolRegistry, toolExecutor,
     channelRegistry, pairingManager, lifecycle, memoryStore,
     getChannelAgents: () => channelAgents, commandRegistry, intentRegistry, routingPolicy, hookEngine,
   });