diff --git a/cmake/kconfig.cmake b/cmake/kconfig.cmake
index 1633c90bd66..e59a32e85d1 100644
--- a/cmake/kconfig.cmake
+++ b/cmake/kconfig.cmake
@@ -94,7 +94,7 @@ get_cmake_property(cache_variable_names CACHE_VARIABLES)
 foreach (name ${cache_variable_names})
   if("${name}" MATCHES "^CONFIG_")
     # When a cache variable starts with 'CONFIG_', it is assumed to be
-    # a CLI Kconfig symbol assignment.
+    # a Kconfig symbol assignment from the CMake command line.
     set(EXTRA_KCONFIG_OPTIONS
       "${EXTRA_KCONFIG_OPTIONS}\n${name}=${${name}}"
       )
diff --git a/scripts/sanitycheck b/scripts/sanitycheck
index b66cc3fad71..48697145172 100755
--- a/scripts/sanitycheck
+++ b/scripts/sanitycheck
@@ -1334,7 +1334,8 @@ class MakeGenerator:
 
         if len(ti.test.extra_configs) > 0 or options.coverage:
             args.append("OVERLAY_CONFIG=\"%s %s\"" %(overlays,
-                        os.path.join(ti.outdir, "overlay.conf")))
+                        os.path.join(ti.outdir,
+                                     "sanitycheck", "testcase_extra.conf")))
 
         if ti.test.type == "unit" and options.enable_coverage:
             args.append("COVERAGE=1")
@@ -1885,8 +1886,13 @@ class TestInstance:
         return build_only
 
     def create_overlay(self, platform):
-        file = os.path.join(self.outdir, "overlay.conf")
-        os.makedirs(self.outdir, exist_ok=True)
+        # Create this in a "sanitycheck/" subdirectory otherwise this
+        # will pass this overlay to kconfig.py *twice* and kconfig.cmake
+        # will silently give that second time precedence over any
+        # --extra-args=CONFIG_*
+        subdir = os.path.join(self.outdir, "sanitycheck")
+        os.makedirs(subdir, exist_ok=True)
+        file = os.path.join(subdir, "testcase_extra.conf")
         with open(file, "w") as f:
             content = ""