diff --git a/base/images/vm-iso-installer/dracut-nfs.conf b/base/images/vm-iso-installer/dracut-nfs.conf
new file mode 100644
index 00000000000..8ce4ef6ce9e
--- /dev/null
+++ b/base/images/vm-iso-installer/dracut-nfs.conf
@@ -0,0 +1,11 @@
+# Include dracut's NFS module in the live installer initrd.
+#
+# Without it, `root=live:nfs://<server>:/<path>/squashfs.img` fails: the kernel
+# NFS modules ship in the initrd, but dmsquash-live/url-lib.sh only registers
+# the NFS handler when `nfs_to_var` is present, and that helper comes from the
+# dracut `nfs` module.
+#
+# kiwi builds the live initrd by running dracut inside this image root, so this
+# drop-in is merged with kiwi's own 02-livecd.conf (dmsquash-live, livenet,
+# pollcdrom). Both use `+=`, so the module lists accumulate.
+add_dracutmodules+=" nfs "
diff --git a/base/images/vm-iso-installer/vm-iso-installer.kiwi b/base/images/vm-iso-installer/vm-iso-installer.kiwi
index 0eff32567b9..4ca844bdf23 100644
--- a/base/images/vm-iso-installer/vm-iso-installer.kiwi
+++ b/base/images/vm-iso-installer/vm-iso-installer.kiwi
@@ -74,6 +74,10 @@
             name="azurelinux.conf"
             target="/etc/anaconda/conf.d/azurelinux.conf"
             permissions="0644" />
+        <file
+            name="dracut-nfs.conf"
+            target="/etc/dracut.conf.d/10-nfs.conf"
+            permissions="0644" />
         <file
             name="anaconda-launcher.sh"
             target="/usr/local/bin/anaconda-launcher.sh"
@@ -108,6 +112,14 @@
         <!-- ISO live boot (Fedora dmsquash-live) -->
         <package name="dracut-live" />
 
+        <!-- NFS-served live root (root=live:nfs://...). dracut's 95nfs module
+             is skipped at initrd build time unless rpcbind, the nfs-utils
+             helpers (rpc.statd, mount.nfs, mount.nfs4) and sed are installed
+             in this image root. sed is otherwise only present transitively. -->
+        <package name="nfs-utils" />
+        <package name="rpcbind" />
+        <package name="sed" />
+
         <!-- Hyper-V guest integration -->
         <package name="hyperv-daemons" />