diff --git a/daemon/graphdriver/overlay2/overlay.go b/daemon/graphdriver/overlay2/overlay.go
index ccb2c3669d..deea3e0176 100644
--- a/daemon/graphdriver/overlay2/overlay.go
+++ b/daemon/graphdriver/overlay2/overlay.go
@@ -194,6 +194,7 @@ func Init(home string, options []string, uidMaps, gidMaps []idtools.IDMap) (grap
 		ctr:           graphdriver.NewRefCounter(graphdriver.NewFsChecker(graphdriver.FsMagicOverlay)),
 		supportsDType: supportsDType,
 		locker:        locker.New(),
+		options:       *opts,
 	}
 
 	d.naiveDiff = graphdriver.NewNaiveDiffDriver(d, uidMaps, gidMaps)
@@ -202,7 +203,12 @@ func Init(home string, options []string, uidMaps, gidMaps []idtools.IDMap) (grap
 		// Try to enable project quota support over xfs.
 		if d.quotaCtl, err = quota.NewControl(home); err == nil {
 			projectQuotaSupported = true
+		} else if opts.quota.Size > 0 {
+			return nil, fmt.Errorf("Storage option overlay2.size not supported. Filesystem does not support Project Quota: %v", err)
 		}
+	} else if opts.quota.Size > 0 {
+		// if xfs is not the backing fs then error out if the storage-opt overlay2.size is used.
+		return nil, fmt.Errorf("Storage Option overlay2.size only supported for backingFS XFS. Found %v", backingFs)
 	}
 
 	logrus.Debugf("backingFs=%s,  projectQuotaSupported=%v", backingFs, projectQuotaSupported)
@@ -224,9 +230,14 @@ func parseOptions(options []string) (*overlayOptions, error) {
 			if err != nil {
 				return nil, err
 			}
-
+		case "overlay2.size":
+			size, err := units.RAMInBytes(val)
+			if err != nil {
+				return nil, err
+			}
+			o.quota.Size = uint64(size)
 		default:
-			return nil, fmt.Errorf("overlay2: Unknown option %s\n", key)
+			return nil, fmt.Errorf("overlay2: unknown option %s", key)
 		}
 	}
 	return o, nil
@@ -312,17 +323,38 @@ func (d *Driver) Cleanup() error {
 // CreateReadWrite creates a layer that is writable for use as a container
 // file system.
 func (d *Driver) CreateReadWrite(id, parent string, opts *graphdriver.CreateOpts) error {
-	return d.Create(id, parent, opts)
+	if opts != nil && len(opts.StorageOpt) != 0 && !projectQuotaSupported {
+		return fmt.Errorf("--storage-opt is supported only for overlay over xfs with 'pquota' mount option")
+	}
+
+	if opts == nil {
+		opts = &graphdriver.CreateOpts{
+			StorageOpt: map[string]string{},
+		}
+	}
+
+	if _, ok := opts.StorageOpt["size"]; !ok {
+		if opts.StorageOpt == nil {
+			opts.StorageOpt = map[string]string{}
+		}
+		opts.StorageOpt["size"] = strconv.FormatUint(d.options.quota.Size, 10)
+	}
+
+	return d.create(id, parent, opts)
 }
 
 // Create is used to create the upper, lower, and merge directories required for overlay fs for a given id.
 // The parent filesystem is used to configure these directories for the overlay.
 func (d *Driver) Create(id, parent string, opts *graphdriver.CreateOpts) (retErr error) {
-
-	if opts != nil && len(opts.StorageOpt) != 0 && !projectQuotaSupported {
-		return fmt.Errorf("--storage-opt is supported only for overlay over xfs with 'pquota' mount option")
+	if opts != nil && len(opts.StorageOpt) != 0 {
+		if _, ok := opts.StorageOpt["size"]; ok {
+			return fmt.Errorf("--storage-opt size is only supported for ReadWrite Layers")
+		}
 	}
+	return d.create(id, parent, opts)
+}
 
+func (d *Driver) create(id, parent string, opts *graphdriver.CreateOpts) (retErr error) {
 	dir := d.dir(id)
 
 	rootUID, rootGID, err := idtools.GetRootUIDGID(d.uidMaps, d.gidMaps)