diff --git a/packages/core/src/kiwi/instance-overrides/sync/clones.ts b/packages/core/src/kiwi/instance-overrides/sync/clones.ts
index de8f9dfd3..1c772e393 100644
--- a/packages/core/src/kiwi/instance-overrides/sync/clones.ts
+++ b/packages/core/src/kiwi/instance-overrides/sync/clones.ts
@@ -38,11 +38,7 @@ export function syncChildrenDeep(
     const tgtNode = graph.getNode(tgt.childIds[i])
     if (!srcNode || !tgtNode || srcNode.type !== tgtNode.type) continue
 
-    if (
-      srcNode.type === 'INSTANCE' &&
-      swappedInstances.has(src.childIds[i]) &&
-      srcNode.componentId !== tgtNode.componentId
-    ) {
+    if (srcNode.type === 'INSTANCE' && srcNode.componentId !== tgtNode.componentId) {
       recloneChildren(graph, src.childIds[i], tgtNode, swappedInstances, protections)
       continue
     }
diff --git a/packages/core/src/layout/apply.ts b/packages/core/src/layout/apply.ts
index a1f2cb734..0f92be791 100644
--- a/packages/core/src/layout/apply.ts
+++ b/packages/core/src/layout/apply.ts
@@ -32,12 +32,12 @@ function applyFrameSize(graph: SceneGraph, frame: SceneNode, yogaNode: YogaNode)
 }
 
 function updateChildFromYoga(graph: SceneGraph, child: SceneNode, yogaChild: YogaNode): void {
-  if (!child.visible || child.layoutPositioning === 'ABSOLUTE' || child.type === 'INSTANCE') return
+  if (!child.visible || child.layoutPositioning === 'ABSOLUTE') return
 
   const derived = child.figmaDerivedLayout
   graph.updateNode(child.id, {
-    x: derived?.x ?? yogaChild.getComputedLeft(),
-    y: derived?.y ?? yogaChild.getComputedTop(),
+    x: child.type === 'INSTANCE' ? yogaChild.getComputedLeft() : (derived?.x ?? yogaChild.getComputedLeft()),
+    y: child.type === 'INSTANCE' ? yogaChild.getComputedTop() : (derived?.y ?? yogaChild.getComputedTop()),
     width: derived?.width ?? yogaChild.getComputedWidth(),
     height: derived?.height ?? yogaChild.getComputedHeight()
   })
diff --git a/tests/engine/kiwi/instance-overrides/sync-clones.test.ts b/tests/engine/kiwi/instance-overrides/sync-clones.test.ts
new file mode 100644
index 000000000..0b984776c
--- /dev/null
+++ b/tests/engine/kiwi/instance-overrides/sync-clones.test.ts
@@ -0,0 +1,34 @@
+import { describe, expect, test } from 'bun:test'
+
+import { SceneGraph } from '@open-pencil/core'
+
+import { syncChildrenDeep } from '#core/kiwi/instance-overrides/sync/clones'
+
+describe('instance override clone sync', () => {
+  test('reclones nested instance children when the source component changes', () => {
+    const graph = new SceneGraph()
+    const page = graph.getPages()[0]
+    const sourceParent = graph.createNode('FRAME', page.id)
+    const targetParent = graph.createNode('FRAME', page.id)
+    const sourceComponent = graph.createNode('COMPONENT', page.id, { name: 'source component' })
+    const targetComponent = graph.createNode('COMPONENT', page.id, { name: 'target component' })
+    graph.createNode('TEXT', sourceComponent.id, { name: 'label', text: 'Source' })
+    graph.createNode('TEXT', targetComponent.id, { name: 'label', text: 'Target' })
+    const sourceChild = graph.createNode('INSTANCE', sourceParent.id, {
+      name: 'nested',
+      componentId: sourceComponent.id
+    })
+    graph.populateInstanceChildren(sourceChild.id, sourceComponent.id)
+    const targetChild = graph.createNode('INSTANCE', targetParent.id, {
+      name: 'nested',
+      componentId: targetComponent.id
+    })
+    graph.populateInstanceChildren(targetChild.id, targetComponent.id)
+
+    syncChildrenDeep(graph, sourceParent.id, targetParent.id, new Set())
+
+    const syncedChild = graph.getNode(targetChild.id)
+    expect(syncedChild?.componentId).toBe(sourceComponent.id)
+    expect(graph.getChildren(targetChild.id).map((child) => child.text)).toEqual(['Source'])
+  })
+})
diff --git a/tests/engine/layout/auto-layout/imported-derived-layout.test.ts b/tests/engine/layout/auto-layout/imported-derived-layout.test.ts
index 598faaaf5..714c14f06 100644
--- a/tests/engine/layout/auto-layout/imported-derived-layout.test.ts
+++ b/tests/engine/layout/auto-layout/imported-derived-layout.test.ts
@@ -103,4 +103,29 @@ describe('imported auto-layout bounds', () => {
 
     expect(graph.getNode(field.id)).toMatchObject({ x: 0, y: 0, width: 276, height: 40 })
   })
+
+  test('uses Yoga positions for imported instances while preserving imported size', () => {
+    const graph = new SceneGraph()
+    const page = graph.getPages()[0]
+    const row = graph.createNode('FRAME', page.id, {
+      width: 200,
+      height: 40,
+      layoutMode: 'HORIZONTAL',
+      primaryAxisSizing: 'FIXED',
+      counterAxisSizing: 'FIXED',
+      primaryAxisAlign: 'MAX',
+      counterAxisAlign: 'CENTER'
+    })
+    const instance = graph.createNode('INSTANCE', row.id, {
+      x: 0,
+      y: 0,
+      width: 40,
+      height: 20,
+      figmaDerivedLayout: { x: 0, y: 0, width: 40, height: 20 }
+    })
+
+    computeAllLayouts(graph)
+
+    expect(graph.getNode(instance.id)).toMatchObject({ x: 160, y: 10, width: 40, height: 20 })
+  })
 })