diff --git a/fs_mgr/libsnapshot/include/libsnapshot/snapshot.h b/fs_mgr/libsnapshot/include/libsnapshot/snapshot.h
index 6d422c6..1ec8634 100644
--- a/fs_mgr/libsnapshot/include/libsnapshot/snapshot.h
+++ b/fs_mgr/libsnapshot/include/libsnapshot/snapshot.h
@@ -335,6 +335,9 @@
     // after loading selinux policy.
     bool PrepareSnapuserdArgsForSelinux(std::vector<std::string>* snapuserd_argv);
 
+    // If snapuserd from first stage init was started from system partition.
+    bool MarkSnapuserdFromSystem();
+
     // Detach dm-user devices from the first stage snapuserd. Load
     // new dm-user tables after loading selinux policy.
     bool DetachFirstStageSnapuserdForSelinux();
@@ -670,6 +673,7 @@
     std::string GetForwardMergeIndicatorPath();
     std::string GetOldPartitionMetadataPath();
     std::string GetBootSnapshotsWithoutSlotSwitchPath();
+    std::string GetSnapuserdFromSystemPath();
 
     const LpMetadata* ReadOldPartitionMetadata(LockedFile* lock);
 
diff --git a/fs_mgr/libsnapshot/snapshot.cpp b/fs_mgr/libsnapshot/snapshot.cpp
index c01360e..e4a6153 100644
--- a/fs_mgr/libsnapshot/snapshot.cpp
+++ b/fs_mgr/libsnapshot/snapshot.cpp
@@ -20,6 +20,7 @@
 #include <sys/file.h>
 #include <sys/types.h>
 #include <sys/unistd.h>
+#include <sys/xattr.h>
 
 #include <filesystem>
 #include <optional>
@@ -88,7 +89,10 @@
         "/metadata/ota/snapshot-boot-without-slot-switch";
 static constexpr char kBootIndicatorPath[] = "/metadata/ota/snapshot-boot";
 static constexpr char kRollbackIndicatorPath[] = "/metadata/ota/rollback-indicator";
+static constexpr char kSnapuserdFromSystem[] = "/metadata/ota/snapuserd-from-system";
 static constexpr auto kUpdateStateCheckInterval = 2s;
+static constexpr char kOtaFileContext[] = "u:object_r:ota_metadata_file:s0";
+
 /*
  * The readahead size is set to 32kb so that
  * there is no significant memory pressure (/proc/pressure/memory) during boot.
@@ -318,7 +322,7 @@
     std::vector<std::string> files = {
             GetSnapshotBootIndicatorPath(),          GetRollbackIndicatorPath(),
             GetForwardMergeIndicatorPath(),          GetOldPartitionMetadataPath(),
-            GetBootSnapshotsWithoutSlotSwitchPath(),
+            GetBootSnapshotsWithoutSlotSwitchPath(), GetSnapuserdFromSystemPath(),
     };
     for (const auto& file : files) {
         RemoveFileIfExists(file);
@@ -1457,6 +1461,10 @@
     return metadata_dir_ + "/" + android::base::Basename(kRollbackIndicatorPath);
 }
 
+std::string SnapshotManager::GetSnapuserdFromSystemPath() {
+    return metadata_dir_ + "/" + android::base::Basename(kSnapuserdFromSystem);
+}
+
 std::string SnapshotManager::GetForwardMergeIndicatorPath() {
     return metadata_dir_ + "/allow-forward-merge";
 }
@@ -2122,6 +2130,34 @@
     return update_status.o_direct();
 }
 
+bool SnapshotManager::MarkSnapuserdFromSystem() {
+    auto path = GetSnapuserdFromSystemPath();
+
+    if (!android::base::WriteStringToFile("1", path)) {
+        PLOG(ERROR) << "Unable to write to vendor update path: " << path;
+        return false;
+    }
+
+    unique_fd fd(open(path.c_str(), O_PATH));
+    if (fd < 0) {
+        PLOG(ERROR) << "Failed to open file: " << path;
+        return false;
+    }
+
+    /*
+     * This function is invoked by first stage init and hence we need to
+     * explicitly set the correct selinux label for this file as update_engine
+     * will try to remove this file later on once the snapshot merge is
+     * complete.
+     */
+    if (fsetxattr(fd.get(), XATTR_NAME_SELINUX, kOtaFileContext, strlen(kOtaFileContext) + 1, 0) <
+        0) {
+        PLOG(ERROR) << "fsetxattr for the path: " << path << " failed";
+    }
+
+    return true;
+}
+
 /*
  * Please see b/304829384 for more details.
  *
@@ -2158,14 +2194,35 @@
  *         iii: If both (i) and (ii) are true, then use the dm-snapshot based
  *         approach.
  *
+ * 3: Post OTA reboot, if the vendor partition was updated from Android 12 to
+ * any other release post Android 12, then snapuserd binary will be "system"
+ * partition as post Android 12, init_boot will contain a copy of snapuserd
+ * binary. Thus, during first stage init, if init is able to communicate to
+ * daemon, that gives us a signal that the binary is from "system" copy. Hence,
+ * there is no need to fallback to legacy dm-snapshot. Thus, init will use a
+ * marker in /metadata to signal that the snapuserd binary from first stage init
+ * can handle userspace snapshots.
+ *
  */
 bool SnapshotManager::IsLegacySnapuserdPostReboot() {
-    if (is_legacy_snapuserd_.has_value() && is_legacy_snapuserd_.value() == true) {
-        auto slot = GetCurrentSlot();
-        if (slot == Slot::Target) {
+    auto slot = GetCurrentSlot();
+    if (slot == Slot::Target) {
+        /*
+            If this marker is present, the daemon can handle userspace snapshots.
+            During post-OTA reboot, this implies that the vendor partition is
+            Android 13 or higher. If the snapshots were created on an
+            Android 12 vendor, this means the vendor partition has been updated.
+        */
+        if (access(GetSnapuserdFromSystemPath().c_str(), F_OK) == 0) {
+            is_snapshot_userspace_ = true;
+            return false;
+        }
+        // If the marker isn't present and if the vendor is still in Android 12
+        if (is_legacy_snapuserd_.has_value() && is_legacy_snapuserd_.value() == true) {
             return true;
         }
     }
+
     return false;
 }
 
diff --git a/init/first_stage_mount.cpp b/init/first_stage_mount.cpp
index 6e0895c..c81a643 100644
--- a/init/first_stage_mount.cpp
+++ b/init/first_stage_mount.cpp
@@ -395,12 +395,7 @@
 
     use_snapuserd_ = sm->IsSnapuserdRequired();
     if (use_snapuserd_) {
-        if (sm->UpdateUsesUserSnapshots()) {
-            LaunchFirstStageSnapuserd();
-        } else {
-            LOG(FATAL) << "legacy virtual-ab is no longer supported";
-            return false;
-        }
+        LaunchFirstStageSnapuserd();
     }
 
     sm->SetUeventRegenCallback([this](const std::string& device) -> bool {
diff --git a/init/snapuserd_transition.cpp b/init/snapuserd_transition.cpp
index 9e3ff41..2370bc2 100644
--- a/init/snapuserd_transition.cpp
+++ b/init/snapuserd_transition.cpp
@@ -100,6 +100,10 @@
     }
     if (client->SupportsSecondStageSocketHandoff()) {
         setenv(kSnapuserdFirstStageInfoVar, "socket", 1);
+        auto sm = SnapshotManager::NewForFirstStageMount();
+        if (!sm->MarkSnapuserdFromSystem()) {
+            LOG(ERROR) << "Failed to update MarkSnapuserdFromSystem";
+        }
     }
 
     setenv(kSnapuserdFirstStagePidVar, std::to_string(pid).c_str(), 1);