diff --git a/public/update_engine.te b/public/update_engine.te
index 9f9b557..fef5dec 100644
--- a/public/update_engine.te
+++ b/public/update_engine.te
@@ -12,6 +12,12 @@
 # Following permissions are needed for update_engine.
 allow update_engine self:process { setsched };
 allow update_engine self:capability { fowner sys_admin };
+# Note: fsetid checks are triggered when creating a file in a directory with
+# the setgid bit set to determine if the file should inherit setgid. In this
+# case, setgid on the file is undesirable so we should just suppress the
+# denial.
+dontaudit update_engine self:capability fsetid;
+
 allow update_engine kmsg_device:chr_file w_file_perms;
 allow update_engine update_engine_exec:file rx_file_perms;
 wakelock_use(update_engine);