diff --git a/crates/nu-command/src/core_commands/overlay/use_.rs b/crates/nu-command/src/core_commands/overlay/use_.rs
index aff8747e2..4c541882b 100644
--- a/crates/nu-command/src/core_commands/overlay/use_.rs
+++ b/crates/nu-command/src/core_commands/overlay/use_.rs
@@ -37,6 +37,11 @@ impl Command for OverlayUse {
                 "Prepend module name to the imported commands and aliases",
                 Some('p'),
             )
+            .switch(
+                "reload",
+                "If the overlay already exists, reload its definitions and environment.",
+                Some('r'),
+            )
             .category(Category::Core)
     }
 
@@ -59,7 +64,7 @@ impl Command for OverlayUse {
         let mut name_arg: Spanned<String> = call.req(engine_state, caller_stack, 0)?;
         name_arg.item = trim_quotes_str(&name_arg.item).to_string();
 
-        let origin_module_id = if let Some(overlay_expr) = call.positional_nth(0) {
+        let maybe_origin_module_id = if let Some(overlay_expr) = call.positional_nth(0) {
             if let Expr::Overlay(module_id) = overlay_expr.expr {
                 module_id
             } else {
@@ -114,9 +119,7 @@ impl Command for OverlayUse {
             ));
         };
 
-        caller_stack.add_overlay(overlay_name);
-
-        if let Some(module_id) = origin_module_id {
+        if let Some(module_id) = maybe_origin_module_id {
             // Add environment variables only if:
             // a) adding a new overlay
             // b) refreshing an active overlay (the origin module changed)
@@ -152,6 +155,9 @@ impl Command for OverlayUse {
                     call.redirect_stderr,
                 );
 
+                // The export-env block should see the env vars *before* activating this overlay
+                caller_stack.add_overlay(overlay_name);
+
                 // Merge the block's environment to the current stack
                 redirect_env(engine_state, caller_stack, &callee_stack);
 
@@ -159,7 +165,11 @@ impl Command for OverlayUse {
                     // Remove the file-relative PWD, if the argument is a valid path
                     caller_stack.remove_env_var(engine_state, "FILE_PWD");
                 }
+            } else {
+                caller_stack.add_overlay(overlay_name);
             }
+        } else {
+            caller_stack.add_overlay(overlay_name);
         }
 
         Ok(PipelineData::new(call.head))
diff --git a/crates/nu-parser/src/parse_keywords.rs b/crates/nu-parser/src/parse_keywords.rs
index a413b8990..fcc88ac1f 100644
--- a/crates/nu-parser/src/parse_keywords.rs
+++ b/crates/nu-parser/src/parse_keywords.rs
@@ -2441,6 +2441,7 @@ pub fn parse_overlay_use(
     };
 
     let has_prefix = call.has_flag("prefix");
+    let do_reload = call.has_flag("reload");
 
     let pipeline = Pipeline::from_vec(vec![Expression {
         expr: Expr::Call(call.clone()),
@@ -2498,7 +2499,7 @@ pub fn parse_overlay_use(
         let module_id = overlay_frame.origin;
 
         if let Some(new_module_id) = working_set.find_module(overlay_name.as_bytes()) {
-            if module_id == new_module_id {
+            if !do_reload && (module_id == new_module_id) {
                 (overlay_name, Module::new(), module_id, false)
             } else {
                 // The origin module of an overlay changed => update it
@@ -2594,13 +2595,17 @@ pub fn parse_overlay_use(
         }
     };
 
-    let (decls_to_lay, aliases_to_lay) = if has_prefix {
-        (
-            origin_module.decls_with_head(final_overlay_name.as_bytes()),
-            origin_module.aliases_with_head(final_overlay_name.as_bytes()),
-        )
+    let (decls_to_lay, aliases_to_lay) = if is_module_updated {
+        if has_prefix {
+            (
+                origin_module.decls_with_head(final_overlay_name.as_bytes()),
+                origin_module.aliases_with_head(final_overlay_name.as_bytes()),
+            )
+        } else {
+            (origin_module.decls(), origin_module.aliases())
+        }
     } else {
-        (origin_module.decls(), origin_module.aliases())
+        (vec![], vec![])
     };
 
     working_set.add_overlay(
diff --git a/tests/overlays/mod.rs b/tests/overlays/mod.rs
index a39b0f4fb..75d75fb81 100644
--- a/tests/overlays/mod.rs
+++ b/tests/overlays/mod.rs
@@ -1055,3 +1055,70 @@ fn overlay_trim_double_quote_hide() {
     #[cfg(not(windows))]
     assert!(!actual_repl.err.is_empty());
 }
+
+#[test]
+fn overlay_use_and_restore_older_env_vars() {
+    let inp = &[
+        r#"module spam {
+            export-env {
+                let old_baz = $env.BAZ;
+                let-env BAZ = $old_baz + 'baz'
+            }
+        }"#,
+        r#"let-env BAZ = 'baz'"#,
+        r#"overlay use spam"#,
+        r#"overlay hide spam"#,
+        r#"let-env BAZ = 'new-baz'"#,
+        r#"overlay use --reload spam"#,
+        r#"$env.BAZ"#,
+    ];
+
+    let actual = nu!(cwd: "tests/overlays", pipeline(&inp.join("; ")));
+    let actual_repl = nu!(cwd: "tests/overlays", nu_repl_code(inp));
+
+    assert_eq!(actual.out, "new-bazbaz");
+    assert_eq!(actual_repl.out, "new-bazbaz");
+}
+
+#[test]
+fn overlay_use_and_reload() {
+    let inp = &[
+        r#"module spam {
+            export def foo [] { 'foo' };
+            export alias fooalias = 'foo';
+            export-env {
+                let-env FOO = 'foo'
+            }
+        }"#,
+        r#"overlay use spam"#,
+        r#"def foo [] { 'newfoo' }"#,
+        r#"alias fooalias = 'newfoo'"#,
+        r#"let-env FOO = 'newfoo'"#,
+        r#"overlay use --reload spam"#,
+        r#"$'(foo)(fooalias)($env.FOO)'"#,
+    ];
+
+    let actual = nu!(cwd: "tests/overlays", pipeline(&inp.join("; ")));
+    let actual_repl = nu!(cwd: "tests/overlays", nu_repl_code(inp));
+
+    assert_eq!(actual.out, "foofoofoo");
+    assert_eq!(actual_repl.out, "foofoofoo");
+}
+
+#[test]
+fn overlay_use_and_reolad_keep_custom() {
+    let inp = &[
+        r#"overlay new spam"#,
+        r#"def foo [] { 'newfoo' }"#,
+        r#"alias fooalias = 'newfoo'"#,
+        r#"let-env FOO = 'newfoo'"#,
+        r#"overlay use --reload spam"#,
+        r#"$'(foo)(fooalias)($env.FOO)'"#,
+    ];
+
+    let actual = nu!(cwd: "tests/overlays", pipeline(&inp.join("; ")));
+    let actual_repl = nu!(cwd: "tests/overlays", nu_repl_code(inp));
+
+    assert_eq!(actual.out, "newfoonewfoonewfoo");
+    assert_eq!(actual_repl.out, "newfoonewfoonewfoo");
+}