diff --git a/ui/build/build.go b/ui/build/build.go
index 377481b..c902a0f 100644
--- a/ui/build/build.go
+++ b/ui/build/build.go
@@ -40,9 +40,10 @@
 pool local_pool
  depth = {{.Parallel}}
 build _kati_always_build_: phony
-{{if .HasKatiSuffix}}include {{.KatiBuildNinjaFile}}
+{{if .HasKatiSuffix}}subninja {{.KatiBuildNinjaFile}}
+subninja {{.KatiPackageNinjaFile}}
 {{end -}}
-include {{.SoongNinjaFile}}
+subninja {{.SoongNinjaFile}}
 `))
 
 func createCombinedBuildNinjaFile(ctx Context, config Config) {
@@ -180,6 +181,7 @@
 		genKatiSuffix(ctx, config)
 		runKatiCleanSpec(ctx, config)
 		runKatiBuild(ctx, config)
+		runKatiPackage(ctx, config)
 
 		ioutil.WriteFile(config.LastKatiSuffixFile(), []byte(config.KatiSuffix()), 0777)
 	} else {
diff --git a/ui/build/config.go b/ui/build/config.go
index d65d97f..1008b2e 100644
--- a/ui/build/config.go
+++ b/ui/build/config.go
@@ -508,6 +508,10 @@
 	return filepath.Join(c.OutDir(), "build"+c.KatiSuffix()+katiBuildSuffix+".ninja")
 }
 
+func (c *configImpl) KatiPackageNinjaFile() string {
+	return filepath.Join(c.OutDir(), "build"+c.KatiSuffix()+katiPackageSuffix+".ninja")
+}
+
 func (c *configImpl) SoongNinjaFile() string {
 	return filepath.Join(c.SoongOutDir(), "build.ninja")
 }
@@ -535,6 +539,10 @@
 	return filepath.Join(c.ProductOut(), "previous_build_config.mk")
 }
 
+func (c *configImpl) KatiPackageMkDir() string {
+	return filepath.Join(c.ProductOut(), "obj", "CONFIG", "kati_packaging")
+}
+
 func (c *configImpl) hostOutRoot() string {
 	return filepath.Join(c.OutDir(), "host")
 }
diff --git a/ui/build/dumpvars.go b/ui/build/dumpvars.go
index ffea841..bea08b6 100644
--- a/ui/build/dumpvars.go
+++ b/ui/build/dumpvars.go
@@ -48,7 +48,6 @@
 		"dump-many-vars",
 		"MAKECMDGOALS="+strings.Join(goals, " "))
 	cmd.Environment.Set("CALLED_FROM_SETUP", "true")
-	cmd.Environment.Set("BUILD_SYSTEM", "build/make/core")
 	if write_soong_vars {
 		cmd.Environment.Set("WRITE_SOONG_VARIABLES", "true")
 	}
diff --git a/ui/build/environment.go b/ui/build/environment.go
index cbeeb4b..d8ff7f2 100644
--- a/ui/build/environment.go
+++ b/ui/build/environment.go
@@ -75,6 +75,17 @@
 	*e = out
 }
 
+// Allow removes all keys that are not present in the input list
+func (e *Environment) Allow(keys ...string) {
+	out := (*e)[:0]
+	for _, env := range *e {
+		if key, _, ok := decodeKeyValue(env); ok && inList(key, keys) {
+			out = append(out, env)
+		}
+	}
+	*e = out
+}
+
 // Environ returns the []string required for exec.Cmd.Env
 func (e *Environment) Environ() []string {
 	return []string(*e)
diff --git a/ui/build/environment_test.go b/ui/build/environment_test.go
index 0294dac..37f500f 100644
--- a/ui/build/environment_test.go
+++ b/ui/build/environment_test.go
@@ -56,6 +56,15 @@
 	}
 }
 
+func TestEnvAllow(t *testing.T) {
+	initial := &Environment{"TEST=1", "TEST2=0", "TEST3=2"}
+	initial.Allow("TEST3", "TEST")
+	got := initial.Environ()
+	if len(got) != 2 || got[0] != "TEST=1" || got[1] != "TEST3=2" {
+		t.Errorf("Expected [TEST=1 TEST3=2], got: %v", got)
+	}
+}
+
 const testKatiEnvFileContents = `#!/bin/sh
 # Generated by kati unknown
 
diff --git a/ui/build/kati.go b/ui/build/kati.go
index 546fd1a..b3e820e 100644
--- a/ui/build/kati.go
+++ b/ui/build/kati.go
@@ -28,6 +28,7 @@
 
 const katiBuildSuffix = ""
 const katiCleanspecSuffix = "-cleanspec"
+const katiPackageSuffix = "-package"
 
 // genKatiSuffix creates a suffix for kati-generated files so that we can cache
 // them based on their inputs. So this should encode all common changes to Kati
@@ -59,7 +60,7 @@
 	}
 }
 
-func runKati(ctx Context, config Config, extraSuffix string, args []string) {
+func runKati(ctx Context, config Config, extraSuffix string, args []string, envFunc func(*Environment)) {
 	executable := config.PrebuiltBuildTool("ckati")
 	args = append([]string{
 		"--ninja",
@@ -80,10 +81,6 @@
 		"--kati_stats",
 	}, args...)
 
-	args = append(args,
-		"SOONG_MAKEVARS_MK="+config.SoongMakeVarsMk(),
-		"TARGET_DEVICE_DIR="+config.TargetDeviceDir())
-
 	cmd := Command(ctx, config, "ckati", executable, args...)
 	cmd.Sandbox = katiSandbox
 	pipe, err := cmd.StdoutPipe()
@@ -92,6 +89,8 @@
 	}
 	cmd.Stderr = cmd.Stdout
 
+	envFunc(cmd.Environment)
+
 	cmd.StartOrFatal()
 	status.KatiReader(ctx.Status.StartTool(), pipe)
 	cmd.WaitOrFatal()
@@ -103,7 +102,6 @@
 
 	args := []string{
 		"--writable", config.OutDir() + "/",
-		"--writable", config.DistDir() + "/",
 		"-f", "build/make/core/main.mk",
 	}
 
@@ -125,9 +123,55 @@
 
 	args = append(args, config.KatiArgs()...)
 
-	args = append(args, "SOONG_ANDROID_MK="+config.SoongAndroidMk())
+	args = append(args,
+		"SOONG_MAKEVARS_MK="+config.SoongMakeVarsMk(),
+		"SOONG_ANDROID_MK="+config.SoongAndroidMk(),
+		"TARGET_DEVICE_DIR="+config.TargetDeviceDir(),
+		"KATI_PACKAGE_MK_DIR="+config.KatiPackageMkDir())
 
-	runKati(ctx, config, katiBuildSuffix, args)
+	runKati(ctx, config, katiBuildSuffix, args, func(env *Environment) {
+		env.Unset("DIST_DIR")
+	})
+}
+
+func runKatiPackage(ctx Context, config Config) {
+	ctx.BeginTrace("kati package")
+	defer ctx.EndTrace()
+
+	args := []string{
+		"--writable", config.DistDir() + "/",
+		"--werror_writable",
+		"--werror_implicit_rules",
+		"--werror_overriding_commands",
+		"--werror_real_to_phony",
+		"--werror_phony_looks_real",
+		"-f", "build/make/packaging/main.mk",
+		"KATI_PACKAGE_MK_DIR=" + config.KatiPackageMkDir(),
+	}
+
+	runKati(ctx, config, katiPackageSuffix, args, func(env *Environment) {
+		env.Allow([]string{
+			// Some generic basics
+			"LANG",
+			"LC_MESSAGES",
+			"PATH",
+			"PWD",
+			"TMPDIR",
+
+			// Tool configs
+			"JAVA_HOME",
+			"PYTHONDONTWRITEBYTECODE",
+
+			// Build configuration
+			"ANDROID_BUILD_SHELL",
+			"DIST_DIR",
+			"OUT_DIR",
+		}...)
+
+		if config.Dist() {
+			env.Set("DIST", "true")
+		}
+	})
 }
 
 func runKatiCleanSpec(ctx Context, config Config) {
@@ -138,5 +182,9 @@
 		"--werror_implicit_rules",
 		"--werror_overriding_commands",
 		"-f", "build/make/core/cleanbuild.mk",
+		"SOONG_MAKEVARS_MK=" + config.SoongMakeVarsMk(),
+		"TARGET_DEVICE_DIR=" + config.TargetDeviceDir(),
+	}, func(env *Environment) {
+		env.Unset("DIST_DIR")
 	})
 }
diff --git a/ui/status/kati.go b/ui/status/kati.go
index 552a9e9..7c26d42 100644
--- a/ui/status/kati.go
+++ b/ui/status/kati.go
@@ -24,7 +24,7 @@
 )
 
 var katiError = regexp.MustCompile(`^(\033\[1m)?[^ ]+:[0-9]+: (\033\[31m)?error:`)
-var katiIncludeRe = regexp.MustCompile(`^(\[(\d+)/(\d+)] )?((including [^ ]+|initializing build system|finishing build rules|writing build rules) ...)$`)
+var katiIncludeRe = regexp.MustCompile(`^(\[(\d+)/(\d+)] )?((including [^ ]+|initializing (build|packaging) system|finishing (build|packaging) rules|writing (build|packaging) rules) ...)$`)
 var katiLogRe = regexp.MustCompile(`^\*kati\*: `)
 var katiNinjaMissing = regexp.MustCompile("^[^ ]+ is missing, regenerating...$")