Quick answer: Unity nested prefab override on the inner prefab gets “collapsed” (lost) when the outer prefab is reapplied? The outer prefab’s override wins by default.
An inner prefab’s tinted material is overridden in the outer prefab to the default; clicking Apply on the outer prefab strips the inner override.
Override Hierarchy
Prefab overrides cascade: scene > outer prefab > inner prefab > asset. The most-derived non-default value wins. If outer prefab has a value, inner’s override is invisible to the scene.
Apply Targets
Apply to specific layer: right-click the override row → Apply to ‘OuterPrefab’ or Apply to ‘InnerPrefab’. Pick the right one so your change lives at the intended layer.
Revert to Drop Outer
If outer overrides are blocking inner, revert the outer prefab’s value to default. The inner override now propagates through.
Variants over Nesting
For variant-style cases (a panel with three color schemes), use prefab variants rather than nested overrides — cleaner hierarchy, fewer surprises.
Verifying
Inner prefab override appears in scenes that use the outer prefab. Apply / Revert at each layer behaves predictably.
“Outer overrides shadow inner overrides. Pick the right apply target.”
Document the override layering for your team — new devs hit this every couple of weeks and it’s otherwise mystifying.