An overlay district places an additional zoning requirement on a geographic area without modifying the underlying zoning. Overlay districts can improve overall water quality by restricting development in specific locations in a watershed or source water protection area in addition to standard zoning requirements or as standalone regulations if base zoning does not exist. Common requirements may address building setbacks, density standards, lot sizes, impervious surface reduction, vegetation, and land-use restrictions. Overlay districts can target changes to source water protection areas alone, allowing uses outside the district to continue.

More than one overlay district may apply to a single area depending on environmental conditions. Specific types of overlay districts include those addressing floodplains, agricultural areas, aquifers, and wetlands.