diff --git a/karapace/schema_models.py b/karapace/schema_models.py
index 2874a903c..e2f75cb7a 100644
--- a/karapace/schema_models.py
+++ b/karapace/schema_models.py
@@ -29,6 +29,7 @@
 
 import hashlib
 import logging
+import re
 
 LOG = logging.getLogger(__name__)
 
@@ -181,19 +182,51 @@ def schema(self) -> Draft7Validator | AvroSchema | ProtobufSchema:
         return parsed_typed_schema.schema
 
 
-def avro_schema_merge_builder(schema_str: str, dependencies: Mapping[str, Dependency]) -> str:
-    """To support references in AVRO we recursively merge all referenced schemas with current schema"""
-    if dependencies:
-        merged_schema = ""
-        for dependency in dependencies.values():
-            merged_schema += avro_schema_merge_builder(dependency.schema.schema_str, dependency.schema.dependencies) + ",\n"
-        merged_schema += schema_str
-        return merged_schema
-    return schema_str
+class AvroMerge:
+    def __init__(self, schema_str: str, dependencies: Mapping[str, Dependency]):
+        self.schema_str = schema_str
+        self.dependencies = dependencies
+        self.unique_id = 0
+
+    def union_safe_schema_str(self, schema_str: str) -> str:
+        # in case we meet union - we use it as is
+        regex = re.compile(r"^\s*\[")
+        if regex.match(schema_str):
+            return (
+                "{"
+                + f' "name": "___un__ique_x_n_q_karapace____{self.unique_id}",'
+                + '"type":"record","fields":[{"name":"name", "type":'
+                + schema_str
+                + "}]}"
+            )
+
+        return (
+            "{"
+            + f' "name": "___un__ique_x_n_q_karapace____{self.unique_id}",'
+            + '"type":"record","fields":[{"name":"name", "type": '
+            + '["string",'
+            + schema_str
+            + "]}]}"
+        )
+
+    def builder(self, schema_str: str, dependencies: Mapping[str, Dependency]) -> str:
+        """To support references in AVRO we recursively merge all referenced schemas with current schema"""
+        if dependencies:
+            merged_schema = ""
+            for dependency in dependencies.values():
+                merged_schema += self.builder(dependency.schema.schema_str, dependency.schema.dependencies) + ",\n"
+            self.unique_id += 1
+            merged_schema += self.union_safe_schema_str(schema_str)
+            return merged_schema
 
+        if self.unique_id == 0:
+            return schema_str
+        self.unique_id += 1
+        return self.union_safe_schema_str(schema_str)
 
-def avro_schema_merge(schema_str: str, dependencies: Mapping[str, Dependency]) -> str:
-    return "[\n" + avro_schema_merge_builder(schema_str, dependencies) + "\n]"
+    def merge(self) -> str:
+        result = "[\n" + self.builder(self.schema_str, self.dependencies) + "\n]"
+        return result
 
 
 def parse(
@@ -212,7 +245,7 @@ def parse(
     if schema_type is SchemaType.AVRO:
         try:
             parsed_schema = parse_avro_schema_definition(
-                avro_schema_merge(schema_str, dependencies),
+                AvroMerge(schema_str, dependencies).merge(),
                 validate_enum_symbols=validate_avro_enum_symbols,
                 validate_names=validate_avro_names,
             )
diff --git a/tests/integration/test_schema_avro_references.py b/tests/integration/test_schema_avro_references.py
index 8dcffc66a..825972a9d 100644
--- a/tests/integration/test_schema_avro_references.py
+++ b/tests/integration/test_schema_avro_references.py
@@ -11,7 +11,7 @@
 baseurl = "http://localhost:8081"
 
 
-async def test_avro_references(registry_async_client: Client) -> None:
+async def test_simple_references(registry_async_client: Client) -> None:
     schema_country = {
         "type": "record",
         "name": "Country",
@@ -177,3 +177,34 @@ async def test_avro_references(registry_async_client: Client) -> None:
     )
     assert res.status_code == 200
     assert "id" in res.json()
+
+    schema_union2 = [
+        {
+            "type": "record",
+            "name": "Person",
+            "namespace": "com.netapp",
+            "fields": [
+                {"name": "name", "type": "string"},
+                {"name": "age", "type": "int"},
+                {"name": "address", "type": "Address"},
+                {"name": "job", "type": "Job"},
+            ],
+        },
+        {
+            "type": "record",
+            "name": "UnemployedPerson",
+            "namespace": "com.netapp",
+            "fields": [
+                {"name": "name", "type": "string"},
+                {"name": "age", "type": "int"},
+                {"name": "address", "type": "Address"},
+            ],
+        },
+    ]
+
+    res = await registry_async_client.post(
+        "subjects/person3/versions",
+        json={"schemaType": "AVRO", "schema": json.dumps(schema_union2), "references": two_references},
+    )
+    assert res.status_code == 200
+    assert "id" in res.json()