Configure SFTP with OpenSSH and an AWS S3 Bucket mounted via S3FS on Amazon EC2

I've had a very similar setup, but with NFS instead of S3. My solution was to mount NFS home directories to a mount point outside of the home directory path, and then use autofs to automatically mount the users home directory on demand inside a top-level directory, /jail, that the user has no write access to.

Relevant configs:

sshd

Subsystem sftp internal-sftp -l DEBUG -u 002 -d %u

UsePAM yes
Match group usergroup
    # This configuration section is part of the sftp-chroot project – https://github.com/mle86/sftp-chroot/
    X11Forwarding no
    AllowTcpForwarding no
    ChrootDirectory /jail/%u  # see /etc/auto.master.d/jails.autofs
    ForceCommand internal-sftp -l DEBUG -u 002  # see sftp-server(8) for options

auto.master

/jail  program:/etc/autofs-sftp-jails.sh  --timeout=20

auto.autohome

*   -fstype=nfs4,rw,hard,intr,rsize=2048,wsize=2048,nosuid,nfsvers3 10.0.0.1:/nfsmount/&

autofs-sftp-jails.sh

#!/bin/sh
# 
# This file is part of the sftp-chroot project – https://github.com/mle86/sftp-chroot/
# 
# This autofs script will allow any local user's homedir to be mounted
# under /jail with a mountpoint named like the user, e.g.
# /jail/xyz      → fake empty directory (root:root 0755)
# /jail/xyz/~xyz → /~xyz
# 
# The base directory /jail will only be accessible for root.
# All mountpoints under /jail are therefore only usable as chroot base directories.
# 
# Exit codes:
#  - 0  Success. Has printed one autofs(5) map entry.
#  - 1  Argument was not a valid username.
#  - 2  User exists, but has no homedir entry.
#  - 3  User's homedir does not exist (or is not a directory).
#  - 4  User's homedir contains a symlink component.
#  - 5  User's homedir contains a non-directory component (?!).
#  - 6  User's homedir has too many components.
#  - 7  User homedir component could not be resolved.
#  - 8  User's homedir contains forbidden characters.


## Initialization:  ############################################################

set -e  # die on errors

username="$1"

PROGNAME="$0($username)"

MOUNT_TO=/jail  # duplicated in auto.master.d/jails.autofs


## Helper functions:  ##########################################################

# fail [exitStatus=1] errorMessage
#  Exits the script with an error message and an optional exit status.
fail () {
    local status=1
    if [ -n "$2" ]; then
        status="$1"
        shift
    fi

    printf '%s: %s\n' "${PROGNAME:-$0}" "$*"  >&2
    exit $status
}

# user_homedir username
#  Retrieves and prints a user's homedir.
#  Exits with an error message and a non-zero status if
#   "getent passwd $username" did not succeed, or
#   the resulting passwd line did not contain a homedir part, or
#   the homedir does not exist or is not actually a directory.
#  The result is therefore guaranteed to be an existing directory.
user_homedir () {
    local username="$1"

    local uent=
    uent="$(getent passwd -- "$username")"  || fail 1 "user not found"

    local homedir="$(printf '%s' "$uent" | cut -d':' -f6)"
    [ -n "$homedir" ]  || fail 2 "no homedir entry"
    [ -d "$homedir" ]  || fail 3 "homedir not found: $homedir"

    printf '%s\n' "$homedir"
}

# remove_trailing_slashes string
#  Removes any trailing slashes in the string, if there are any,
#  and prints the result.
remove_trailing_slashes () {
    printf '%s' "$1" | sed 's:/*$::'
}

# homedir_name_check homedir
#  Checks its argument for dangerous characters.
homedir_name_check () {
    local homedir="$1"
    case "$homedir" in
        *':'*)      fail 8 "homedir with colon rejected: $homedir" ;;
        *'*'*)      fail 8 "homedir with asterisk rejected: $homedir" ;;
        *'`'*)      fail 8 "homedir with backtick rejected: $homedir" ;;
        *'"'*|*"'"*)    fail 8 "homedir with quote rejected: $homedir" ;;
        *"\\")      fail 8 "homedir with backslash rejected: $homedir" ;;
    esac
    true
}

# homedir_symlink_check homedir
#  Checks that its argument's path components do not contain any symlinks
#  and are all existing, real directories.
homedir_symlink_check () {
    local homedir="$(remove_trailing_slashes "$1")"
        # trailing slash has to go, or the -L test will RESOLVE the symlink instead of recognizing it!
    local n_max=50
    local stopdir='/'

    local testdir="$homedir"
    while [ -n "$testdir" ] && [ "$testdir" != "$stopdir" ]; do
        [ ! -L "$testdir" ]  || fail 4 "homedir component is a symlink: $testdir"
        [   -d "$testdir" ]  || fail 5 "homedir component is not a directory: $testdir"

        [ $n_max -gt 0 ]  || fail 6 "too many homedir components: $homedir"
        n_max=$((n_max - 1))

        # go to next-higher path component:
        testdir="$(dirname -- "$testdir")"  || fail 7 "could not resolve component: $homedir"
    done
    true
}


## Integrity checks:  ##########################################################

homedir="$(user_homedir "$username")"
# Now we know that the user exists and has an existing homedir.

# Make sure that the homedir does not contain any dangerous characters.
# In theory, they should not be a real problem,
# but we'd have to escape them in our final output.
# Since special characters in homedir names are really uncommon,
# we'll just reject them altogether:
homedir_name_check "$homedir"

# None of the homedir components can be a symlink!
# Otherwise the main account could remove the sub account's homedir
# and replace it with a symlink to, say, /root/secrets/.
# No matter what modes /root/ has -- as long as the sub account
# could enter secrets/ itself, they can read all files there.
# To prevent this, we check all path components:
homedir_symlink_check "$homedir"


## Prepare the environment:  ###################################################

# The /jail directory has to belong to root (or internal-sftp won't chroot).
# Restrictive modes are essential, or local users might access the jail mountpoints,
# circumventing the /home/$BASE_USER modes.
chmod -- 0700      "$MOUNT_TO"
chown -- root:root "$MOUNT_TO"


## Perform the mount:  #########################################################

# Finally tell autofs to bind-mount /jail/$username/$homedir to the real $homedir.
# 
# Because /jail/$username does not actually exist (yet),
# autofs will temporarily create it (root:root 0755)
# and all the other path components of $homedir, including home/.
# 
# But if we were to emit a "/" mount too (expanding to /jail/$username),
# it would have to contain an empty $homedir mount point!

# "key" is the relative mountpoint directory. Our base directory is /jail,
#  so the key is the requested directory name therein -- the username.
# "location" is the device/directory/network resource to mount.
#  The ":" prefix indicates a local device/directory.
#          key  [options]     location
printf -- '"/%s" -fstype=bind ":%s"\n'  "$homedir" "$homedir"

That's the basics of it. On another note, I've always heard that S3FS was not reliable. I'm not sure how true that is anymore, but if you do wind up having issues with it, I'd front S3 with AWS File Gateway.