Student and advisor applying to same job - conflict of interest with recommendation letter I'm currently a Ph.D. student. I'm applying for a post-Ph.D. faculty job, and so is one of my two Ph.D. co-advisors. I think we have a good relationship, and I am thrilled they are applying, and truly hope they get the job. I think this is mutual.

They recently decided to apply. Prior to their decision, they agreed to review my application and be listed as a reference. 

Now that we are both applying, they have agreed to review my application, but only after they have finished with theirs, to keep them independent. Furthermore, they suggested they should not be a letter writer, but then said they would remain as a reference if I want, since I don't have that many others to choose from (being somewhat earlier in my career, having collaborated with others a bit less).

I've asked the Search Committee head if they are OK with me listing them as a reference. If my advisor and I agree to do it, does the committee have a problem with it? Their reply will guide my answer.

But I seek advice here too. Is it OK to keep the advisor as the reference? I trust them to write a good letter, even in the unlikely event that we are both selected, or I alone am selected. Is this unwise?
It is helpful that you and your advisor have been in contact and have honest communication about this subject. It's commendable, and doesn't happen nearly often enough.

That said,, for this particular job, if you want to have any realistic chance of getting this particular job, you really need to have someone else replace this particular co-advisor. Otherwise, a rather confused hiring panel may take a look at both applications, wonder what the heck is going on, and throw out both applications.

However, for any job in which you're not in direct conflict, I think it would probably be OK to have your co-advisor as a letter of reference.