diff --git a/Gems/Atom/RPI/Code/CMakeLists.txt b/Gems/Atom/RPI/Code/CMakeLists.txt
index 521178be20..7bf47d675a 100644
--- a/Gems/Atom/RPI/Code/CMakeLists.txt
+++ b/Gems/Atom/RPI/Code/CMakeLists.txt
@@ -160,6 +160,7 @@ if(PAL_TRAIT_BUILD_TESTS_SUPPORTED AND PAL_TRAIT_BUILD_HOST_TOOLS)
                 Gem::Atom_RPI.Public
                 Gem::Atom_RHI.Public
                 Gem::Atom_RPI.Edit
+                Gem::Atom_Utils.Editor.Static
     )
     ly_add_googletest(
         NAME Gem::Atom_RPI.Tests
diff --git a/Gems/Atom/RPI/Code/Tests/Common/RPITestFixture.h b/Gems/Atom/RPI/Code/Tests/Common/RPITestFixture.h
index 48d404d268..b745e55ee8 100644
--- a/Gems/Atom/RPI/Code/Tests/Common/RPITestFixture.h
+++ b/Gems/Atom/RPI/Code/Tests/Common/RPITestFixture.h
@@ -21,7 +21,7 @@
 #include <Common/AssetManagerTestFixture.h>
 #include <Common/RHI/Stubs.h>
 #include <Common/RHI/Factory.h>
-#include <Common/AssetSystemStub.h>
+#include <Atom/Utils/AssetSystemStub.h>
 
 namespace UnitTest
 {
diff --git a/Gems/Atom/RPI/Code/atom_rpi_tests_files.cmake b/Gems/Atom/RPI/Code/atom_rpi_tests_files.cmake
index e99e4e456b..5d67948ac8 100644
--- a/Gems/Atom/RPI/Code/atom_rpi_tests_files.cmake
+++ b/Gems/Atom/RPI/Code/atom_rpi_tests_files.cmake
@@ -10,8 +10,6 @@ set(FILES
     Tests/Buffer/BufferTests.cpp
     Tests/Common/AssetManagerTestFixture.cpp
     Tests/Common/AssetManagerTestFixture.h
-    Tests/Common/AssetSystemStub.cpp
-    Tests/Common/AssetSystemStub.h
     Tests/Common/ErrorMessageFinder.cpp
     Tests/Common/ErrorMessageFinder.h
     Tests/Common/ErrorMessageFinderTests.cpp
diff --git a/Gems/Atom/Tools/AtomToolsFramework/Code/CMakeLists.txt b/Gems/Atom/Tools/AtomToolsFramework/Code/CMakeLists.txt
index e64c9b80e7..bb2ac1f513 100644
--- a/Gems/Atom/Tools/AtomToolsFramework/Code/CMakeLists.txt
+++ b/Gems/Atom/Tools/AtomToolsFramework/Code/CMakeLists.txt
@@ -61,3 +61,31 @@ ly_add_target(
         PRIVATE
             Gem::AtomToolsFramework.Static
 )
+
+################################################################################
+# Tests
+################################################################################
+if(PAL_TRAIT_BUILD_TESTS_SUPPORTED)
+
+    ly_add_target(
+        NAME AtomToolsFramework.Tests ${PAL_TRAIT_TEST_TARGET_TYPE}
+        NAMESPACE Gem
+        FILES_CMAKE
+            atomtoolsframework_tests_files.cmake
+        INCLUDE_DIRECTORIES
+            PRIVATE
+                .
+                Tests
+        BUILD_DEPENDENCIES
+            PRIVATE
+                AZ::AzTest
+                AZ::AzTestShared
+                Gem::AtomToolsFramework.Static
+                Gem::Atom_Utils.Editor.Static
+    )
+
+    ly_add_googletest(
+        NAME Gem::AtomToolsFramework.Tests
+    )
+
+endif()
\ No newline at end of file
diff --git a/Gems/Atom/Tools/AtomToolsFramework/Code/Tests/AtomToolsFrameworkTest.cpp b/Gems/Atom/Tools/AtomToolsFramework/Code/Tests/AtomToolsFrameworkTest.cpp
index aee8e2a775..349c2b9ced 100644
--- a/Gems/Atom/Tools/AtomToolsFramework/Code/Tests/AtomToolsFrameworkTest.cpp
+++ b/Gems/Atom/Tools/AtomToolsFramework/Code/Tests/AtomToolsFrameworkTest.cpp
@@ -7,25 +7,71 @@
  */
 
 #include <AzTest/AzTest.h>
+#include <Atom/Utils/AssetSystemStub.h>
+#include <AtomToolsFramework/Util/MaterialPropertyUtil.h>
 
-class AtomToolsFrameworkTest
-    : public ::testing::Test
+namespace UnitTest
 {
-protected:
-    void SetUp() override
+    class AtomToolsFrameworkTest : public ::testing::Test
     {
+    protected:
+        void SetUp() override
+        {
+            if (!AZ::AllocatorInstance<AZ::SystemAllocator>::IsReady())
+            {
+                AZ::AllocatorInstance<AZ::SystemAllocator>::Create(AZ::SystemAllocator::Descriptor());
+            }
 
-    }
+            m_assetSystemStub.Activate();
 
-    void TearDown() override
-    {
+            RegisterSourceAsset("objects/upgrades/materials/supercondor.material");
+            RegisterSourceAsset("materials/condor.material");
+            RegisterSourceAsset("materials/talisman.material");
+            RegisterSourceAsset("materials/city.material");
+            RegisterSourceAsset("materials/totem.material");
+            RegisterSourceAsset("textures/orange.png");
+            RegisterSourceAsset("textures/red.png");
+            RegisterSourceAsset("textures/gold.png");
+            RegisterSourceAsset("textures/fuzz.png");
+        }
 
-    }
-};
+        void TearDown() override
+        {
+            m_assetSystemStub.Deactivate();
 
-TEST_F(AtomToolsFrameworkTest, SanityTest)
-{
-    ASSERT_TRUE(true);
-}
+            if (AZ::AllocatorInstance<AZ::SystemAllocator>::IsReady())
+            {
+                AZ::AllocatorInstance<AZ::SystemAllocator>::Destroy();
+            }
+        }
+
+        void RegisterSourceAsset(const AZStd::string& path)
+        {
+            const AZ::IO::BasicPath assetRootPath = AZ::IO::PathView(m_assetRoot).LexicallyNormal();
+            const AZ::IO::BasicPath normalizedPath = AZ::IO::BasicPath(assetRootPath).Append(path).LexicallyNormal();
+
+            AZ::Data::AssetInfo assetInfo = {};
+            assetInfo.m_assetId = AZ::Uuid::CreateRandom();
+            assetInfo.m_relativePath = normalizedPath.LexicallyRelative(assetRootPath).StringAsPosix();
+            m_assetSystemStub.RegisterSourceInfo(normalizedPath.StringAsPosix().c_str(), assetInfo, assetRootPath.StringAsPosix().c_str());
+        }
+
+        static constexpr const char* m_assetRoot = "d:/project/assets/";
+        AssetSystemStub m_assetSystemStub;
+    };
+
+    TEST_F(AtomToolsFrameworkTest, GetExteralReferencePath_Succeeds)
+    {
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("", "", 2), "");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/materials/condor.material", "", 2), "");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/materials/talisman.material", "", 2), "");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/materials/talisman.material", "d:/project/assets/textures/gold.png", 2), "../textures/gold.png");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/materials/talisman.material", "d:/project/assets/textures/gold.png", 0), "textures/gold.png");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/objects/upgrades/materials/supercondor.material", "d:/project/assets/materials/condor.material", 3), "../../../materials/condor.material");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/objects/upgrades/materials/supercondor.material", "d:/project/assets/materials/condor.material", 2), "materials/condor.material");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/objects/upgrades/materials/supercondor.material", "d:/project/assets/materials/condor.material", 1), "materials/condor.material");
+        ASSERT_EQ(AtomToolsFramework::GetExteralReferencePath("d:/project/assets/objects/upgrades/materials/supercondor.material", "d:/project/assets/materials/condor.material", 0), "materials/condor.material");
+    }
 
-AZ_UNIT_TEST_HOOK(DEFAULT_UNIT_TEST_ENV);
+    AZ_UNIT_TEST_HOOK(DEFAULT_UNIT_TEST_ENV);
+} // namespace UnitTest
diff --git a/Gems/Atom/Tools/AtomToolsFramework/Code/atomtoolsframework_tests_files.cmake b/Gems/Atom/Tools/AtomToolsFramework/Code/atomtoolsframework_tests_files.cmake
new file mode 100644
index 0000000000..bd9ad9b3d8
--- /dev/null
+++ b/Gems/Atom/Tools/AtomToolsFramework/Code/atomtoolsframework_tests_files.cmake
@@ -0,0 +1,11 @@
+#
+# Copyright (c) Contributors to the Open 3D Engine Project.
+# For complete copyright and license terms please see the LICENSE at the root of this distribution.
+#
+# SPDX-License-Identifier: Apache-2.0 OR MIT
+#
+#
+
+set(FILES
+    Tests/AtomToolsFrameworkTest.cpp
+)
\ No newline at end of file
diff --git a/Gems/Atom/Utils/Code/CMakeLists.txt b/Gems/Atom/Utils/Code/CMakeLists.txt
index 89bc8dd0a5..cbdfb016a1 100644
--- a/Gems/Atom/Utils/Code/CMakeLists.txt
+++ b/Gems/Atom/Utils/Code/CMakeLists.txt
@@ -27,6 +27,27 @@ ly_add_target(
             3rdParty::libpng
 )
 
+if(PAL_TRAIT_BUILD_HOST_TOOLS)
+
+    ly_add_target(
+        NAME Atom_Utils.Editor.Static STATIC
+        NAMESPACE Gem
+        FILES_CMAKE
+            atom_utils_editor_files.cmake
+        INCLUDE_DIRECTORIES
+            PRIVATE
+                Source
+            PUBLIC
+                Include
+        BUILD_DEPENDENCIES
+            PRIVATE
+                AZ::AtomCore
+                AZ::AzCore
+                AZ::AzFramework
+                AZ::AzToolsFramework
+    )
+endif()
+
 ################################################################################
 # Tests
 ################################################################################
diff --git a/Gems/Atom/RPI/Code/Tests/Common/AssetSystemStub.h b/Gems/Atom/Utils/Code/Include/Atom/Utils/AssetSystemStub.h
similarity index 100%
rename from Gems/Atom/RPI/Code/Tests/Common/AssetSystemStub.h
rename to Gems/Atom/Utils/Code/Include/Atom/Utils/AssetSystemStub.h
diff --git a/Gems/Atom/RPI/Code/Tests/Common/AssetSystemStub.cpp b/Gems/Atom/Utils/Code/Source/AssetSystemStub.cpp
similarity index 99%
rename from Gems/Atom/RPI/Code/Tests/Common/AssetSystemStub.cpp
rename to Gems/Atom/Utils/Code/Source/AssetSystemStub.cpp
index 31a46e9a6f..f026e8bcd7 100644
--- a/Gems/Atom/RPI/Code/Tests/Common/AssetSystemStub.cpp
+++ b/Gems/Atom/Utils/Code/Source/AssetSystemStub.cpp
@@ -6,7 +6,7 @@
  *
  */
 
-#include <Common/AssetSystemStub.h>
+#include <Atom/Utils/AssetSystemStub.h>
 #include <AzFramework/StringFunc/StringFunc.h>
 
 namespace UnitTest
diff --git a/Gems/Atom/Utils/Code/atom_utils_editor_files.cmake b/Gems/Atom/Utils/Code/atom_utils_editor_files.cmake
new file mode 100644
index 0000000000..7d7eb10e7c
--- /dev/null
+++ b/Gems/Atom/Utils/Code/atom_utils_editor_files.cmake
@@ -0,0 +1,12 @@
+#
+# Copyright (c) Contributors to the Open 3D Engine Project.
+# For complete copyright and license terms please see the LICENSE at the root of this distribution.
+#
+# SPDX-License-Identifier: Apache-2.0 OR MIT
+#
+#
+
+set(FILES
+    Include/Atom/Utils/AssetSystemStub.h
+    Source/AssetSystemStub.cpp
+)