diff --git a/Gems/Atom/Tools/AtomToolsFramework/Code/Include/AtomToolsFramework/Inspector/InspectorPropertyGroupWidget.h b/Gems/Atom/Tools/AtomToolsFramework/Code/Include/AtomToolsFramework/Inspector/InspectorPropertyGroupWidget.h
index cef3eada75..d373e2010c 100644
--- a/Gems/Atom/Tools/AtomToolsFramework/Code/Include/AtomToolsFramework/Inspector/InspectorPropertyGroupWidget.h
+++ b/Gems/Atom/Tools/AtomToolsFramework/Code/Include/AtomToolsFramework/Inspector/InspectorPropertyGroupWidget.h
@@ -41,7 +41,8 @@ namespace AtomToolsFramework
             AzToolsFramework::IPropertyEditorNotify* instanceNotificationHandler = {},
             QWidget* parent = {},
             const AZ::u32 saveStateKey = {},
-            const AzToolsFramework::InstanceDataHierarchy::ValueComparisonFunction& valueComparisonFunction = {});
+            const AzToolsFramework::InstanceDataHierarchy::ValueComparisonFunction& valueComparisonFunction = {},
+            const AzToolsFramework::IndicatorQueryFunction& indicatorQueryFunction = {});
 
         void Refresh() override;
         void Rebuild() override;
diff --git a/Gems/Atom/Tools/AtomToolsFramework/Code/Source/Inspector/InspectorPropertyGroupWidget.cpp b/Gems/Atom/Tools/AtomToolsFramework/Code/Source/Inspector/InspectorPropertyGroupWidget.cpp
index e1f8573bb3..6ab76dedef 100644
--- a/Gems/Atom/Tools/AtomToolsFramework/Code/Source/Inspector/InspectorPropertyGroupWidget.cpp
+++ b/Gems/Atom/Tools/AtomToolsFramework/Code/Source/Inspector/InspectorPropertyGroupWidget.cpp
@@ -19,7 +19,8 @@ namespace AtomToolsFramework
         AzToolsFramework::IPropertyEditorNotify* instanceNotificationHandler,
         QWidget* parent,
         const AZ::u32 saveStateKey,
-        const AzToolsFramework::InstanceDataHierarchy::ValueComparisonFunction& valueComparisonFunction)
+        const AzToolsFramework::InstanceDataHierarchy::ValueComparisonFunction& valueComparisonFunction,
+        const AzToolsFramework::IndicatorQueryFunction& indicatorQueryFunction)
         : InspectorGroupWidget(parent)
     {
         AZ::SerializeContext* context = nullptr;
@@ -34,6 +35,7 @@ namespace AtomToolsFramework
         m_propertyEditor->SetHideRootProperties(true);
         m_propertyEditor->SetAutoResizeLabels(true);
         m_propertyEditor->SetValueComparisonFunction(valueComparisonFunction);
+        m_propertyEditor->SetIndicatorQueryFunction(indicatorQueryFunction);
         m_propertyEditor->SetSavedStateKey(saveStateKey);
         m_propertyEditor->Setup(context, instanceNotificationHandler, false);
         m_propertyEditor->AddInstance(instance, instanceClassId, nullptr, instanceToCompare);
diff --git a/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.cpp b/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.cpp
index 28d7d3d3f5..78e3edecf5 100644
--- a/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.cpp
+++ b/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.cpp
@@ -91,12 +91,19 @@ namespace MaterialEditor
         return AZ::Crc32(AZStd::string::format("MaterialInspector::PropertyGroup::%s::%s", m_documentPath.c_str(), groupNameId.c_str()));
     }
 
-    bool MaterialInspector::CompareInstanceNodeProperties(
-        const AzToolsFramework::InstanceDataNode* source, const AzToolsFramework::InstanceDataNode* target) const
+    bool MaterialInspector::IsInstanceNodePropertyModifed(const AzToolsFramework::InstanceDataNode* node) const
     {
-        AZ_UNUSED(source);
-        const AtomToolsFramework::DynamicProperty* property = AtomToolsFramework::FindDynamicPropertyForInstanceDataNode(target);
-        return property && AtomToolsFramework::ArePropertyValuesEqual(property->GetValue(), property->GetConfig().m_parentValue);
+        const AtomToolsFramework::DynamicProperty* property = AtomToolsFramework::FindDynamicPropertyForInstanceDataNode(node);
+        return property && !AtomToolsFramework::ArePropertyValuesEqual(property->GetValue(), property->GetConfig().m_parentValue);
+    }
+
+    const char* MaterialInspector::GetInstanceNodePropertyIndicator(const AzToolsFramework::InstanceDataNode* node) const
+    {
+        if (IsInstanceNodePropertyModifed(node))
+        {
+            return ":/PropertyEditor/Resources/changed_data_item.png";
+        }
+        return nullptr;
     }
 
     void MaterialInspector::AddOverviewGroup()
@@ -122,8 +129,8 @@ namespace MaterialEditor
 
         // Passing in same group as main and comparison instance to enable custom value comparison for highlighting modified properties
         auto propertyGroupWidget = new AtomToolsFramework::InspectorPropertyGroupWidget(
-            &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId),
-            [this](const auto source, const auto target) { return CompareInstanceNodeProperties(source, target); });
+            &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId), {},
+            [this](const auto node) { return GetInstanceNodePropertyIndicator(node); });
         AddGroup(groupNameId, groupDisplayName, groupDescription, propertyGroupWidget);
     }
 
@@ -153,8 +160,8 @@ namespace MaterialEditor
 
         // Passing in same group as main and comparison instance to enable custom value comparison for highlighting modified properties
         auto propertyGroupWidget = new AtomToolsFramework::InspectorPropertyGroupWidget(
-            &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId),
-            [this](const auto source, const auto target) { return CompareInstanceNodeProperties(source, target); });
+            &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId), {},
+            [this](const auto node) { return GetInstanceNodePropertyIndicator(node); });
         AddGroup(groupNameId, groupDisplayName, groupDescription, propertyGroupWidget);
     }
 
@@ -189,8 +196,8 @@ namespace MaterialEditor
 
             // Passing in same group as main and comparison instance to enable custom value comparison for highlighting modified properties
             auto propertyGroupWidget = new AtomToolsFramework::InspectorPropertyGroupWidget(
-                &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId),
-                [this](const auto source, const auto target) { return CompareInstanceNodeProperties(source, target); });
+                &group, &group, group.TYPEINFO_Uuid(), this, this, GetGroupSaveStateKey(groupNameId), {},
+                [this](const auto node) { return GetInstanceNodePropertyIndicator(node); });
             AddGroup(groupNameId, groupDisplayName, groupDescription, propertyGroupWidget);
             
             bool isGroupVisible = false;
diff --git a/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.h b/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.h
index 845a8cb0f7..4ac127d94b 100644
--- a/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.h
+++ b/Gems/Atom/Tools/MaterialEditor/Code/Source/Window/MaterialInspector/MaterialInspector.h
@@ -43,8 +43,8 @@ namespace MaterialEditor
 
     private:
         AZ::Crc32 GetGroupSaveStateKey(const AZStd::string& groupNameId) const;
-        bool CompareInstanceNodeProperties(
-            const AzToolsFramework::InstanceDataNode* source, const AzToolsFramework::InstanceDataNode* target) const;
+        bool IsInstanceNodePropertyModifed(const AzToolsFramework::InstanceDataNode* node) const;
+        const char* GetInstanceNodePropertyIndicator(const AzToolsFramework::InstanceDataNode* node) const;
 
         void AddOverviewGroup();
         void AddUvNamesGroup();