diff --git a/Gems/Terrain/Code/Source/Components/TerrainSurfaceDataSystemComponent.cpp b/Gems/Terrain/Code/Source/Components/TerrainSurfaceDataSystemComponent.cpp
index 04c94b24d6..0346ff7281 100644
--- a/Gems/Terrain/Code/Source/Components/TerrainSurfaceDataSystemComponent.cpp
+++ b/Gems/Terrain/Code/Source/Components/TerrainSurfaceDataSystemComponent.cpp
@@ -156,9 +156,19 @@ namespace Terrain
                     point.m_entityId = GetEntityId();
                     point.m_position = AZ::Vector3(inPosition.GetX(), inPosition.GetY(), terrainHeight);
                     point.m_normal = terrain->GetNormal(inPosition);
+
+                    // Always add a "terrain" or "terrainHole" tag.
                     const AZ::Crc32 terrainTag =
                         isHole ? SurfaceData::Constants::s_terrainHoleTagCrc : SurfaceData::Constants::s_terrainTagCrc;
                     SurfaceData::AddMaxValueForMasks(point.m_masks, terrainTag, 1.0f);
+
+                    // Add all of the surface tags that the terrain has at this point.
+                    AzFramework::SurfaceData::OrderedSurfaceTagWeightSet surfaceWeights;
+                    terrain->GetSurfaceWeights(point.m_position, surfaceWeights);
+                    for (auto& tag : surfaceWeights)
+                    {
+                        SurfaceData::AddMaxValueForMasks(point.m_masks, tag.m_surfaceType, tag.m_weight);
+                    }
                     surfacePointList.push_back(point);
                 }
                 // Only one handler should exist.
diff --git a/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.cpp b/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.cpp
index 2fbd6a4814..958e175cf3 100644
--- a/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.cpp
+++ b/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.cpp
@@ -12,6 +12,7 @@
 #include <AzCore/Serialization/SerializeContext.h>
 
 #include <GradientSignal/Ebuses/GradientRequestBus.h>
+#include <TerrainSystem/TerrainSystemBus.h>
 
 namespace Terrain
 {
@@ -33,7 +34,8 @@ namespace Terrain
                     ->Attribute(AZ::Edit::Attributes::AutoExpand, true)
 
                     ->DataElement(
-                        AZ::Edit::UIHandlers::Default, &TerrainSurfaceGradientMapping::m_gradientEntityId, "Gradient Entity", "ID of Entity providing a gradient.")
+                        AZ::Edit::UIHandlers::Default, &TerrainSurfaceGradientMapping::m_gradientEntityId,
+                        "Gradient Entity", "ID of Entity providing a gradient.")
                        ->Attribute(AZ::Edit::Attributes::ChangeNotify, AZ::Edit::PropertyRefreshLevels::AttributesAndValues)
                     ->UIElement("GradientPreviewer", "Previewer")
                         ->Attribute(AZ::Edit::Attributes::NameLabelOverride, "")
@@ -68,7 +70,8 @@ namespace Terrain
                     ->Attribute(AZ::Edit::Attributes::AutoExpand, true)
 
                     ->DataElement(
-                        AZ::Edit::UIHandlers::Default, &TerrainSurfaceGradientListConfig::m_gradientSurfaceMappings, "Gradient to Surface Mappings", "Maps Gradient Entities to Surfaces.")
+                        AZ::Edit::UIHandlers::Default, &TerrainSurfaceGradientListConfig::m_gradientSurfaceMappings,
+                        "Gradient to Surface Mappings", "Maps Gradient Entities to Surfaces.")
                     ;
             }
         }
@@ -109,12 +112,36 @@ namespace Terrain
 
     void TerrainSurfaceGradientListComponent::Activate()
     {
+        LmbrCentral::DependencyNotificationBus::Handler::BusConnect(GetEntityId());
         Terrain::TerrainAreaSurfaceRequestBus::Handler::BusConnect(GetEntityId());
+
+        // Make sure we get update notifications whenever this entity or any dependent gradient entity changes in any way.
+        // We'll use that to notify the terrain system that the surface information needs to be refreshed.
+        m_dependencyMonitor.Reset();
+        m_dependencyMonitor.ConnectOwner(GetEntityId());
+        m_dependencyMonitor.ConnectDependency(GetEntityId());
+
+        for (auto& surfaceMapping : m_configuration.m_gradientSurfaceMappings)
+        {
+            if (surfaceMapping.m_gradientEntityId != GetEntityId())
+            {
+                m_dependencyMonitor.ConnectDependency(surfaceMapping.m_gradientEntityId);
+            }
+        }
+
+        // Notify that the area has changed.
+        OnCompositionChanged();
     }
 
     void TerrainSurfaceGradientListComponent::Deactivate()
     {
+        m_dependencyMonitor.Reset();
+
         Terrain::TerrainAreaSurfaceRequestBus::Handler::BusDisconnect();
+        LmbrCentral::DependencyNotificationBus::Handler::BusDisconnect();
+
+        // Since this surface data will no longer exist, notify the terrain system to refresh the area.
+        OnCompositionChanged();
     }
 
     bool TerrainSurfaceGradientListComponent::ReadInConfig(const AZ::ComponentConfig* baseConfig)
@@ -137,7 +164,9 @@ namespace Terrain
         return false;
     }
     
-    void TerrainSurfaceGradientListComponent::GetSurfaceWeights(const AZ::Vector3& inPosition, AzFramework::SurfaceData::OrderedSurfaceTagWeightSet& outSurfaceWeights) const
+    void TerrainSurfaceGradientListComponent::GetSurfaceWeights(
+        const AZ::Vector3& inPosition,
+        AzFramework::SurfaceData::OrderedSurfaceTagWeightSet& outSurfaceWeights) const
     {
         outSurfaceWeights.clear();
 
@@ -146,7 +175,8 @@ namespace Terrain
         for (const auto& mapping : m_configuration.m_gradientSurfaceMappings)
         {
             float weight = 0.0f;
-            GradientSignal::GradientRequestBus::EventResult(weight, mapping.m_gradientEntityId, &GradientSignal::GradientRequestBus::Events::GetValue, params);
+            GradientSignal::GradientRequestBus::EventResult(weight,
+                mapping.m_gradientEntityId, &GradientSignal::GradientRequestBus::Events::GetValue, params);
 
             AzFramework::SurfaceData::SurfaceTagWeight tagWeight;
             tagWeight.m_surfaceType = mapping.m_surfaceTag;
@@ -154,4 +184,10 @@ namespace Terrain
             outSurfaceWeights.emplace(tagWeight);
         }
     }
+
+    void TerrainSurfaceGradientListComponent::OnCompositionChanged()
+    {
+        TerrainSystemServiceRequestBus::Broadcast(&TerrainSystemServiceRequestBus::Events::RefreshArea, GetEntityId());
+    }
+
 } // namespace Terrain
diff --git a/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.h b/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.h
index 799038354c..bb30029f35 100644
--- a/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.h
+++ b/Gems/Terrain/Code/Source/Components/TerrainSurfaceGradientListComponent.h
@@ -11,6 +11,8 @@
 #include <AzCore/Asset/AssetCommon.h>
 #include <AzCore/Component/Component.h>
 #include <AzFramework/Terrain/TerrainDataRequestBus.h>
+#include <LmbrCentral/Dependency/DependencyMonitor.h>
+#include <LmbrCentral/Dependency/DependencyNotificationBus.h>
 #include <SurfaceData/SurfaceDataTypes.h>
 
 #include <Terrain/Ebuses/TerrainAreaSurfaceRequestBus.h>
@@ -47,6 +49,7 @@ namespace Terrain
     class TerrainSurfaceGradientListComponent
         : public AZ::Component
         , public Terrain::TerrainAreaSurfaceRequestBus::Handler
+        , private LmbrCentral::DependencyNotificationBus::Handler
     {
     public:
         template<typename, typename>
@@ -72,6 +75,11 @@ namespace Terrain
         void GetSurfaceWeights(const AZ::Vector3& inPosition, AzFramework::SurfaceData::OrderedSurfaceTagWeightSet& outSurfaceWeights) const override;
 
     private:
+        //////////////////////////////////////////////////////////////////////////
+        // LmbrCentral::DependencyNotificationBus
+        void OnCompositionChanged() override;
+
         TerrainSurfaceGradientListConfig m_configuration;
+        LmbrCentral::DependencyMonitor m_dependencyMonitor;
     };
 } // namespace Terrain