diff --git a/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.cpp b/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.cpp
index c74a478dad..72f03230ac 100644
--- a/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.cpp
+++ b/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.cpp
@@ -70,8 +70,9 @@ namespace Terrain
         if (auto serialize = azrtti_cast<AZ::SerializeContext*>(context))
         {
             serialize->Class<TerrainPhysicsColliderConfig, AZ::ComponentConfig>()
-                ->Version(2)->Field(
-                "Mappings", &TerrainPhysicsColliderConfig::m_surfaceMaterialMappings)
+                ->Version(3)
+                ->Field("DefaultMaterial", &TerrainPhysicsColliderConfig::m_defaultMaterialSelection)
+                ->Field("Mappings", &TerrainPhysicsColliderConfig::m_surfaceMaterialMappings)
             ;
 
             if (auto edit = serialize->GetEditContext())
@@ -82,6 +83,8 @@ namespace Terrain
                     ->ClassElement(AZ::Edit::ClassElements::EditorData, "")
                     ->Attribute(AZ::Edit::Attributes::Visibility, AZ::Edit::PropertyVisibility::ShowChildrenOnly)
                     ->Attribute(AZ::Edit::Attributes::AutoExpand, true)
+                    ->DataElement(AZ::Edit::UIHandlers::Default, &TerrainPhysicsColliderConfig::m_defaultMaterialSelection,
+                        "Default Surface Physics Material", "Select a material to be used by maps surfaces by default")
                     ->DataElement(
                         AZ::Edit::UIHandlers::Default, &TerrainPhysicsColliderConfig::m_surfaceMaterialMappings,
                         "Surface to Material Mappings", "Maps surfaces to physics materials")
@@ -319,7 +322,7 @@ namespace Terrain
         }
 
         // If this surface isn't mapped, use the default material.
-        return Physics::MaterialId();
+        return m_configuration.m_defaultMaterialSelection.GetMaterialId();
     }
 
     void TerrainPhysicsColliderComponent::GenerateHeightsAndMaterialsInBounds(
@@ -417,7 +420,7 @@ namespace Terrain
         AZStd::vector<Physics::MaterialId> materialList;
 
         // Ensure the list contains the default material as the first entry.
-        materialList.emplace_back(Physics::MaterialId());
+        materialList.emplace_back(m_configuration.m_defaultMaterialSelection.GetMaterialId());
 
         for (auto& mapping : m_configuration.m_surfaceMaterialMappings)
         {
diff --git a/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.h b/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.h
index 8a70f282d0..5f79fa9103 100644
--- a/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.h
+++ b/Gems/Terrain/Code/Source/Components/TerrainPhysicsColliderComponent.h
@@ -48,7 +48,7 @@ namespace Terrain
         AZ_CLASS_ALLOCATOR(TerrainPhysicsColliderConfig, AZ::SystemAllocator, 0);
         AZ_RTTI(TerrainPhysicsColliderConfig, "{E9EADB8F-C3A5-4B9C-A62D-2DBC86B4CE59}", AZ::ComponentConfig);
         static void Reflect(AZ::ReflectContext* context);
-
+        Physics::MaterialSelection m_defaultMaterialSelection;
         AZStd::vector<TerrainPhysicsSurfaceMaterialMapping> m_surfaceMaterialMappings;
     };
 
diff --git a/Gems/Terrain/Code/Tests/TerrainPhysicsColliderTests.cpp b/Gems/Terrain/Code/Tests/TerrainPhysicsColliderTests.cpp
index dc43544f05..6dc225f537 100644
--- a/Gems/Terrain/Code/Tests/TerrainPhysicsColliderTests.cpp
+++ b/Gems/Terrain/Code/Tests/TerrainPhysicsColliderTests.cpp
@@ -502,3 +502,95 @@ TEST_F(TerrainPhysicsColliderComponentTest, TerrainPhysicsColliderGetHeightsAndM
 
     m_entity.reset();
 }
+
+TEST_F(TerrainPhysicsColliderComponentTest, TerrainPhysicsColliderDefaultMaterialAssignedWhenTagHasNoMapping)
+{
+    CreateEntity();
+
+    m_boxComponent = m_entity->CreateComponent<UnitTest::MockAxisAlignedBoxShapeComponent>();
+    m_app.RegisterComponentDescriptor(m_boxComponent->CreateDescriptor());
+
+    // Create two SurfaceTag/Material mappings and add them to the collider.
+    Terrain::TerrainPhysicsColliderConfig config;
+
+    const Physics::MaterialId defaultSurfaceMaterial = Physics::MaterialId::Create();
+    const Physics::MaterialId mat1 = Physics::MaterialId::Create();
+
+    const SurfaceData::SurfaceTag tag1 = SurfaceData::SurfaceTag("tag1");
+    const SurfaceData::SurfaceTag tag2 = SurfaceData::SurfaceTag("tag2");
+
+    Terrain::TerrainPhysicsSurfaceMaterialMapping mapping1;
+    mapping1.m_materialId = mat1;
+    mapping1.m_surfaceTag = tag1;
+    config.m_surfaceMaterialMappings.emplace_back(mapping1);
+    config.m_defaultMaterialSelection.SetMaterialId(defaultSurfaceMaterial);
+
+    // Intentionally don't set the mapping for "tag2". It's expected the default material will substitute.
+
+    m_colliderComponent = m_entity->CreateComponent<Terrain::TerrainPhysicsColliderComponent>(config);
+    m_app.RegisterComponentDescriptor(m_colliderComponent->CreateDescriptor());
+
+    m_entity->Activate();
+
+    // Validate material list is generated with the default material
+    {
+        AZStd::vector<Physics::MaterialId> materialList;
+        Physics::HeightfieldProviderRequestsBus::EventResult(
+            materialList, m_entity->GetId(), &Physics::HeightfieldProviderRequestsBus::Events::GetMaterialList);
+
+        // The materialList should be 2 items long: the default material and mat1.
+        EXPECT_EQ(materialList.size(), 2);
+        EXPECT_EQ(materialList[0], defaultSurfaceMaterial);
+        EXPECT_EQ(materialList[1], mat1);
+    }
+
+    const AZ::Vector3 boundsMin = AZ::Vector3(0.0f);
+    const AZ::Vector3 boundsMax = AZ::Vector3(256.0f, 256.0f, 32768.0f);
+
+    NiceMock<UnitTest::MockShapeComponentRequests> boxShape(m_entity->GetId());
+    const AZ::Aabb bounds = AZ::Aabb::CreateFromMinMax(boundsMin, boundsMax);
+    ON_CALL(boxShape, GetEncompassingAabb).WillByDefault(Return(bounds));
+
+    const float mockHeight = 32768.0f;
+    AZ::Vector2 mockHeightResolution = AZ::Vector2(1.0f);
+
+    AzFramework::SurfaceData::SurfaceTagWeight return1;
+    return1.m_surfaceType = tag1;
+    return1.m_weight = 1.0f;
+
+    AzFramework::SurfaceData::SurfaceTagWeight return2;
+    return2.m_surfaceType = tag2;
+    return2.m_weight = 1.0f;
+
+    AzFramework::SurfaceData::SurfaceTagWeightList surfaceTags = { return1, return2 };
+
+    NiceMock<UnitTest::MockTerrainDataRequests> terrainListener;
+    ON_CALL(terrainListener, GetTerrainHeightQueryResolution).WillByDefault(Return(mockHeightResolution));
+    ON_CALL(terrainListener, ProcessSurfacePointsFromRegion).WillByDefault(
+        [this, mockHeight, &surfaceTags](const AZ::Aabb& inRegion, const AZ::Vector2& stepSize,
+            AzFramework::Terrain::SurfacePointRegionFillCallback perPositionCallback,
+            [[maybe_unused]] AzFramework::Terrain::TerrainDataRequests::Sampler sampleFilter)
+    {
+        ProcessRegionLoop(inRegion, stepSize, perPositionCallback, &surfaceTags, mockHeight);
+    }
+    );
+
+    // Validate material indices 
+    {
+        AZStd::vector<Physics::HeightMaterialPoint> heightsAndMaterials;
+        Physics::HeightfieldProviderRequestsBus::EventResult(
+            heightsAndMaterials, m_entity->GetId(), &Physics::HeightfieldProviderRequestsBus::Events::GetHeightsAndMaterials);
+
+        // We set the bounds to 256, so check that the correct number of entries are present.
+        EXPECT_EQ(heightsAndMaterials.size(), 256 * 256);
+
+        // Check an entry from the first half of the returned list.
+        EXPECT_EQ(heightsAndMaterials[0].m_materialIndex, 1);
+
+        // Check an entry from the second half of the list.
+        // This should point to the default material (0) since we don't have a mapping for "tag2"
+        EXPECT_EQ(heightsAndMaterials[256 * 128].m_materialIndex, 0);
+    }
+
+    m_entity.reset();
+}