diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabCatchmentProcessor.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabCatchmentProcessor.cpp
index a89b364471..fa8eb3fd65 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabCatchmentProcessor.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabCatchmentProcessor.cpp
@@ -84,8 +84,6 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
             }
             SpawnableUtils::SortEntitiesByTransformHierarchy(*spawnable);
             context.GetProcessedObjects().push_back(AZStd::move(object));
-
-            context.RemovePrefab(prefabName);
         }
         else
         {
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.cpp
index eb206349d0..38f58503ed 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.cpp
@@ -10,6 +10,8 @@
 *
 */
 
+#include <AzFramework/Spawnable/Spawnable.h>
+
 #include <AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.h>
 
 namespace AzToolsFramework::Prefab::PrefabConversionUtils
@@ -24,37 +26,14 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
         return result.second;
     }
 
-    bool PrefabProcessorContext::RemovePrefab(AZStd::string_view prefabName)
-    {
-        if (!m_isIterating)
-        {
-            return m_prefabs.erase(prefabName) > 0;
-        }
-        else
-        {
-            m_delayedDelete.emplace_back(prefabName);
-        }
-        return false;
-    }
-
     void PrefabProcessorContext::ListPrefabs(const AZStd::function<void(AZStd::string_view, PrefabDom&)>& callback)
     {
         m_isIterating = true;
         for (auto& it : m_prefabs)
         {
-            if (AZStd::find(m_delayedDelete.begin(), m_delayedDelete.end(), it.first) == m_delayedDelete.end())
-            {
-                callback(it.first, it.second);
-            }
+            callback(it.first, it.second);
         }
         m_isIterating = false;
-
-        // Clear out any prefabs that have been deleted.
-        for (AZStd::string& deleted : m_delayedDelete)
-        {
-            m_prefabs.erase(deleted);
-        }
-        m_delayedDelete.clear();
     }
 
     void PrefabProcessorContext::ListPrefabs(const AZStd::function<void(AZStd::string_view, const PrefabDom&)>& callback) const
@@ -70,6 +49,44 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
         return !m_prefabs.empty();
     }
 
+    bool PrefabProcessorContext::RegisterSpawnableProductAssetDependency(AZStd::string prefabName, AZStd::string dependentPrefabName)
+    {
+        using ConversionUtils = PrefabConversionUtils::ProcessedObjectStore;
+
+        prefabName += AzFramework::Spawnable::DotFileExtension;
+        uint32_t spawnableSubId = ConversionUtils::BuildSubId(AZStd::move(prefabName));
+
+        dependentPrefabName += AzFramework::Spawnable::DotFileExtension;
+        uint32_t spawnablePrefabSubId = ConversionUtils::BuildSubId(AZStd::move(dependentPrefabName));
+
+        return RegisterSpawnableProductAssetDependency(spawnableSubId, spawnablePrefabSubId);
+    }
+
+    bool PrefabProcessorContext::RegisterSpawnableProductAssetDependency(AZStd::string prefabName, const AZ::Data::AssetId& dependentAssetId)
+    {
+        using ConversionUtils = PrefabConversionUtils::ProcessedObjectStore;
+
+        prefabName += AzFramework::Spawnable::DotFileExtension;
+        uint32_t spawnableSubId = ConversionUtils::BuildSubId(AZStd::move(prefabName));
+
+        AZ::Data::AssetId spawnableAssetId(GetSourceUuid(), spawnableSubId);
+
+        return RegisterProductAssetDependency(spawnableAssetId, dependentAssetId);
+    }
+
+    bool PrefabProcessorContext::RegisterSpawnableProductAssetDependency(uint32_t spawnableAssetSubId, uint32_t dependentSpawnableAssetSubId)
+    {
+        AZ::Data::AssetId spawnableAssetId(GetSourceUuid(), spawnableAssetSubId);
+        AZ::Data::AssetId dependentSpawnableAssetId(GetSourceUuid(), dependentSpawnableAssetSubId);
+
+        return RegisterProductAssetDependency(spawnableAssetId, dependentSpawnableAssetId);
+    }
+
+    bool PrefabProcessorContext::RegisterProductAssetDependency(const AZ::Data::AssetId& assetId, const AZ::Data::AssetId& dependentAssetId)
+    {
+        return m_registeredProductAssetDependencies[assetId].emplace(dependentAssetId).second;
+    }
+
     PrefabProcessorContext::ProcessedObjectStoreContainer& PrefabProcessorContext::GetProcessedObjects()
     {
         return m_products;
@@ -80,6 +97,16 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
         return m_products;
     }
 
+    PrefabProcessorContext::ProductAssetDependencyContainer& PrefabProcessorContext::GetRegisteredProductAssetDependencies()
+    {
+        return m_registeredProductAssetDependencies;
+    }
+
+    const PrefabProcessorContext::ProductAssetDependencyContainer& PrefabProcessorContext::GetRegisteredProductAssetDependencies() const
+    {
+        return m_registeredProductAssetDependencies;
+    }
+
     void PrefabProcessorContext::SetPlatformTags(AZ::PlatformTagSet tags)
     {
         m_platformTags = AZStd::move(tags);
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.h
index 66368f335b..3dc8c99bf3 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Spawnable/PrefabProcessorContext.h
@@ -29,6 +29,8 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
     {
     public:
         using ProcessedObjectStoreContainer = AZStd::vector<ProcessedObjectStore>;
+        using ProductAssetDependencyContainer =
+            AZStd::unordered_map<AZ::Data::AssetId, AZStd::unordered_set<AZ::Data::AssetId>>;
 
         AZ_CLASS_ALLOCATOR(PrefabProcessorContext, AZ::SystemAllocator, 0);
         AZ_RTTI(PrefabProcessorContext, "{C7D77E3A-C544-486B-B774-7C82C38FE22F}");
@@ -37,14 +39,21 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
         virtual ~PrefabProcessorContext() = default;
 
         virtual bool AddPrefab(AZStd::string prefabName, PrefabDom prefab);
-        virtual bool RemovePrefab(AZStd::string_view prefabName);
         virtual void ListPrefabs(const AZStd::function<void(AZStd::string_view, PrefabDom&)>& callback);
         virtual void ListPrefabs(const AZStd::function<void(AZStd::string_view, const PrefabDom&)>& callback) const;
         virtual bool HasPrefabs() const;
 
+        virtual bool RegisterSpawnableProductAssetDependency(AZStd::string prefabName, AZStd::string dependentPrefabName);
+        virtual bool RegisterSpawnableProductAssetDependency(AZStd::string prefabName, const AZ::Data::AssetId& dependentAssetId);
+        virtual bool RegisterSpawnableProductAssetDependency(uint32_t spawnableAssetSubId, uint32_t dependentSpawnableAssetSubId);
+        virtual bool RegisterProductAssetDependency(const AZ::Data::AssetId& assetId, const AZ::Data::AssetId& dependentAssetId);
+
         virtual ProcessedObjectStoreContainer& GetProcessedObjects();
         virtual const ProcessedObjectStoreContainer& GetProcessedObjects() const;
 
+        virtual ProductAssetDependencyContainer& GetRegisteredProductAssetDependencies();
+        virtual const ProductAssetDependencyContainer& GetRegisteredProductAssetDependencies() const;
+
         virtual void SetPlatformTags(AZ::PlatformTagSet tags);
         virtual const AZ::PlatformTagSet& GetPlatformTags() const;
         virtual const AZ::Uuid& GetSourceUuid() const;
@@ -57,7 +66,8 @@ namespace AzToolsFramework::Prefab::PrefabConversionUtils
 
         NamedPrefabContainer m_prefabs;
         ProcessedObjectStoreContainer m_products;
-        AZStd::vector<AZStd::string> m_delayedDelete;
+        ProductAssetDependencyContainer m_registeredProductAssetDependencies;
+
         AZ::PlatformTagSet m_platformTags;
         AZ::Uuid m_sourceUuid;
         bool m_isIterating{ false };
diff --git a/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.cpp b/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.cpp
index 84a4cd5cc6..a95ec60d61 100644
--- a/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.cpp
+++ b/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.cpp
@@ -176,6 +176,7 @@ namespace AZ::Prefab
     bool PrefabBuilderComponent::StoreProducts(
         AZ::IO::PathView tempDirPath,
         const AzToolsFramework::Prefab::PrefabConversionUtils::PrefabProcessorContext::ProcessedObjectStoreContainer& store,
+        const AzToolsFramework::Prefab::PrefabConversionUtils::PrefabProcessorContext::ProductAssetDependencyContainer& registeredDependencies,
         AZStd::vector<AssetBuilderSDK::JobProduct>& outputProducts) const
     {
         outputProducts.reserve(store.size());
@@ -214,6 +215,18 @@ namespace AZ::Prefab
             if (AssetBuilderSDK::OutputObject(&object.GetAsset(), object.GetAssetType(), productPath.String(), object.GetAssetType(),
                 object.GetAsset().GetId().m_subId, product))
             {
+                auto findRegisteredDependencies = registeredDependencies.find(object.GetAsset().GetId());
+                if (findRegisteredDependencies != registeredDependencies.end())
+                {
+                    AZStd::transform(findRegisteredDependencies->second.begin(), findRegisteredDependencies->second.end(),
+                        AZStd::back_inserter(product.m_dependencies),
+                        [](const AZ::Data::AssetId& productId) -> AssetBuilderSDK::ProductDependency
+                        {
+                            return AssetBuilderSDK::ProductDependency(productId,
+                                AZ::Data::ProductDependencyInfo::CreateFlags(AZ::Data::AssetLoadBehavior::NoLoad));
+                        });
+                }
+
                 outputProducts.push_back(AZStd::move(product));
             }
 
@@ -248,20 +261,15 @@ namespace AZ::Prefab
         if (context.HasCompletedSuccessfully())
         {
             AZ_TracePrintf("Prefab Builder", "Finalizing products.\n");
-            if (!context.HasPrefabs())
+
+            if (StoreProducts(tempDirPath, context.GetProcessedObjects(),
+                context.GetRegisteredProductAssetDependencies(), jobProducts))
             {
-                if (StoreProducts(tempDirPath, context.GetProcessedObjects(), jobProducts))
-                {
-                    return true;
-                }
-                else
-                {
-                    AZ_Error("Prefab Builder", false, "One or more objects couldn't be committed to disk.");
-                }
+                return true;
             }
             else
             {
-                AZ_Error("Prefab Builder", false, "After processing there were still Prefabs left.");
+                AZ_Error("Prefab Builder", false, "One or more objects couldn't be committed to disk.");
             }
         }
         else
diff --git a/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.h b/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.h
index 7fbd0b4be0..f78e2cb889 100644
--- a/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.h
+++ b/Gems/Prefab/PrefabBuilder/PrefabBuilderComponent.h
@@ -69,6 +69,7 @@ namespace AZ::Prefab
         bool StoreProducts(
             AZ::IO::PathView tempDirPath,
             const AzToolsFramework::Prefab::PrefabConversionUtils::PrefabProcessorContext::ProcessedObjectStoreContainer& store,
+            const AzToolsFramework::Prefab::PrefabConversionUtils::PrefabProcessorContext::ProductAssetDependencyContainer& registeredDependencies,
             AZStd::vector<AssetBuilderSDK::JobProduct>& outputProducts) const;
         
         void ProcessJob(const AssetBuilderSDK::ProcessJobRequest& request, AssetBuilderSDK::ProcessJobResponse& response);