diff --git a/cmake/3rdParty.cmake b/cmake/3rdParty.cmake
index f70ed1aa02..4b7f929279 100644
--- a/cmake/3rdParty.cmake
+++ b/cmake/3rdParty.cmake
@@ -6,6 +6,17 @@
 #
 #
 
+define_property(TARGET PROPERTY LY_SYSTEM_LIBRARY
+    BRIEF_DOCS "Defines a 3rdParty library as a system library"
+    FULL_DOCS [[
+        Property which is set on third party targets that should be considered
+        as provided by the system. Such targets are excluded from the runtime
+        dependencies considerations, and are not distributed as part of the
+        O3DE SDK package. Instead, users of the SDK are expected to install
+        such a third party library themselves.
+    ]]
+)
+
 # Do not overcomplicate searching for the 3rdParty path, if it is not easy to find,
 # the user should define it.
 
@@ -79,9 +90,10 @@ endfunction()
 #                             "fileA\nMy/Output/Subfolder/lib"
 #                             "fileB\nMy/Output/Subfolder/bin"
 #
+# \arg:SYSTEM           If specified, the library is considered a system library, and is not copied to the build output directory
 function(ly_add_external_target)
 
-    set(options)
+    set(options SYSTEM)
     set(oneValueArgs NAME VERSION 3RDPARTY_DIRECTORY PACKAGE 3RDPARTY_ROOT_DIRECTORY OUTPUT_SUBDIRECTORY)
     set(multiValueArgs HEADER_CHECK COMPILE_DEFINITIONS INCLUDE_DIRECTORIES BUILD_DEPENDENCIES RUNTIME_DEPENDENCIES)
 
@@ -300,6 +312,10 @@ function(ly_add_external_target)
             )
         endif()
 
+        if(ly_add_external_target_SYSTEM)
+            set_target_properties(3rdParty::${NAME_WITH_NAMESPACE} PROPERTIES LY_SYSTEM_LIBRARY TRUE)
+        endif()
+
     endif()
 
 endfunction()
@@ -327,4 +343,4 @@ if(NOT INSTALLED_ENGINE)
     ly_include_cmake_file_list(cmake/3rdParty/cmake_files.cmake)
     ly_get_absolute_pal_filename(pal_3rdparty_dir ${CMAKE_CURRENT_SOURCE_DIR}/cmake/3rdParty/Platform/${PAL_PLATFORM_NAME})
     ly_include_cmake_file_list(${pal_3rdparty_dir}/cmake_${PAL_PLATFORM_NAME_LOWERCASE}_files.cmake)
-endif()
\ No newline at end of file
+endif()
diff --git a/cmake/Platform/Common/RuntimeDependencies_common.cmake b/cmake/Platform/Common/RuntimeDependencies_common.cmake
index 95d91da7f7..60e55453f8 100644
--- a/cmake/Platform/Common/RuntimeDependencies_common.cmake
+++ b/cmake/Platform/Common/RuntimeDependencies_common.cmake
@@ -70,12 +70,23 @@ function(ly_get_runtime_dependencies ly_RUNTIME_DEPENDENCIES ly_TARGET)
 
     # link dependencies are not runtime dependencies (we dont have anything to copy) however, we need to traverse
     # them since them or some dependency downstream could have something to copy over
-    foreach(link_dependency ${link_dependencies})
-        if(NOT ${link_dependency} MATCHES "^::@") # Skip wraping produced when targets are not created in the same directory (https://cmake.org/cmake/help/latest/prop_tgt/LINK_LIBRARIES.html)
-            unset(dependencies)
-            ly_get_runtime_dependencies(dependencies ${link_dependency})
-            list(APPEND all_runtime_dependencies ${dependencies})
+    foreach(link_dependency IN LISTS link_dependencies)
+        if(${link_dependency} MATCHES "^::@")
+            # Skip wraping produced when targets are not created in the same directory
+            # (https://cmake.org/cmake/help/latest/prop_tgt/LINK_LIBRARIES.html)
+            continue()
+        endif()
+
+        if(TARGET ${link_dependency} AND link_dependency MATCHES "^3rdParty::")
+            get_target_property(is_system_library ${link_dependency} LY_SYSTEM_LIBRARY)
+            if(is_system_library)
+                continue()
+            endif()
         endif()
+
+        unset(dependencies)
+        ly_get_runtime_dependencies(dependencies ${link_dependency})
+        list(APPEND all_runtime_dependencies ${dependencies})
     endforeach()
 
     # For manual dependencies, we want to copy over the dependency and traverse them