diff --git a/Gems/Atom/RPI/Code/Include/Atom/RPI.Edit/Material/MaterialTypeSourceData.h b/Gems/Atom/RPI/Code/Include/Atom/RPI.Edit/Material/MaterialTypeSourceData.h
index 900a57746a..507652b9fa 100644
--- a/Gems/Atom/RPI/Code/Include/Atom/RPI.Edit/Material/MaterialTypeSourceData.h
+++ b/Gems/Atom/RPI/Code/Include/Atom/RPI.Edit/Material/MaterialTypeSourceData.h
@@ -131,15 +131,17 @@ namespace AZ
                 PropertyGroup() = default;
                 AZ_DISABLE_COPY(PropertyGroup)
 
-                const AZStd::string& GetName() const { return m_name; }
-                const AZStd::string& GetDisplayName() const { return m_displayName; }
-                const AZStd::string& GetDescription() const { return m_description; }
-                const PropertyList& GetProperties() const { return m_properties; }
-                const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& GetPropertyGroups() const { return m_propertyGroups; }
-                const AZStd::vector<Ptr<MaterialFunctorSourceDataHolder>>& GetFunctors() const { return m_materialFunctorSourceData; }
+                const AZStd::string& GetName() const;
+                const AZStd::string& GetDisplayName() const;
+                const AZStd::string& GetDescription() const;
+                const PropertyList& GetProperties() const;
+                const AZStd::string& GetShaderInputsPrefix() const;
+                const AZStd::string& GetShaderOptionsPrefix() const;
+                const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& GetPropertyGroups() const;
+                const AZStd::vector<Ptr<MaterialFunctorSourceDataHolder>>& GetFunctors() const;
                 
-                void SetDisplayName(AZStd::string_view displayName) { m_displayName = displayName; }
-                void SetDescription(AZStd::string_view description) { m_description = description; }
+                void SetDisplayName(AZStd::string_view displayName);
+                void SetDescription(AZStd::string_view description);
 
                 //! Add a new property to this PropertyGroup.
                 //! @param name a unique for the property. Must be a C-style identifier.
@@ -281,13 +283,13 @@ namespace AZ
             //! Splits an ID string like "itemA.itemB.itemC" into a vector like ["itemA.itemB", "itemC"].
             static AZStd::vector<AZStd::string_view> SplitId(AZStd::string_view id);
 
+            //! Describes a path in the hierarchy of property groups, with the top level group at the beginning and a leaf-most group at the end.
+            using PropertyGroupStack = AZStd::vector<const PropertyGroup*>;
+
             //! Call back function type used with the enumeration functions.
+            //! The PropertyGroupStack contains the stack of property groups at the current point in the traversal.
             //! Return false to terminate the traversal.
-            using EnumeratePropertyGroupsCallback = AZStd::function<bool(
-                const PropertyGroup*, // the next property group in the tree
-                const MaterialNameContext&, // The name context defined by the PropertyGroup, used to scope the contents of the property group
-                const MaterialNameContext&  // The name context that the PropertyGroup is in, used to scope the property group name
-                )>;
+            using EnumeratePropertyGroupsCallback = AZStd::function<bool(const PropertyGroupStack&)>;
 
             //! Recursively traverses all of the property groups contained in the material type, executing a callback function for each.
             //! @return false if the enumeration was terminated early by the callback returning false.
@@ -304,6 +306,9 @@ namespace AZ
             //! @return false if the enumeration was terminated early by the callback returning false.
             bool EnumerateProperties(const EnumeratePropertiesCallback& callback) const;
 
+            //! Returns a MaterialNameContext for a specific path through the property group hierarchy.
+            static MaterialNameContext MakeMaterialNameContext(const MaterialTypeSourceData::PropertyGroupStack& propertyGroupStack);
+
             Outcome<Data::Asset<MaterialTypeAsset>> CreateMaterialTypeAsset(Data::AssetId assetId, AZStd::string_view materialTypeSourceFilePath = "", bool elevateWarnings = true) const;
 
             //! If the data was loaded from an old format file (i.e. where "groups" and "properties" were separate sections),
@@ -319,10 +324,10 @@ namespace AZ
             PropertyDefinition* FindProperty(AZStd::span<AZStd::string_view> parsedPropertyId, AZStd::span<AZStd::unique_ptr<PropertyGroup>> inPropertyGroupList);
             
             // Function overloads for recursion, returns false to indicate that recursion should end.
-            bool EnumeratePropertyGroups(const EnumeratePropertyGroupsCallback& callback, MaterialNameContext nameContext, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const;
+            bool EnumeratePropertyGroups(const EnumeratePropertyGroupsCallback& callback, PropertyGroupStack* propertyGroupStack, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const;
             bool EnumerateProperties(const EnumeratePropertiesCallback& callback, MaterialNameContext nameContext, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const;
             
-            static MaterialNameContext ExtendNameContext(MaterialNameContext nameContext, const MaterialTypeSourceData::PropertyGroup& propertyGroup);
+            static void ExtendNameContext(MaterialNameContext& nameContext, const MaterialTypeSourceData::PropertyGroup& propertyGroup);
 
             //! Recursively populates a material type asset with properties from the tree of material property groups.
             //! @param materialTypeSourceFilePath path to the material type file that is being processed, used to look up relative paths
@@ -342,7 +347,7 @@ namespace AZ
             
             PropertyLayout m_propertyLayout;
         };
-
+        
         //! The wrapper class for derived material functors.
         //! It is used in deserialization so that derived material functors can be deserialized by name.
         class MaterialFunctorSourceDataHolder final
diff --git a/Gems/Atom/RPI/Code/Include/Atom/RPI.Reflect/Material/MaterialNameContext.h b/Gems/Atom/RPI/Code/Include/Atom/RPI.Reflect/Material/MaterialNameContext.h
index 124d73ad7a..ac6adffe2b 100644
--- a/Gems/Atom/RPI/Code/Include/Atom/RPI.Reflect/Material/MaterialNameContext.h
+++ b/Gems/Atom/RPI/Code/Include/Atom/RPI.Reflect/Material/MaterialNameContext.h
@@ -45,9 +45,9 @@ namespace AZ
             bool ContextualizeShaderOption(AZStd::string& shaderOptionName) const;
             
             //! Returns true if there is some non-default name context.
-            bool HasContextForProperties() const { return !m_propertyIdContext.empty(); }
-            bool HasContextForSrgInputs() const { return !m_srgInputNameContext.empty(); }
-            bool HasContextForShaderOptions() const { return !m_shaderOptionNameContext.empty(); }
+            bool HasContextForProperties() const;
+            bool HasContextForSrgInputs() const;
+            bool HasContextForShaderOptions() const;
 
             //! Returns true if the name context is empty.
             bool IsDefault() const;
diff --git a/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialSourceData.cpp b/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialSourceData.cpp
index 7f2c13515a..91a7092362 100644
--- a/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialSourceData.cpp
+++ b/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialSourceData.cpp
@@ -262,7 +262,7 @@ namespace AZ
                 return Failure();
             }
 
-            auto materialTypeLoadOutcome = MaterialUtils::LoadMaterialTypeSourceData(materialTypeSourcePath);
+            auto materialTypeLoadOutcome = MaterialUtils::LoadMaterialTypeSourceData(materialTypeSourcePath, nullptr, sourceDependencies);
             if (!materialTypeLoadOutcome)
             {
                 AZ_Error("MaterialSourceData", false, "Failed to load MaterialTypeSourceData: '%s'.", materialTypeSourcePath.c_str());
diff --git a/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialTypeSourceData.cpp b/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialTypeSourceData.cpp
index 6bcaa5d519..9153120732 100644
--- a/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialTypeSourceData.cpp
+++ b/Gems/Atom/RPI/Code/Source/RPI.Edit/Material/MaterialTypeSourceData.cpp
@@ -157,6 +157,56 @@ namespace AZ
             toPropertyGroupList.back()->m_name = name;
             return toPropertyGroupList.back().get();
         }
+        
+        const AZStd::string& MaterialTypeSourceData::PropertyGroup::GetName() const
+        {
+            return m_name;
+        }
+
+        const AZStd::string& MaterialTypeSourceData::PropertyGroup::GetDisplayName() const
+        {
+            return m_displayName;
+        }
+
+        const AZStd::string& MaterialTypeSourceData::PropertyGroup::GetDescription() const
+        {
+            return m_description;
+        }
+
+        const MaterialTypeSourceData::PropertyList& MaterialTypeSourceData::PropertyGroup::GetProperties() const
+        {
+            return m_properties;
+        }
+
+        const AZStd::string& MaterialTypeSourceData::PropertyGroup::GetShaderInputsPrefix() const
+        {
+            return m_shaderInputsPrefix;
+        }
+
+        const AZStd::string& MaterialTypeSourceData::PropertyGroup::GetShaderOptionsPrefix() const
+        {
+            return m_shaderOptionsPrefix;
+        }
+
+        const AZStd::vector<AZStd::unique_ptr<MaterialTypeSourceData::PropertyGroup>>& MaterialTypeSourceData::PropertyGroup::GetPropertyGroups() const
+        {
+            return m_propertyGroups;
+        }
+
+        const AZStd::vector<Ptr<MaterialFunctorSourceDataHolder>>& MaterialTypeSourceData::PropertyGroup::GetFunctors() const
+        {
+            return m_materialFunctorSourceData;
+        }
+
+        void MaterialTypeSourceData::PropertyGroup::SetDisplayName(AZStd::string_view displayName)
+        {
+            m_displayName = displayName;
+        }
+
+        void MaterialTypeSourceData::PropertyGroup::SetDescription(AZStd::string_view description)
+        {
+            m_description = description;
+        }
 
         MaterialTypeSourceData::PropertyDefinition* MaterialTypeSourceData::PropertyGroup::AddProperty(AZStd::string_view name)
         {
@@ -377,21 +427,23 @@ namespace AZ
             return parts;
         }
 
-        bool MaterialTypeSourceData::EnumeratePropertyGroups(const EnumeratePropertyGroupsCallback& callback, MaterialNameContext nameContext, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const
+        bool MaterialTypeSourceData::EnumeratePropertyGroups(const EnumeratePropertyGroupsCallback& callback, PropertyGroupStack* propertyGroupStack, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const
         {
             for (auto& propertyGroup : inPropertyGroupList)
             {
-                MaterialNameContext groupNameContext = ExtendNameContext(nameContext, *propertyGroup);
+                propertyGroupStack->push_back(propertyGroup.get());
 
-                if (!callback(propertyGroup.get(), groupNameContext, nameContext))
+                if (!callback(*propertyGroupStack))
                 {
                     return false;  // Stop processing
                 }
                 
-                if (!EnumeratePropertyGroups(callback, groupNameContext, propertyGroup->m_propertyGroups))
+                if (!EnumeratePropertyGroups(callback, propertyGroupStack, propertyGroup->m_propertyGroups))
                 {
                     return false; // Stop processing
                 }
+
+                propertyGroupStack->pop_back();
             }
 
             return true;
@@ -404,14 +456,16 @@ namespace AZ
                 return false;
             }
 
-            return EnumeratePropertyGroups(callback, {}, m_propertyLayout.m_propertyGroups);
+            PropertyGroupStack propertyGroupStack;
+            return EnumeratePropertyGroups(callback, &propertyGroupStack, m_propertyLayout.m_propertyGroups);
         }
 
         bool MaterialTypeSourceData::EnumerateProperties(const EnumeratePropertiesCallback& callback, MaterialNameContext nameContext, const AZStd::vector<AZStd::unique_ptr<PropertyGroup>>& inPropertyGroupList) const
         {
             for (auto& propertyGroup : inPropertyGroupList)
             {
-                MaterialNameContext groupNameContext = ExtendNameContext(nameContext, *propertyGroup);
+                MaterialNameContext groupNameContext = nameContext;
+                ExtendNameContext(groupNameContext, *propertyGroup);
 
                 for (auto& property : propertyGroup->m_properties)
                 {
@@ -529,13 +583,21 @@ namespace AZ
             return groupDefinitions;
         }
 
-        MaterialNameContext MaterialTypeSourceData::ExtendNameContext(MaterialNameContext nameContext, const MaterialTypeSourceData::PropertyGroup& propertyGroup)
+        void MaterialTypeSourceData::ExtendNameContext(MaterialNameContext& nameContext, const MaterialTypeSourceData::PropertyGroup& propertyGroup)
         {
-            MaterialNameContext materialNameContext2 = nameContext;
-            materialNameContext2.ExtendPropertyIdContext(propertyGroup.m_name);
-            materialNameContext2.ExtendShaderOptionContext(propertyGroup.m_shaderOptionsPrefix);
-            materialNameContext2.ExtendSrgInputContext(propertyGroup.m_shaderInputsPrefix);
-            return materialNameContext2;
+            nameContext.ExtendPropertyIdContext(propertyGroup.m_name);
+            nameContext.ExtendShaderOptionContext(propertyGroup.m_shaderOptionsPrefix);
+            nameContext.ExtendSrgInputContext(propertyGroup.m_shaderInputsPrefix);
+        }
+        
+        /*static*/ MaterialNameContext MaterialTypeSourceData::MakeMaterialNameContext(const MaterialTypeSourceData::PropertyGroupStack& propertyGroupStack)
+        {
+            MaterialNameContext nameContext;
+            for (auto& group : propertyGroupStack)
+            {
+                ExtendNameContext(nameContext, *group);
+            }
+            return nameContext;
         }
 
         bool MaterialTypeSourceData::BuildPropertyList(
@@ -549,7 +611,7 @@ namespace AZ
                 return false;
             }
 
-            materialNameContext = ExtendNameContext(materialNameContext, *propertyGroup);
+            ExtendNameContext(materialNameContext, *propertyGroup);
 
             for (const AZStd::unique_ptr<PropertyDefinition>& property : propertyGroup->m_properties)
             {
@@ -886,6 +948,6 @@ namespace AZ
                 return Failure();
             }
         }
-
+        
     } // namespace RPI
 } // namespace AZ
diff --git a/Gems/Atom/RPI/Code/Source/RPI.Reflect/Material/MaterialNameContext.cpp b/Gems/Atom/RPI/Code/Source/RPI.Reflect/Material/MaterialNameContext.cpp
index 5846c60e05..9ef97c8785 100644
--- a/Gems/Atom/RPI/Code/Source/RPI.Reflect/Material/MaterialNameContext.cpp
+++ b/Gems/Atom/RPI/Code/Source/RPI.Reflect/Material/MaterialNameContext.cpp
@@ -117,6 +117,20 @@ namespace AZ
             shaderOptionName = m_shaderOptionNameContext + shaderOptionName;
             return true;
         }
+        
+        bool MaterialNameContext::HasContextForProperties() const
+        {
+            return !m_propertyIdContext.empty();
+        }
+
+        bool MaterialNameContext::HasContextForSrgInputs() const
+        {
+            return !m_srgInputNameContext.empty();
+        }
 
+        bool MaterialNameContext::HasContextForShaderOptions() const
+        {
+            return !m_shaderOptionNameContext.empty();
+        }
     } // namespace RPI
 } // namespace AZ
diff --git a/Gems/Atom/Tools/MaterialEditor/Code/Source/Document/MaterialDocument.cpp b/Gems/Atom/Tools/MaterialEditor/Code/Source/Document/MaterialDocument.cpp
index 5605917e42..d122a7fff4 100644
--- a/Gems/Atom/Tools/MaterialEditor/Code/Source/Document/MaterialDocument.cpp
+++ b/Gems/Atom/Tools/MaterialEditor/Code/Source/Document/MaterialDocument.cpp
@@ -354,9 +354,7 @@ namespace MaterialEditor
                         return false;
                     }
                     
-                    // TODO: Support populating the Material Editor with nested property groups, not just the top level.
-                    AZStd::string_view groupName = propertyId.GetStringView().substr(0, propertyId.GetStringView().size() - propertyDefinition->GetName().size() - 1);
-                    sourceData.SetPropertyValue(AZ::RPI::MaterialPropertyId{groupName, propertyDefinition->GetName()}, propertyValue);
+                    sourceData.SetPropertyValue(propertyId, propertyValue);
                 }
             }
             return true;
@@ -553,27 +551,38 @@ namespace MaterialEditor
         // Assets must still be used for now because they contain the final accumulated value after all other materials
         // in the hierarchy are applied
         bool enumerateResult = m_materialTypeSourceData.EnumeratePropertyGroups(
-            [this, &parentPropertyValues](
-                const AZ::RPI::MaterialTypeSourceData::PropertyGroup* propertyGroup,
-                const AZ::RPI::MaterialNameContext& groupNameContext,
-                const AZ::RPI::MaterialNameContext& parentNameContext)
+            [this, &parentPropertyValues](const AZ::RPI::MaterialTypeSourceData::PropertyGroupStack& propertyGroupStack)
             {
-                // Add any material functors that are located inside each property group.
+                using namespace AZ::RPI;
+
+                const MaterialTypeSourceData::PropertyGroup* propertyGroup = propertyGroupStack.back();
+                
+                MaterialNameContext groupNameContext = MaterialTypeSourceData::MakeMaterialNameContext(propertyGroupStack);
+
                 if (!AddEditorMaterialFunctors(propertyGroup->GetFunctors(), groupNameContext))
                 {
                     return false;
                 }
-                
+
+                AZStd::vector<AZStd::string> groupNameVector;
+                AZStd::vector<AZStd::string> groupDisplayNameVector;
+
+                for (auto& group : propertyGroupStack)
+                {
+                    groupNameVector.push_back(group->GetName());
+                    groupDisplayNameVector.push_back(group->GetDisplayName());
+                }
+
                 m_groups.emplace_back(aznew AtomToolsFramework::DynamicPropertyGroup);
-                m_groups.back()->m_name = propertyGroup->GetName();
-                parentNameContext.ContextualizeProperty(m_groups.back()->m_name);
-                m_groups.back()->m_displayName = propertyGroup->GetDisplayName();
                 m_groups.back()->m_description = propertyGroup->GetDescription();
+                AzFramework::StringFunc::Join(m_groups.back()->m_name, groupNameVector.begin(), groupNameVector.end(), ".");
+                AzFramework::StringFunc::Join(m_groups.back()->m_displayName, groupDisplayNameVector.begin(), groupDisplayNameVector.end(), " | ");
 
                 for (const auto& propertyDefinition : propertyGroup->GetProperties())
                 {
-                    // Assign id before conversion so it can be used in dynamic description
                     AtomToolsFramework::DynamicPropertyConfig propertyConfig;
+
+                    // Assign id before conversion so it can be used in dynamic description
                     propertyConfig.m_id = propertyDefinition->GetName();
                     groupNameContext.ContextualizeProperty(propertyConfig.m_id);
 
@@ -587,9 +596,8 @@ namespace MaterialEditor
                     if (propertyIndexInBounds)
                     {
                         AtomToolsFramework::ConvertToPropertyConfig(propertyConfig, *propertyDefinition);
-
-                        // TODO: Support populating the Material Editor with nested property groups, not just the top level.
-                        // (Does DynamicPropertyConfig really even need m_groupDisplayName?)
+                        
+                        // (Does DynamicPropertyConfig really even need m_groupName? It doesn't seem to be used anywhere)
                         propertyConfig.m_groupName = m_groups.back()->m_name;
                         propertyConfig.m_groupDisplayName = m_groups.back()->m_displayName;
                         propertyConfig.m_showThumbnail = true;
diff --git a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.cpp b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.cpp
index 376aba2208..1c6410f8c3 100644
--- a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.cpp
+++ b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.cpp
@@ -102,29 +102,10 @@ namespace AZ
                     UnloadMaterial();
                     return false;
                 }
+                
+                // Add material functors that are in the top-level functors list. Other functors are also added per-property-group elsewhere.
+                AddEditorMaterialFunctors(m_editData.m_materialTypeSourceData.m_materialFunctorSourceData, AZ::RPI::MaterialNameContext{});
 
-                // Get a list of all the editor functors to be used for property editor states
-                auto propertyLayout = m_editData.m_materialAsset->GetMaterialPropertiesLayout();
-                AZ::RPI::MaterialNameContext materialNameContext; // There is no name context for top-level functors, only functors inside PropertyGroups
-                const AZ::RPI::MaterialFunctorSourceData::EditorContext editorContext =
-                    AZ::RPI::MaterialFunctorSourceData::EditorContext(m_editData.m_materialTypeSourcePath, propertyLayout, &materialNameContext);
-                for (AZ::RPI::Ptr<AZ::RPI::MaterialFunctorSourceDataHolder> functorData : m_editData.m_materialTypeSourceData.m_materialFunctorSourceData)
-                {
-                    AZ::RPI::MaterialFunctorSourceData::FunctorResult createResult = functorData->CreateFunctor(editorContext);
-
-                    if (createResult.IsSuccess())
-                    {
-                        AZ::RPI::Ptr<AZ::RPI::MaterialFunctor>& functor = createResult.GetValue();
-                        if (functor != nullptr)
-                        {
-                            m_editorFunctors.push_back(functor);
-                        }
-                    }
-                    else
-                    {
-                        AZ_Error("AZ::Render::EditorMaterialComponentInspector", false, "Material functors were not created: '%s'.", m_editData.m_materialTypeSourcePath.c_str());
-                    }
-                }
 
                 Populate();
                 LoadOverridesFromEntity();
@@ -295,47 +276,73 @@ namespace AZ
             void MaterialPropertyInspector::AddPropertiesGroup()
             {
                 // Copy all of the properties from the material asset to the source data that will be exported
-                // TODO: Support populating the Material Editor with nested property groups, not just the top level.
-                for (const AZStd::unique_ptr<AZ::RPI::MaterialTypeSourceData::PropertyGroup>& propertyGroup : m_editData.m_materialTypeSourceData.GetPropertyLayout().m_propertyGroups)
-                {
-                    const AZStd::string& groupName = propertyGroup->GetName();
-                    const AZStd::string& groupDisplayName = !propertyGroup->GetDisplayName().empty() ? propertyGroup->GetDisplayName() : groupName;
-                    const AZStd::string& groupDescription = !propertyGroup->GetDescription().empty() ? propertyGroup->GetDescription() : groupDisplayName;
-                    auto& group = m_groups[groupName];
-                    
-                    group.m_properties.reserve(propertyGroup->GetProperties().size());
-                    for (const auto& propertyDefinition : propertyGroup->GetProperties())
+                m_editData.m_materialTypeSourceData.EnumeratePropertyGroups(
+                    [this](const AZ::RPI::MaterialTypeSourceData::PropertyGroupStack& propertyGroupStack)
                     {
-                        AtomToolsFramework::DynamicPropertyConfig propertyConfig;
+                        using namespace AZ::RPI;
+
+                        const MaterialTypeSourceData::PropertyGroup* propertyGroupDefinition = propertyGroupStack.back();
+                
+                        MaterialNameContext groupNameContext = MaterialTypeSourceData::MakeMaterialNameContext(propertyGroupStack);
+                        
+                        AddEditorMaterialFunctors(propertyGroupDefinition->GetFunctors(), groupNameContext);
 
-                        // Assign id before conversion so it can be used in dynamic description
-                        propertyConfig.m_id = AZ::RPI::MaterialPropertyId(groupName, propertyDefinition->GetName());
+                        AZStd::vector<AZStd::string> groupNameVector;
+                        AZStd::vector<AZStd::string> groupDisplayNameVector;
 
-                        AtomToolsFramework::ConvertToPropertyConfig(propertyConfig, *propertyDefinition.get());
+                        for (auto& group : propertyGroupStack)
+                        {
+                            groupNameVector.push_back(group->GetName());
+                            groupDisplayNameVector.push_back(!group->GetDisplayName().empty() ? group->GetDisplayName() : group->GetName());
+                        }
+
+                        AZStd::string groupId;
+                        AzFramework::StringFunc::Join(groupId, groupNameVector.begin(), groupNameVector.end(), ".");
 
-                        const auto& propertyIndex = 
-                            m_editData.m_materialAsset->GetMaterialPropertiesLayout()->FindPropertyIndex(propertyConfig.m_id);
+                        auto& group = m_groups[groupId];
+                        group.m_name = groupId;
+                        AzFramework::StringFunc::Join(group.m_displayName, groupDisplayNameVector.begin(), groupDisplayNameVector.end(), " | ");
+                        group.m_description = !propertyGroupDefinition->GetDescription().empty() ? propertyGroupDefinition->GetDescription() : group.m_displayName;
                         
-                        propertyConfig.m_groupName = groupDisplayName;
-                        propertyConfig.m_showThumbnail = true;
-                        propertyConfig.m_defaultValue = AtomToolsFramework::ConvertToEditableType(
-                            m_editData.m_materialTypeAsset->GetDefaultPropertyValues()[propertyIndex.GetIndex()]);
+                        group.m_properties.reserve(propertyGroupDefinition->GetProperties().size());
+                        for (const auto& propertyDefinition : propertyGroupDefinition->GetProperties())
+                        {
+                            AtomToolsFramework::DynamicPropertyConfig propertyConfig;
+                            
+                            // Assign id before conversion so it can be used in dynamic description
+                            propertyConfig.m_id = propertyDefinition->GetName();
+                            groupNameContext.ContextualizeProperty(propertyConfig.m_id);
+                            
+                            AtomToolsFramework::ConvertToPropertyConfig(propertyConfig, *propertyDefinition);
+
+                            const auto& propertyIndex = 
+                                m_editData.m_materialAsset->GetMaterialPropertiesLayout()->FindPropertyIndex(propertyConfig.m_id);
+
+                            // (Does DynamicPropertyConfig really even need m_groupName? It doesn't seem to be used anywhere)
+                            propertyConfig.m_groupName = group.m_name;
+                            propertyConfig.m_groupDisplayName = group.m_displayName;
+                            propertyConfig.m_showThumbnail = true;
+                            
+                            propertyConfig.m_defaultValue = AtomToolsFramework::ConvertToEditableType(
+                                m_editData.m_materialTypeAsset->GetDefaultPropertyValues()[propertyIndex.GetIndex()]);
+                            
+                            // There is no explicit parent material here. Material instance property overrides replace the values from the
+                            // assigned material asset. Its values should be treated as parent, for comparison, in this case.
+                            propertyConfig.m_parentValue = AtomToolsFramework::ConvertToEditableType(
+                                m_editData.m_materialTypeAsset->GetDefaultPropertyValues()[propertyIndex.GetIndex()]);
+                            propertyConfig.m_originalValue = AtomToolsFramework::ConvertToEditableType(
+                                m_editData.m_materialAsset->GetPropertyValues()[propertyIndex.GetIndex()]);
+                            group.m_properties.emplace_back(propertyConfig);
+                        }
                         
-                        // There is no explicit parent material here. Material instance property overrides replace the values from the
-                        // assigned material asset. Its values should be treated as parent, for comparison, in this case.
-                        propertyConfig.m_parentValue = AtomToolsFramework::ConvertToEditableType(
-                            m_editData.m_materialTypeAsset->GetDefaultPropertyValues()[propertyIndex.GetIndex()]);
-                        propertyConfig.m_originalValue = AtomToolsFramework::ConvertToEditableType(
-                            m_editData.m_materialAsset->GetPropertyValues()[propertyIndex.GetIndex()]);
-                        group.m_properties.emplace_back(propertyConfig);
-                    }
+                        // 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(group.m_name), {},
+                            [this](const auto node) { return GetInstanceNodePropertyIndicator(node); }, 0);
+                        AddGroup(group.m_name, group.m_displayName, group.m_description, propertyGroupWidget);
 
-                    // 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(groupName), {},
-                        [this](const auto node) { return GetInstanceNodePropertyIndicator(node); }, 0);
-                    AddGroup(groupName, groupDisplayName, groupDescription, propertyGroupWidget);
-                }
+                        return true;
+                    });
             }
 
             void MaterialPropertyInspector::Populate()
@@ -435,6 +442,37 @@ namespace AZ
                 // m_updatePreview should be set to true here for continuous preview updates as slider/color properties change but needs
                 // throttling
             }
+            
+            bool MaterialPropertyInspector::AddEditorMaterialFunctors(
+                const AZStd::vector<AZ::RPI::Ptr<AZ::RPI::MaterialFunctorSourceDataHolder>>& functorSourceDataHolders,
+                const AZ::RPI::MaterialNameContext& nameContext)
+            {
+                // Copied from MaterialDocument::AddEditorMaterialFunctors, should be refactored at some point
+
+                const AZ::RPI::MaterialFunctorSourceData::EditorContext editorContext = AZ::RPI::MaterialFunctorSourceData::EditorContext(
+                    m_editData.m_materialTypeSourcePath, m_editData.m_materialAsset->GetMaterialPropertiesLayout(), &nameContext);
+
+                for (AZ::RPI::Ptr<AZ::RPI::MaterialFunctorSourceDataHolder> functorData : functorSourceDataHolders)
+                {
+                    AZ::RPI::MaterialFunctorSourceData::FunctorResult result = functorData->CreateFunctor(editorContext);
+
+                    if (result.IsSuccess())
+                    {
+                        AZ::RPI::Ptr<AZ::RPI::MaterialFunctor>& functor = result.GetValue();
+                        if (functor != nullptr)
+                        {
+                            m_editorFunctors.push_back(functor);
+                        }
+                    }
+                    else
+                    {
+                        AZ_Error("MaterialDocument", false, "Material functors were not created: '%s'.", m_editData.m_materialTypeSourcePath.c_str());
+                        return false;
+                    }
+                }
+
+                return true;
+            }
 
             void MaterialPropertyInspector::RunEditorMaterialFunctors()
             {
diff --git a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.h b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.h
index 82f46ebc90..44f1fb3491 100644
--- a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.h
+++ b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentInspector.h
@@ -108,6 +108,10 @@ namespace AZ
                 void RunEditorMaterialFunctors();
                 void UpdateMaterialInstanceProperty(const AtomToolsFramework::DynamicProperty& property);
 
+                bool AddEditorMaterialFunctors(
+                    const AZStd::vector<AZ::RPI::Ptr<AZ::RPI::MaterialFunctorSourceDataHolder>>& functorSourceDataHolders,
+                    const AZ::RPI::MaterialNameContext& nameContext);   
+
                 AZ::Crc32 GetGroupSaveStateKey(const AZStd::string& groupName) const;
                 bool IsInstanceNodePropertyModifed(const AzToolsFramework::InstanceDataNode* node) const;
                 const char* GetInstanceNodePropertyIndicator(const AzToolsFramework::InstanceDataNode* node) const;
diff --git a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentUtil.cpp b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentUtil.cpp
index 35633068d5..88cbbba87b 100644
--- a/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentUtil.cpp
+++ b/Gems/AtomLyIntegration/CommonFeatures/Code/Source/Material/EditorMaterialComponentUtil.cpp
@@ -151,9 +151,7 @@ namespace AZ
                             return true;
                         }
 
-                        // TODO: Support populating the Material Editor with nested property groups, not just the top level.
-                        AZStd::string_view groupName = propertyId.GetStringView().substr(0, propertyId.GetStringView().size() - propertyDefinition->GetName().size() - 1);
-                        exportData.SetPropertyValue(RPI::MaterialPropertyId{groupName, propertyDefinition->GetName()}, propertyValue);
+                        exportData.SetPropertyValue(propertyId, propertyValue);
                         return true;
                     });