diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
index 114f45d501..0f2b896b40 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
@@ -221,7 +221,8 @@ namespace AzToolsFramework
         AZ::IO::Path relativePath = m_loaderInterface->GenerateRelativePath(filename);
 
         m_rootInstance->SetTemplateSourcePath(relativePath);
-        
+        m_prefabSystemComponent->UpdateTemplateFilePath(m_rootInstance->GetTemplateId(), relativePath);
+
         AZStd::string out;
         if (!m_loaderInterface->SaveTemplateToString(m_rootInstance->GetTemplateId(), out))
         {
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
index e88e999878..0d2696f14b 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
@@ -424,6 +424,48 @@ namespace AzToolsFramework
             return newTemplateId;
         }
 
+        void PrefabSystemComponent::UpdateTemplateFilePath(TemplateId templateId, const AZ::IO::PathView& filePath)
+        {
+            auto findTemplateResult = FindTemplate(templateId);
+            if (!findTemplateResult.has_value())
+            {
+                AZ_Error(
+                    "Prefab", false,
+                    "Template associated by given Id '%llu' doesn't exist in PrefabSystemComponent.",
+                    templateId);
+                return;
+            }
+
+            if (!filePath.IsRelative())
+            {
+                AZ_Error("Prefab", false, "Provided filePath '%.*s' must be relative.", AZ_STRING_ARG(filePath.Native()));
+                return;
+            }
+
+            Template& templateToChange = findTemplateResult->get();
+            if (templateToChange.GetFilePath() == filePath)
+            {
+                return;
+            }
+            
+            m_templateFilePathToIdMap.erase(templateToChange.GetFilePath());
+            if (!m_templateFilePathToIdMap.try_emplace(filePath, templateId).second)
+            {
+                AZ_Error("Prefab", false, "Provided filePath '%.*s' already exists.", AZ_STRING_ARG(filePath.Native()));
+                return;
+            }
+
+            PrefabDom& prefabDom = templateToChange.GetPrefabDom();
+            PrefabDomValueReference pathReference = Prefab::PrefabDomUtils::FindPrefabDomValue(prefabDom, "Source");
+            if (pathReference)
+            {
+                const AZStd::string_view pathStr = filePath.Native();
+                pathReference->get().SetString(pathStr.data(), aznumeric_caster(pathStr.length()), prefabDom.GetAllocator());
+            }
+
+            templateToChange.SetFilePath(filePath);
+        }
+
         void PrefabSystemComponent::RemoveTemplate(const TemplateId& templateId)
         {
             auto findTemplateResult = FindTemplate(templateId);
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
index 04bcee2961..d6908922c9 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
@@ -101,6 +101,13 @@ namespace AzToolsFramework
             */
             TemplateId AddTemplate(const AZ::IO::Path& filePath, PrefabDom prefabDom) override;
 
+            /**
+             * Updates relative filepath location of a prefab (in case of SaveAs operation).
+             * @param templateId An id of a Template to change filepath of.
+             * @param filePath new relative path of the Template.
+             */
+            void UpdateTemplateFilePath(TemplateId templateId, const AZ::IO::PathView& filePath) override;
+
             /**
             * Remove the Template associated with the given id from Prefab System Component.
             * @param templateId A unique id of a Template.
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
index ae66700728..1f59088518 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
@@ -33,6 +33,7 @@ namespace AzToolsFramework
             virtual LinkReference FindLink(const LinkId& id) = 0;
 
             virtual TemplateId AddTemplate(const AZ::IO::Path& filePath, PrefabDom prefabDom) = 0;
+            virtual void UpdateTemplateFilePath(TemplateId templateId, const AZ::IO::PathView& filePath) = 0;
             virtual void RemoveTemplate(const TemplateId& templateId) = 0;
             virtual void RemoveAllTemplates() = 0;
 
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.cpp
index 99dce3d14f..e5ab403ea6 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.cpp
@@ -180,5 +180,9 @@ namespace AzToolsFramework
             return m_filePath;
         }
 
+        void Template::SetFilePath(const AZ::IO::PathView& path)
+        {
+            m_filePath = path;
+        }
     } // namespace Prefab
 } // namespace AzToolsFramework
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.h
index fbc9a26f36..f7a41431f8 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/Template/Template.h
@@ -63,6 +63,7 @@ namespace AzToolsFramework
             PrefabDomValueConstReference GetInstancesValue() const;
 
             const AZ::IO::Path& GetFilePath() const;
+            void SetFilePath(const AZ::IO::PathView& path);
 
         private:
             // Container for keeping links representing the Template's nested instances.