diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
index dd1fdec74d..07be2a6644 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Entity/PrefabEditorEntityOwnershipService.cpp
@@ -298,7 +298,7 @@ namespace AzToolsFramework
             Prefab::PrefabDom serializedInstance;
             if (Prefab::PrefabDomUtils::StoreInstanceInPrefabDom(addedInstance, serializedInstance))
             {
-                m_prefabSystemComponent->UpdatePrefabTemplate(addedInstance.GetTemplateId(), serializedInstance, false);
+                m_prefabSystemComponent->UpdatePrefabTemplate(addedInstance.GetTemplateId(), serializedInstance);
             }
             
             return addedInstance;
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
index 53652933a4..d89a388e91 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.cpp
@@ -159,7 +159,7 @@ namespace AzToolsFramework
             }
         }
 
-        void PrefabSystemComponent::UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom, bool shouldPropagateTemplateChanges)
+        void PrefabSystemComponent::UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom)
         {
             auto templateToUpdate = FindTemplate(templateId);
             if (templateToUpdate)
@@ -169,10 +169,7 @@ namespace AzToolsFramework
                 {
                     templateDomToUpdate.CopyFrom(updatedDom, templateDomToUpdate.GetAllocator());
                     templateToUpdate->get().MarkAsDirty(true);
-                    if (shouldPropagateTemplateChanges)
-                    {
-                        PropagateTemplateChanges(templateId);
-                    }
+                    PropagateTemplateChanges(templateId);
                 }
             }
         }
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
index d04b760aae..d4499d1e2d 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponent.h
@@ -187,7 +187,10 @@ namespace AzToolsFramework
             * @param entities A vector of entities that will be used in the new instance. May be empty
             * @param instances A vector of Prefab Instances that will be nested in the new instance, will be consumed and moved.
             *                  May be empty
-            * @param filePath the path to associate the template of the new instance to
+            * @param filePath the path to associate the template of the new instance to.
+            * @param containerEntity The container entity for the prefab to be created. It will be created if a nullptr is provided.
+            * @param shouldCreateLinks The flag indicating if links should be created between the templates of the instance
+            *        and its nested instances.
             * @return A pointer to the newly created instance. nullptr on failure
             */
             AZStd::unique_ptr<Instance> CreatePrefab(
@@ -199,11 +202,11 @@ namespace AzToolsFramework
 
             /**
              * Updates a template with the given updated DOM.
-             * 
+             *
              * @param templateId The id of the template to update.
              * @param updatedDom The DOM to update the template with.
              */
-            void UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom, bool shouldPropagateTemplateChanges = true) override;
+            void UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom) override;
 
             void PropagateTemplateChanges(TemplateId templateId) override;
 
@@ -262,7 +265,9 @@ namespace AzToolsFramework
             /**
             * Takes a prefab instance and generates a new Prefab Template
             * along with any new Prefab Links representing any of the nested instances present
-            * @param instance The instance used to generate the new Template
+            * @param instance The instance used to generate the new Template.
+            * @param shouldCreateLinks The flag indicating if links should be created between the templates of the instance
+            *        and its nested instances.
             */
             TemplateId CreateTemplateFromInstance(Instance& instance, bool shouldCreateLinks);
 
diff --git a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
index d957a14b61..f0ea99f3dd 100644
--- a/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
+++ b/Code/Framework/AzToolsFramework/AzToolsFramework/Prefab/PrefabSystemComponentInterface.h
@@ -55,7 +55,7 @@ namespace AzToolsFramework
             virtual void SetTemplateDirtyFlag(const TemplateId& templateId, bool dirty) = 0;
 
             virtual PrefabDom& FindTemplateDom(TemplateId templateId) = 0;
-            virtual void UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom, bool shouldPropagateTemplateChanges = true) = 0;
+            virtual void UpdatePrefabTemplate(TemplateId templateId, const PrefabDom& updatedDom) = 0;
             virtual void PropagateTemplateChanges(TemplateId templateId) = 0;
 
             virtual AZStd::unique_ptr<Instance> InstantiatePrefab(const TemplateId& templateId) = 0;