diff --git a/.changeset/ninety-experts-cheat.md b/.changeset/ninety-experts-cheat.md
new file mode 100644
index 0000000000..093145ecc6
--- /dev/null
+++ b/.changeset/ninety-experts-cheat.md
@@ -0,0 +1,5 @@
+---
+'@backstage/plugin-catalog-react': patch
+---
+
+update EntityAutocompletePicker selected options when filter value is changed externally
diff --git a/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.test.tsx b/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.test.tsx
index f025c14011..5fd8b549ce 100644
--- a/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.test.tsx
+++ b/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.test.tsx
@@ -14,16 +14,16 @@
  * limitations under the License.
  */
 
-import { fireEvent, render, waitFor, screen } from '@testing-library/react';
+import { fireEvent, render, screen, waitFor } from '@testing-library/react';
 import React from 'react';
 import {
-  MockEntityListContextProvider,
   catalogApiMock,
+  MockEntityListContextProvider,
 } from '@backstage/plugin-catalog-react/testUtils';
 import { EntityAutocompletePicker } from './EntityAutocompletePicker';
 import { TestApiProvider } from '@backstage/test-utils';
 import { catalogApiRef } from '../../api';
-import { DefaultEntityFilters } from '../../hooks';
+import { DefaultEntityFilters, useEntityList } from '../../hooks';
 import { Entity } from '@backstage/catalog-model';
 import { EntityFilter } from '../../types';
 import { EntityKindFilter, EntityTypeFilter } from '../../filters';
@@ -281,15 +281,28 @@ describe('<EntityAutocompletePicker/>', () => {
     });
   });
 
-  it('responds to external queryParameters changes', async () => {
+  it('responds to external filter changes', async () => {
     const mockCatalogApi = makeMockCatalogApi();
-    const updateFilters = jest.fn();
-    const rendered = render(
+    const ChangeFilterButton = () => {
+      const { updateFilters } = useEntityList<EntityFilters>();
+
+      return (
+        <button
+          data-testid="external-filter-change-button"
+          onClick={() =>
+            updateFilters({ options: new EntityOptionFilter(['option3']) })
+          }
+        >
+          Trigger external filter change
+        </button>
+      );
+    };
+
+    render(
       <TestApiProvider apis={[[catalogApiRef, mockCatalogApi]]}>
         <MockEntityListContextProvider<EntityFilters>
           value={{
-            updateFilters,
-            queryParameters: { options: ['option1'] },
+            filters: { options: new EntityOptionFilter(['option2']) },
           }}
         >
           <EntityAutocompletePicker<EntityFilters>
@@ -298,34 +311,21 @@ describe('<EntityAutocompletePicker/>', () => {
             name="options"
             Filter={EntityOptionFilter}
           />
+          <ChangeFilterButton />
         </MockEntityListContextProvider>
       </TestApiProvider>,
     );
+
     await waitFor(() =>
-      expect(updateFilters).toHaveBeenLastCalledWith({
-        options: new EntityOptionFilter(['option1']),
-      }),
+      expect(screen.queryByText('Options')).toBeInTheDocument(),
     );
-    rendered.rerender(
-      <TestApiProvider apis={[[catalogApiRef, mockCatalogApi]]}>
-        <MockEntityListContextProvider<EntityFilters>
-          value={{
-            updateFilters,
-            queryParameters: { options: ['option2'] },
-          }}
-        >
-          <EntityAutocompletePicker<EntityFilters>
-            label="Options"
-            path="spec.options"
-            name="options"
-            Filter={EntityOptionFilter}
-          />
-        </MockEntityListContextProvider>
-      </TestApiProvider>,
+    expect(screen.queryByText('option2')).toBeInTheDocument();
+
+    screen.getByTestId('external-filter-change-button').click();
+    await waitFor(() =>
+      expect(screen.queryByText('option3')).toBeInTheDocument(),
     );
-    expect(updateFilters).toHaveBeenLastCalledWith({
-      options: new EntityOptionFilter(['option2']),
-    });
+    expect(screen.queryByText('option2')).not.toBeInTheDocument();
   });
 
   it('filters available values by kind as default', async () => {
diff --git a/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.tsx b/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.tsx
index 09b5c1e908..c134446d27 100644
--- a/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.tsx
+++ b/plugins/catalog-react/src/components/EntityAutocompletePicker/EntityAutocompletePicker.tsx
@@ -29,6 +29,7 @@ import {
 import { EntityFilter } from '../../types';
 import { reduceBackendCatalogFilters } from '../../utils/filters';
 import { CatalogAutocomplete } from '../CatalogAutocomplete';
+import { isEqual } from 'lodash';
 
 /** @public */
 export type AllowedEntityFilters<T extends DefaultEntityFilters> = {
@@ -114,11 +115,13 @@ export function EntityAutocompletePicker<
     [queryParameter],
   );
 
+  const filteredOptions = (filters[name] as unknown as { values: string[] })
+    ?.values;
+
   const [selectedOptions, setSelectedOptions] = useState(
     queryParameters.length
       ? queryParameters
-      : (filters[name] as unknown as { values: string[] })?.values ??
-          initialSelectedOptions,
+      : filteredOptions ?? initialSelectedOptions,
   );
 
   // Set selected options on query parameter updates; this happens at initial page load and from
@@ -132,12 +135,26 @@ export function EntityAutocompletePicker<
   const availableOptions = Object.keys(availableValues ?? {});
   const shouldAddFilter = selectedOptions.length && availableOptions.length;
 
+  // Update filter value when selectedOptions change
   useEffect(() => {
     updateFilters({
       [name]: shouldAddFilter ? new Filter(selectedOptions) : undefined,
     } as Partial<T>);
   }, [name, shouldAddFilter, selectedOptions, Filter, updateFilters]);
 
+  // Update selected options when filter value changes
+  useEffect(() => {
+    if (!shouldAddFilter) return;
+
+    const newSelectedOptions = filteredOptions ?? [];
+
+    // Check value is actually different (not just a different reference) to prevent selectedOptions <> filters loop
+    if (!isEqual(newSelectedOptions, selectedOptions)) {
+      setSelectedOptions(newSelectedOptions);
+    }
+    // eslint-disable-next-line react-hooks/exhaustive-deps -- Don't re-set filter value when selectedOptions changes
+  }, [filteredOptions]);
+
   const filter = filters[name];
   if (
     (filter && typeof filter === 'object' && !('values' in filter)) ||