diff --git a/config/nrfconnect/chip-module/CMakeLists.txt b/config/nrfconnect/chip-module/CMakeLists.txt
index 1419f77db4..ab12df1265 100644
--- a/config/nrfconnect/chip-module/CMakeLists.txt
+++ b/config/nrfconnect/chip-module/CMakeLists.txt
@@ -233,7 +233,7 @@ endif()
 # Define 'chip-ota-image' target for building CHIP OTA image
 # ==============================================================================
 
-if (CONFIG_CHIP_OTA_IMAGE_BUILD)
+if (CONFIG_CHIP_OTA_IMAGE_BUILD AND NOT SYSBUILD)
     chip_ota_image(chip-ota-image
         INPUT_FILES ${PROJECT_BINARY_DIR}/dfu_multi_image.bin
         OUTPUT_FILE ${PROJECT_BINARY_DIR}/${CONFIG_CHIP_OTA_IMAGE_FILE_NAME}
diff --git a/config/zephyr/ota-image_sysbuild.cmake b/config/zephyr/ota-image_sysbuild.cmake
new file mode 100644
index 0000000000..2bd78ea6ee
--- /dev/null
+++ b/config/zephyr/ota-image_sysbuild.cmake
@@ -0,0 +1,102 @@
+#
+#   Copyright (c) 2021 Project CHIP Authors
+#
+#   Licensed under the Apache License, Version 2.0 (the "License");
+#   you may not use this file except in compliance with the License.
+#   You may obtain a copy of the License at
+#
+#       http://www.apache.org/licenses/LICENSE-2.0
+#
+#   Unless required by applicable law or agreed to in writing, software
+#   distributed under the License is distributed on an "AS IS" BASIS,
+#   WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+#   See the License for the specific language governing permissions and
+#   limitations under the License.
+#
+
+#
+# Create CMake target for building Matter OTA (Over-the-air update) image.
+#
+# Required arguments:
+#   INPUT_FILES file1[, file2...]  Binary files to be included in Matter OTA image
+#   OUTPUT_FILE file               Location of generated Matter OTA image
+#
+function(chip_ota_image TARGET_NAME)
+  cmake_parse_arguments(ARG "" "OUTPUT_FILE" "INPUT_FILES" ${ARGN})
+
+  if(NOT ARG_INPUT_FILES OR NOT ARG_OUTPUT_FILE)
+    message(FATAL_ERROR "Both INPUT_FILES and OUTPUT_FILE arguments must be specified")
+  endif()
+
+  sysbuild_get(CONFIG_CHIP_DEVICE_SOFTWARE_VERSION IMAGE ${DEFAULT_IMAGE} VAR CONFIG_CHIP_DEVICE_SOFTWARE_VERSION KCONFIG)
+  sysbuild_get(CONFIG_CHIP_DEVICE_SOFTWARE_VERSION_STRING IMAGE ${DEFAULT_IMAGE} VAR CONFIG_CHIP_DEVICE_SOFTWARE_VERSION_STRING KCONFIG)
+  sysbuild_get(CONFIG_CHIP_DEVICE_VENDOR_ID IMAGE ${DEFAULT_IMAGE} VAR CONFIG_CHIP_DEVICE_VENDOR_ID KCONFIG)
+  sysbuild_get(CONFIG_CHIP_DEVICE_PRODUCT_ID IMAGE ${DEFAULT_IMAGE} VAR CONFIG_CHIP_DEVICE_PRODUCT_ID KCONFIG)
+
+  # Prepare ota_image_tool.py argument list
+  if(EXISTS ${APP_DIR}/VERSION)
+    file(READ ${APP_DIR}/VERSION ver)
+    set_property(DIRECTORY APPEND PROPERTY CMAKE_CONFIGURE_DEPENDS ${APP_DIR}/VERSION)
+    string(REGEX MATCH "VERSION_MAJOR = ([0-9]*)" _ ${ver})
+    set(app_version_major ${CMAKE_MATCH_1})
+    string(REGEX MATCH "VERSION_MINOR = ([0-9]*)" _ ${ver})
+    set(app_version_minor ${CMAKE_MATCH_1})
+    string(REGEX MATCH "PATCHLEVEL = ([0-9]*)" _ ${ver})
+    set(app_version_patchlevel ${CMAKE_MATCH_1})
+    string(REGEX MATCH "VERSION_TWEAK = ([0-9]*)" _ ${ver})
+    set(app_version_tweak ${CMAKE_MATCH_1})
+
+    set(APP_VERSION_STRING "${app_version_major}.${app_version_minor}.${app_version_patchlevel}+${app_version_tweak}")
+    math(EXPR APPVERSION "(${app_version_major} << 24) | (${app_version_minor} << 16) | (${app_version_patchlevel} << 8) | ${app_version_tweak}" OUTPUT_FORMAT HEXADECIMAL)
+
+    set(OTA_ARGS
+        "--vendor-id"
+        ${CONFIG_CHIP_DEVICE_VENDOR_ID}
+        "--product-id"
+        ${CONFIG_CHIP_DEVICE_PRODUCT_ID}
+        "--version"
+        ${APPVERSION}
+        "--version-str"
+        ${APP_VERSION_STRING}
+        "--digest-algorithm"
+        "sha256"
+    )
+  else()
+    set(OTA_ARGS
+        "--vendor-id"
+        ${CONFIG_CHIP_DEVICE_VENDOR_ID}
+        "--product-id"
+        ${CONFIG_CHIP_DEVICE_PRODUCT_ID}
+        "--version"
+        ${CONFIG_CHIP_DEVICE_SOFTWARE_VERSION}
+        "--version-str"
+        ${CONFIG_CHIP_DEVICE_SOFTWARE_VERSION_STRING}
+        "--digest-algorithm"
+        "sha256"
+    )
+  endif()
+
+  separate_arguments(OTA_EXTRA_ARGS NATIVE_COMMAND "${CHIP_OTA_IMAGE_EXTRA_ARGS}")
+
+  list(APPEND OTA_ARGS ${OTA_EXTRA_ARGS})
+  list(APPEND OTA_ARGS ${ARG_INPUT_FILES})
+  list(APPEND OTA_ARGS ${ARG_OUTPUT_FILE})
+
+  # Convert the argument list to multi-line string
+  string(REPLACE ";" "\n" OTA_ARGS "${OTA_ARGS}")
+
+  # Pass the argument list via file to avoid hitting Windows command-line length limit
+  file(GENERATE
+       OUTPUT ${ARG_OUTPUT_FILE}.args
+       CONTENT ${OTA_ARGS}
+  )
+
+  add_custom_command(OUTPUT ${ARG_OUTPUT_FILE}
+                    COMMAND ${Python3_EXECUTABLE} ${ZEPHYR_CONNECTEDHOMEIP_MODULE_DIR}/src/app/ota_image_tool.py create @${ARG_OUTPUT_FILE}.args
+                    DEPENDS ${ARG_INPUT_FILES} ${ZEPHYR_CONNECTEDHOMEIP_MODULE_DIR}/src/app/ota_image_tool.py
+  )
+
+  add_custom_target(${TARGET_NAME} ALL
+                    DEPENDS ${ARG_OUTPUT_FILE}
+  )
+endfunction()