diff --git a/config/audit_events/types/self_hosted_model_created.yml b/config/audit_events/types/self_hosted_model_created.yml
new file mode 100644
index 0000000000000000000000000000000000000000..fa6203a73b23e1edd1593b9b3f9753d1b825c225
--- /dev/null
+++ b/config/audit_events/types/self_hosted_model_created.yml
@@ -0,0 +1,9 @@
+name: self_hosted_model_created
+description: A new self-hosted model configuration was added
+introduced_by_issue: https://gitlab.com/gitlab-org/gitlab/-/issues/477999
+introduced_by_mr: https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165303
+feature_category: self-hosted_models
+milestone: '17.4'
+saved_to_database: true
+scope: [Instance, User]
+streamed: true
diff --git a/doc/user/compliance/audit_event_types.md b/doc/user/compliance/audit_event_types.md
index 4cc67e31c3fca678b172cf661eec7c4023972359..1394f40f3f423590768502bad064d4b61f121e24 100644
--- a/doc/user/compliance/audit_event_types.md
+++ b/doc/user/compliance/audit_event_types.md
@@ -453,6 +453,7 @@ Audit event types belong to the following product categories.
 
 | Name | Description | Saved to database | Streamed | Introduced in | Scope |
 |:------------|:------------|:------------------|:---------|:--------------|:--------------|
+| [`self_hosted_model_created`](https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165303) | A new self-hosted model configuration was added | **{check-circle}** Yes | **{check-circle}** Yes | GitLab [17.4](https://gitlab.com/gitlab-org/gitlab/-/issues/477999) | Instance, User |
 | [`self_hosted_model_destroyed`](https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165321) | A new self-hosted model configuration was destroyed | **{check-circle}** Yes | **{check-circle}** Yes | GitLab [17.4](https://gitlab.com/gitlab-org/gitlab/-/issues/477999) | Instance, User |
 | [`self_hosted_model_feature_changed`](https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165489) | A self-hosted model feature had its configuration changed | **{check-circle}** Yes | **{check-circle}** Yes | GitLab [17.4](https://gitlab.com/gitlab-org/gitlab/-/issues/463215) | Project |
 | [`self_hosted_model_terms_accepted`](https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165480) | Terms for usage of self-hosted models were accepted | **{check-circle}** Yes | **{check-circle}** Yes | GitLab [17.4](https://gitlab.com/gitlab-org/gitlab/-/issues/477999) | Instance, User |
diff --git a/ee/app/controllers/admin/ai/self_hosted_models_controller.rb b/ee/app/controllers/admin/ai/self_hosted_models_controller.rb
index 50463201f8e6287a216bc8c5e1393e615898762f..6bb87a3ceb9496f48f7b6eaaacdcf23723b2c419 100644
--- a/ee/app/controllers/admin/ai/self_hosted_models_controller.rb
+++ b/ee/app/controllers/admin/ai/self_hosted_models_controller.rb
@@ -20,9 +20,10 @@ def new
       end
 
       def create
-        @self_hosted_model = ::Ai::SelfHostedModel.create(self_hosted_models_params)
+        service_result = ::Ai::SelfHostedModels::CreateService.new(current_user, self_hosted_models_params).execute
 
-        if @self_hosted_model.persisted?
+        if service_result.success?
+          @self_hosted_model = service_result.payload
           redirect_to admin_ai_self_hosted_models_url, notice: _("Self-Hosted Model was created")
         else
           render :new
diff --git a/ee/app/graphql/mutations/ai/self_hosted_models/create.rb b/ee/app/graphql/mutations/ai/self_hosted_models/create.rb
index 57599ac73955e7431af25198c2ea32aa660d8bd5..db6068b35f800d0de11d37d6290b66b7b405a96b 100644
--- a/ee/app/graphql/mutations/ai/self_hosted_models/create.rb
+++ b/ee/app/graphql/mutations/ai/self_hosted_models/create.rb
@@ -25,23 +25,19 @@ class Create < Base
         def resolve(**args)
           check_feature_access!
 
-          # TODO: We should create a service this is done for MVP sake
-          model = ::Ai::SelfHostedModel.create!(
-            name: args[:name],
-            model: args[:model],
-            endpoint: args[:endpoint],
-            api_token: args[:api_token]
-          )
-
-          {
-            self_hosted_model: model,
-            errors: [] # Errors are rescued below
-          }
-        rescue ActiveRecord::RecordInvalid => e
-          {
-            self_hosted_model: nil,
-            errors: [e.message]
-          }
+          result = ::Ai::SelfHostedModels::CreateService.new(current_user, args).execute
+
+          if result.success?
+            {
+              self_hosted_model: result.payload,
+              errors: [] # Errors are rescued below
+            }
+          else
+            {
+              self_hosted_model: nil,
+              errors: [result.message]
+            }
+          end
         end
       end
     end
diff --git a/ee/app/services/ai/self_hosted_models/create_service.rb b/ee/app/services/ai/self_hosted_models/create_service.rb
new file mode 100644
index 0000000000000000000000000000000000000000..eee98bd1d2ba9bf77a5174b92bb903a87109a104
--- /dev/null
+++ b/ee/app/services/ai/self_hosted_models/create_service.rb
@@ -0,0 +1,40 @@
+# frozen_string_literal: true
+
+module Ai
+  module SelfHostedModels
+    class CreateService
+      def initialize(current_user, params)
+        @params = params
+        @user = current_user
+      end
+
+      def execute
+        @self_hosted_model = ::Ai::SelfHostedModel.new(params)
+
+        if @self_hosted_model.save
+          audit_creation_event(@self_hosted_model)
+
+          ServiceResponse.success(payload: @self_hosted_model)
+        else
+          ServiceResponse.error(message: @self_hosted_model.errors.full_messages.join(", "))
+        end
+      end
+
+      private
+
+      def audit_creation_event(model)
+        audit_context = {
+          name: 'self_hosted_model_created',
+          author: user,
+          scope: user,
+          target: model,
+          message: "Self-hosted model #{model.name}/#{model.model}/#{model.endpoint} created"
+        }
+
+        ::Gitlab::Audit::Auditor.audit(audit_context)
+      end
+
+      attr_accessor :user, :params
+    end
+  end
+end
diff --git a/ee/spec/requests/api/graphql/ai/self_hosted_models/create_spec.rb b/ee/spec/requests/api/graphql/ai/self_hosted_models/create_spec.rb
index 1f9be3d8c2ca2cef253467f22ccdc0a22bb59a71..a6dab4ee908d63f72d272b25ac55daa3fad4dd12 100644
--- a/ee/spec/requests/api/graphql/ai/self_hosted_models/create_spec.rb
+++ b/ee/spec/requests/api/graphql/ai/self_hosted_models/create_spec.rb
@@ -64,7 +64,7 @@
         post_graphql_mutation(mutation, current_user: current_user)
 
         expect(mutation_response['selfHostedModel']).to be(nil)
-        expect(mutation_response['errors']).to include("Validation failed: Name can't be blank")
+        expect(mutation_response['errors']).to include("Name can't be blank")
       end
 
       it 'does not create a self-hosted model' do
diff --git a/ee/spec/services/ai/self_hosted_models/create_service_spec.rb b/ee/spec/services/ai/self_hosted_models/create_service_spec.rb
new file mode 100644
index 0000000000000000000000000000000000000000..b121aef26ba2cc527bd79294a71be0d3b79831ed
--- /dev/null
+++ b/ee/spec/services/ai/self_hosted_models/create_service_spec.rb
@@ -0,0 +1,75 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+
+RSpec.describe ::Ai::SelfHostedModels::CreateService, feature_category: :"self-hosted_models" do
+  let(:user) { create(:user) }
+  let(:base_params) do
+    {
+      name: 'Test Model',
+      model: 'codestral',
+      endpoint: 'https://api.example.com',
+      api_token: 'test_token'
+    }
+  end
+
+  let(:params) { base_params }
+  let(:service) { described_class.new(user, params) }
+
+  before do
+    allow(Gitlab::Audit::Auditor).to receive(:audit).and_call_original
+  end
+
+  describe '#execute', :aggregate_failures do
+    subject(:result) { service.execute }
+
+    let(:model) { result.payload }
+    let(:audit_event) do
+      {
+        name: 'self_hosted_model_created',
+        author: user,
+        scope: user,
+        target: model,
+        message: "Self-hosted model #{params[:name]}/#{params[:model]}/#{params[:endpoint]} created"
+      }
+    end
+
+    context 'when params are valid' do
+      it 'creates the model' do
+        expect { result }.to change { ::Ai::SelfHostedModel.count }.by(1)
+        expect(result).to be_success
+
+        expect(model.name).to eq('Test Model')
+        expect(model.model).to eq('codestral')
+        expect(model.endpoint).to eq('https://api.example.com')
+        expect(model.api_token).to eq('test_token')
+
+        expect(Gitlab::Audit::Auditor).to have_received(:audit).with(audit_event)
+      end
+    end
+
+    context 'when model is invalid' do
+      let(:params) { base_params.merge(model: 'invalid_model') }
+
+      it 'raises error' do
+        expect { result }.to raise_error(ArgumentError, /'invalid_model' is not a valid model/)
+
+        expect(Gitlab::Audit::Auditor).not_to receive(:audit).with(hash_including(name: "self_hosted_model_created"))
+      end
+    end
+
+    context 'when params are invalid' do
+      let(:params) { base_params.merge(name: '', endpoint: 'not_a_url') }
+
+      it 'returns an error response' do
+        expect { result }.not_to change { ::Ai::SelfHostedModel.count }
+
+        expect(result).to be_error
+        expect(result.message).to include("Name can't be blank")
+        expect(result.message).to include("Endpoint is blocked: Only allowed schemes are http, https")
+
+        expect(Gitlab::Audit::Auditor).not_to receive(:audit).with(hash_including(name: "self_hosted_model_created"))
+      end
+    end
+  end
+end