diff --git a/config/audit_events/types/self_hosted_model_updated.yml b/config/audit_events/types/self_hosted_model_updated.yml
new file mode 100644
index 0000000000000000000000000000000000000000..0746ff0004b68facaf0ab73a962f0ac2ea416847
--- /dev/null
+++ b/config/audit_events/types/self_hosted_model_updated.yml
@@ -0,0 +1,9 @@
+name: self_hosted_model_updated
+description: A self-hosted model configuration was updated
+introduced_by_issue: https://gitlab.com/gitlab-org/gitlab/-/issues/483295
+introduced_by_mr: https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165520
+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 c34c4aeabe3d82e2b9728a50013655640d04b293..01cbcfb726c9c7138dc8fad0ec976aa34c44347c 100644
--- a/doc/user/compliance/audit_event_types.md
+++ b/doc/user/compliance/audit_event_types.md
@@ -454,6 +454,7 @@ Audit event types belong to the following product categories.
 | Name | Description | Saved to database | Streamed | Introduced in | Scope |
 |:------------|:------------|:------------------|:---------|:--------------|:--------------|
 | [`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 |
+| [`self_hosted_model_updated`](https://gitlab.com/gitlab-org/gitlab/-/merge_requests/165520) | A self-hosted model configuration was updated | **{check-circle}** Yes | **{check-circle}** Yes | GitLab [17.4](https://gitlab.com/gitlab-org/gitlab/-/issues/483295) | Instance, User |
 
 ### Source code management
 
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 7d8cead2550689473b249197af1915189a57bd9b..5e169fb676aa9ce59006e35cdd148798d03803ed 100644
--- a/ee/app/controllers/admin/ai/self_hosted_models_controller.rb
+++ b/ee/app/controllers/admin/ai/self_hosted_models_controller.rb
@@ -36,7 +36,11 @@ def edit
       def update
         @self_hosted_model = ::Ai::SelfHostedModel.find(params[:id])
 
-        if @self_hosted_model.update(update_self_hosted_model_params)
+        result = ::Ai::SelfHostedModels::UpdateService.new(
+          @self_hosted_model, current_user, update_self_hosted_model_params
+        ).execute
+
+        if result.success?
           redirect_to admin_ai_self_hosted_models_url, notice: _("Self-Hosted Model was updated")
         else
           render :edit
diff --git a/ee/app/graphql/mutations/ai/self_hosted_models/update.rb b/ee/app/graphql/mutations/ai/self_hosted_models/update.rb
index e8d11b4d85bc85de7c6e8b91bd98ddf378cea24a..1aee1f49ae0b3017189d4bc021286235cedd3a0b 100644
--- a/ee/app/graphql/mutations/ai/self_hosted_models/update.rb
+++ b/ee/app/graphql/mutations/ai/self_hosted_models/update.rb
@@ -31,28 +31,18 @@ class Update < Base
         def resolve(**args)
           check_feature_access!
 
-          model = update_self_hosted_model(args)
-
-          if model.errors.present?
-            {
-              self_hosted_model: nil,
-              errors: Array(model.errors)
-            }
-          else
-            { self_hosted_model: model, errors: [] }
-          end
-        end
-
-        private
+          model = find_object(id: args.delete(:id))
 
-        def update_self_hosted_model(args)
-          model = find_object(id: args[:id])
+          result = ::Ai::SelfHostedModels::UpdateService.new(model, current_user, args).execute
 
-          model.update(args.except(:id))
-
-          model
+          {
+            self_hosted_model: result.success? ? result.payload : nil,
+            errors: result.error? ? Array.wrap(result.errors) : []
+          }
         end
 
+        private
+
         def find_object(id:)
           GitlabSchema.object_from_id(id, expected_type: ::Ai::SelfHostedModel).sync
         end
diff --git a/ee/app/services/ai/self_hosted_models/update_service.rb b/ee/app/services/ai/self_hosted_models/update_service.rb
new file mode 100644
index 0000000000000000000000000000000000000000..be16590430442fea5479567435be61882ef657cd
--- /dev/null
+++ b/ee/app/services/ai/self_hosted_models/update_service.rb
@@ -0,0 +1,40 @@
+# frozen_string_literal: true
+
+module Ai
+  module SelfHostedModels
+    class UpdateService
+      def initialize(self_hosted_model, user, update_params)
+        @self_hosted_model = self_hosted_model
+        @user = user
+        @params = update_params
+      end
+
+      def execute
+        if self_hosted_model.update(params)
+          record_audit_event
+
+          ServiceResponse.success(payload: self_hosted_model)
+        else
+          ServiceResponse.error(message: self_hosted_model.errors.full_messages.join(", "))
+        end
+      end
+
+      private
+
+      attr_accessor :self_hosted_model, :user, :params
+
+      def record_audit_event
+        model = self_hosted_model
+        audit_context = {
+          name: 'self_hosted_model_updated',
+          author: user,
+          scope: user,
+          target: model,
+          message: "Self-hosted model #{model.name}/#{model.model}/#{model.endpoint} updated"
+        }
+
+        ::Gitlab::Audit::Auditor.audit(audit_context)
+      end
+    end
+  end
+end
diff --git a/ee/spec/services/ai/self_hosted_models/update_service_spec.rb b/ee/spec/services/ai/self_hosted_models/update_service_spec.rb
new file mode 100644
index 0000000000000000000000000000000000000000..2474eb06c65576e14507b5485eb1cc03ab8e6b97
--- /dev/null
+++ b/ee/spec/services/ai/self_hosted_models/update_service_spec.rb
@@ -0,0 +1,53 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+
+RSpec.describe ::Ai::SelfHostedModels::UpdateService, feature_category: :"self-hosted_models" do
+  let_it_be(:user) { create(:user) }
+
+  let(:self_hosted_model) { create(:ai_self_hosted_model) }
+
+  let(:params) { {} }
+  let(:service) { described_class.new(self_hosted_model, user, params) }
+
+  let(:audit_event) do
+    model = self_hosted_model
+    {
+      name: 'self_hosted_model_updated',
+      author: user,
+      scope: user,
+      target: model,
+      message: "Self-hosted model new model name/#{model.model}/#{model.endpoint} updated"
+    }
+  end
+
+  describe '#execute', :aggregate_failures do
+    subject(:result) { service.execute }
+
+    context 'when the model is successfully updated' do
+      let(:params) { { name: "new model name" } }
+
+      it 'returns a success response' do
+        expect(Gitlab::Audit::Auditor).to receive(:audit).with(audit_event).and_call_original
+
+        result
+
+        expect(self_hosted_model.reload.name).to eq("new model name")
+
+        expect(result).to be_success
+        expect(result.payload).to eq(self_hosted_model)
+      end
+    end
+
+    context 'when the model fails to be updated' do
+      let(:params) { { endpoint: nil } }
+
+      it 'returns an error response' do
+        expect(Gitlab::Audit::Auditor).not_to receive(:audit)
+
+        expect(result).to be_error
+        expect(result.message).to eq("Endpoint can't be blank, Endpoint must be a valid URL")
+      end
+    end
+  end
+end