diff --git a/webhooks/component_webhook.go b/webhooks/component_webhook.go
index 95c81d714..7778529b4 100644
--- a/webhooks/component_webhook.go
+++ b/webhooks/component_webhook.go
@@ -90,7 +90,14 @@ func (r *ComponentWebhook) Default(ctx context.Context, obj runtime.Object) erro
 					Name:       hasApplication.Name,
 					UID:        hasApplication.UID,
 				}
+
+				if isArgoCDManaged(&curComp, &hasApplication) {
+					componentlog.Info("component is managed by ArgoCD, skipping owner reference setting")
+					return nil
+				}
+
 				curComp.SetOwnerReferences(append(curComp.GetOwnerReferences(), ownerReference))
+
 				err = r.client.Update(ctx, &curComp)
 				return err
 			})
@@ -300,3 +307,43 @@ func (r *ComponentWebhook) validateBuildNudgesRefGraph(ctx context.Context, nudg
 
 	return nil
 }
+
+// isArgoCDManaged checks if a component or its Application is managed by ArgoCD
+// by looking for ArgoCD tracking annotations or labels
+func isArgoCDManaged(component *appstudiov1alpha1.Component, application *appstudiov1alpha1.Application) bool {
+
+	// use a constant for the ArgoCD tracking ID key
+	const argocdtrackingId = "argocd.argoproj.io/tracking-id"
+
+	// Check component annotations
+	if component.Annotations != nil {
+		if _, exists := component.Annotations[argocdtrackingId]; exists {
+			return true
+		}
+	}
+
+	// Check component labels
+	if component.Labels != nil {
+		if _, exists := component.Labels[argocdtrackingId]; exists {
+			return true
+		}
+	}
+
+	// Check Application annotations (to avoid race conditions)
+	if application != nil {
+		if application.Annotations != nil {
+			if _, exists := application.Annotations[argocdtrackingId]; exists {
+				return true
+			}
+		}
+
+		// Check Application labels
+		if application.Labels != nil {
+			if _, exists := application.Labels[argocdtrackingId]; exists {
+				return true
+			}
+		}
+	}
+
+	return false
+}
diff --git a/webhooks/component_webhook_unit_test.go b/webhooks/component_webhook_unit_test.go
index 97949d4ca..0b9028ff4 100644
--- a/webhooks/component_webhook_unit_test.go
+++ b/webhooks/component_webhook_unit_test.go
@@ -734,6 +734,160 @@ func TestUpdateNudgedComponentStatus(t *testing.T) {
 	}
 }
 
+func TestIsArgoCDManaged(t *testing.T) {
+	// reusable application for tests with no ArgoCD tracking
+	normalApplication := &appstudiov1alpha1.Application{
+		ObjectMeta: v1.ObjectMeta{
+			Name:      "application1",
+			Namespace: "default",
+		},
+	}
+
+	t.Run("should return true when component has ArgoCD annotation", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				Annotations: map[string]string{
+					"argocd.argoproj.io/tracking-id": "123",
+				},
+			},
+		}
+		result := isArgoCDManaged(component, normalApplication)
+
+		if !result {
+			t.Errorf("TestIsArgoCDManaged(): should return true when component has ArgoCD annotation, got false")
+		}
+	})
+
+	t.Run("should return true when component has ArgoCD label", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				Labels: map[string]string{
+					"argocd.argoproj.io/tracking-id": "123",
+				},
+			},
+		}
+
+		result := isArgoCDManaged(component, normalApplication)
+
+		if !result {
+			t.Errorf("TestIsArgoCDManaged(): should return true when component has ArgoCD label, got false")
+		}
+	})
+
+	t.Run("should return true when application has ArgoCD annotation", func(t *testing.T) {
+		// Component without ArgoCD tracking
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				// Component has no ArgoCD tracking - looks normal
+			},
+		}
+
+		// Application HAS ArgoCD annotation
+		application := &appstudiov1alpha1.Application{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "application1",
+				Namespace: "default",
+				Annotations: map[string]string{
+					"argocd.argoproj.io/tracking-id": "123",
+				},
+			},
+		}
+
+		result := isArgoCDManaged(component, application)
+
+		if !result {
+			t.Errorf("TestIsArgoCDManaged(): should return true when application has ArgoCD annotation, got false")
+		}
+	})
+
+	t.Run("should return true when application has ArgoCD label", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				// Component has no ArgoCD tracking
+			},
+		}
+
+		// Application HAS ArgoCD label (not annotation)
+		application := &appstudiov1alpha1.Application{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "application1",
+				Namespace: "default",
+				Labels: map[string]string{
+					"argocd.argoproj.io/tracking-id": "123",
+				},
+			},
+		}
+
+		result := isArgoCDManaged(component, application)
+
+		if !result {
+			t.Errorf("TestIsArgoCDManaged(): should return true when application has ArgoCD label, got false")
+		}
+	})
+
+	t.Run("should return false when component and application both have no ArgoCD tracking", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				// No annotations, no labels - completely normal component
+			},
+		}
+
+		result := isArgoCDManaged(component, normalApplication)
+
+		if result {
+			t.Errorf("TestIsArgoCDManaged(): should return false when neither has ArgoCD tracking, got true")
+		}
+	})
+
+	t.Run("should return false when component has no ArgoCD and application is nil", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				// Component has no ArgoCD tracking
+			},
+		}
+
+		// Call with nil application - should not panic and should return false
+		result := isArgoCDManaged(component, nil)
+
+		if result {
+			t.Errorf("TestIsArgoCDManaged(): should return false when component has no ArgoCD and application is nil, got true")
+		}
+	})
+
+	t.Run("should return true when component has ArgoCD annotation even with nil application", func(t *testing.T) {
+		component := &appstudiov1alpha1.Component{
+			ObjectMeta: v1.ObjectMeta{
+				Name:      "component1",
+				Namespace: "default",
+				// Component HAS ArgoCD annotation
+				Annotations: map[string]string{
+					"argocd.argoproj.io/tracking-id": "123",
+				},
+			},
+		}
+
+		// Even with nil application, should return true because component has annotation
+		result := isArgoCDManaged(component, nil)
+
+		if !result {
+			t.Errorf("TestIsArgoCDManaged(): should return true when component has ArgoCD annotation even with nil application, got false")
+		}
+	})
+
+}
+
 // setUpComponentsForFakeErrorClient creates a fake controller-runtime Kube client with components to test error scenarios
 func setUpComponentsForFakeErrorClient(t *testing.T) *FakeClient {
 	fakeErrorClient := NewFakeErrorClient(t)