diff --git a/meta-oe/recipes-kernel/ktls-utils/ktls-utils/0001-systemd-Fix-out-of-tree-builds.patch b/meta-oe/recipes-kernel/ktls-utils/ktls-utils/0001-systemd-Fix-out-of-tree-builds.patch
new file mode 100644
index 0000000000..a5a46ea8d3
--- /dev/null
+++ b/meta-oe/recipes-kernel/ktls-utils/ktls-utils/0001-systemd-Fix-out-of-tree-builds.patch
@@ -0,0 +1,28 @@
+From 496b0ffd7cd685a1adb48b150157fdea14f5f159 Mon Sep 17 00:00:00 2001
+From: Khem Raj <raj.khem@gmail.com>
+Date: Tue, 9 Dec 2025 08:53:53 -0800
+Subject: [PATCH] systemd: Fix out-of-tree builds
+
+The systemd unit file installation does not work when the build directory
+differs from the source directory because cp cannot find the source file.
+Prefix the unit files with $(srcdir) to reference files from the source tree.
+
+This fixes out-of-tree builds which use separate build directories (B != S).
+
+Upstream-Status: Submitted [https://github.com/oracle/ktls-utils/pull/134]
+Signed-off-by: Khem Raj <raj.khem@gmail.com>
+---
+ systemd/Makefile.am | 2 +-
+ 1 file changed, 1 insertion(+), 1 deletion(-)
+
+diff --git a/systemd/Makefile.am b/systemd/Makefile.am
+index d2f8e25..d6435ad 100644
+--- a/systemd/Makefile.am
++++ b/systemd/Makefile.am
+@@ -24,5 +24,5 @@ MAINTAINERCLEANFILES	= Makefile.in
+ if INSTALL_SYSTEMD
+ install-data-hook: $(unit_files)
+ 	mkdir -p $(DESTDIR)/$(unitdir)
+-	cp $(unit_files) $(DESTDIR)/$(unitdir)
++	cp $(addprefix $(srcdir)/,$(unit_files)) $(DESTDIR)/$(unitdir)
+ endif
diff --git a/meta-oe/recipes-kernel/ktls-utils/ktls-utils_1.3.0.bb b/meta-oe/recipes-kernel/ktls-utils/ktls-utils_1.3.0.bb
index 748e1cae99..47e1f7f091 100644
--- a/meta-oe/recipes-kernel/ktls-utils/ktls-utils_1.3.0.bb
+++ b/meta-oe/recipes-kernel/ktls-utils/ktls-utils_1.3.0.bb
@@ -8,10 +8,11 @@ LICENSE = "GPL-2.0-only"
 LIC_FILES_CHKSUM = "file://COPYING;md5=d568123389d9a12625cca2b089b1728b"
 
 SRC_URI = "https://github.com/oracle/ktls-utils/releases/download/${BP}/${BP}.tar.gz \
+           file://0001-systemd-Fix-out-of-tree-builds.patch \
            "
 SRC_URI[sha256sum] = "8ee295b26b608450bc0c47ba199b34cf92f7f9ec4c81a62363e6450da76b6739"
 
-inherit autotools-brokensep pkgconfig systemd
+inherit autotools pkgconfig systemd
 
 PACKAGECONFIG ??= "${@bb.utils.contains('DISTRO_FEATURES', 'systemd', 'systemd', '', d)}"