diff --git a/cmake/modules/FindUSD.cmake b/cmake/modules/FindUSD.cmake
index 26239d626f..2caef7acd6 100644
--- a/cmake/modules/FindUSD.cmake
+++ b/cmake/modules/FindUSD.cmake
@@ -131,6 +131,13 @@ if (USD_INCLUDE_DIR AND EXISTS "${USD_INCLUDE_DIR}/pxr/imaging/hd/changeTracker.
     endif()
 endif()
 
+# See if USD changetracker has instance count.
+set(USD_HAS_NAMESPACE_EDIT FALSE CACHE INTERNAL "USD.NamespaceEdit")
+if (USD_INCLUDE_DIR AND EXISTS "${USD_INCLUDE_DIR}/pxr/usd/sdf/namespaceEdit.h")
+    set(USD_HAS_NAMESPACE_EDIT TRUE CACHE INTERNAL "USD.NamespaceEdit")
+    message(STATUS "USD has namespace edit")
+endif()
+
 # See if MaterialX shaders with color4 inputs exist natively in Sdr:
 # Not yet in a tagged USD version: https://github.com/PixarAnimationStudios/USD/pull/1894
 set(USD_HAS_COLOR4_SDR_SUPPORT FALSE CACHE INTERNAL "USD.Sdr.PropertyTypes.Color4")
diff --git a/lib/usdUfe/CMakeLists.txt b/lib/usdUfe/CMakeLists.txt
index c8070e33a2..c994cfdb9d 100644
--- a/lib/usdUfe/CMakeLists.txt
+++ b/lib/usdUfe/CMakeLists.txt
@@ -56,6 +56,14 @@ if (USD_HAS_COLOR4_SDR_SUPPORT)
     )
 endif()
 
+message(STATUS "USD_HAS_NAMESPACE_EDIT is ${USD_HAS_NAMESPACE_EDIT}")
+if (USD_HAS_NAMESPACE_EDIT)
+    target_compile_definitions(${PROJECT_NAME}
+        PRIVATE
+        USD_HAS_NAMESPACE_EDIT=1
+    )
+endif()
+
 message(STATUS "MAYA_HAS_DISPLAY_LAYER_API is ${MAYA_HAS_DISPLAY_LAYER_API}")
 if (MAYA_HAS_DISPLAY_LAYER_API)
     target_compile_definitions(${PROJECT_NAME}
diff --git a/lib/usdUfe/ufe/UsdUndoInsertChildCommand.cpp b/lib/usdUfe/ufe/UsdUndoInsertChildCommand.cpp
index 00f308375b..e9418a79cf 100644
--- a/lib/usdUfe/ufe/UsdUndoInsertChildCommand.cpp
+++ b/lib/usdUfe/ufe/UsdUndoInsertChildCommand.cpp
@@ -29,6 +29,9 @@
 
 #include <pxr/base/tf/token.h>
 #include <pxr/usd/sdf/copyUtils.h>
+#ifdef USD_HAS_NAMESPACE_EDIT
+#include <pxr/usd/sdf/namespaceEdit.h>
+#endif
 #include <pxr/usd/usd/editContext.h>
 #include <pxr/usd/usd/stage.h>
 #include <pxr/usd/usdGeom/gprim.h>
@@ -215,6 +218,23 @@ static void doInsertion(
         throw std::runtime_error(error);
     }
 
+#ifdef USD_HAS_NAMESPACE_EDIT
+    // Try to use a single-layer renaming namespace edit.
+    // This only works correctly if there is a single layer and the destination layer
+    // is the same as the source layer. If it fails we will fall through to the other
+    // algorithm below.
+    if (1 == authLayerAndPaths.size()) {
+        SdfBatchNamespaceEdit edits;
+
+        const auto parentPath = dstUsdPath.GetParentPath();
+        edits.Add(SdfNamespaceEdit::Reparent(srcUsdPath, parentPath, SdfNamespaceEdit::Same));
+
+        if (dstLayer->Apply(edits)) {
+            return;
+        }
+    }
+#endif
+
     UsdUfe::MergePrimsOptions options;
     options.verbosity = UsdUfe::MergeVerbosity::None;
     options.mergeChildren = true;
diff --git a/test/lib/ufe/testGroupCmd.py b/test/lib/ufe/testGroupCmd.py
index d41d7bd54a..53339dace6 100644
--- a/test/lib/ufe/testGroupCmd.py
+++ b/test/lib/ufe/testGroupCmd.py
@@ -1137,6 +1137,32 @@ def testGroupNested(self):
             self.assertNotIn(groupName, groupNames)
             groupNames.add(groupName)
 
+    @unittest.skipUnless(Usd.GetVersion() >= (0, 24, 3), 'Requires USD 24.03 or greater for namespace edits')
+    def testGroupPrimWithRef(self):
+        """
+        Tests that grouping a prim with a reference does not flatten
+        the reference when done in a single layer.
+        """
+        cmds.file(new=True, force=True)
+        import mayaUsd_createStageWithNewLayer
+
+        proxyShapePathStr = mayaUsd_createStageWithNewLayer.createStageWithNewLayer()
+        stage = mayaUsd.lib.GetPrim(proxyShapePathStr).GetStage()
+        self.assertTrue(stage)
+
+        # create a over containing a reference
+        primWithRef = stage.OverridePrim("/primWithRef")
+        self.assertTrue(primWithRef)
+        cubeRefFile = testUtils.getTestScene("cubeRef", "cube.usda")
+        primWithRef.GetReferences().AddReference(cubeRefFile)
+
+        cmds.group('%s,/primWithRef' % proxyShapePathStr)
+
+        self.assertFalse(stage.GetPrimAtPath('/primWithRef'))
+        primWithRef = stage.GetPrimAtPath('/group1/primWithRef')
+        self.assertTrue(primWithRef)
+        self.assertTrue(primWithRef.HasAuthoredReferences())
+
 
 if __name__ == '__main__':
     unittest.main(verbosity=2)