diff --git a/apis/rds/v1alpha1/custom_types.go b/apis/rds/v1alpha1/custom_types.go
index 12736d0e09..9e37b902c4 100644
--- a/apis/rds/v1alpha1/custom_types.go
+++ b/apis/rds/v1alpha1/custom_types.go
@@ -741,6 +741,11 @@ type CustomDBInstanceParameters struct {
 	// deleted.
 	// +optional
 	DeleteAutomatedBackups *bool `json:"deleteAutomatedBackups,omitempty"`
+
+	// TagIgnorePrefixes tells the reconciler to pretend tags with these
+	// prefixes don't exist during diff/updates.
+	// +optional
+	TagIgnorePrefixes []string `json:"tagIgnorePrefixes,omitempty"`
 }
 
 // CustomDBInstanceObservation includes the custom status fields of DBInstance.
diff --git a/apis/rds/v1alpha1/zz_generated.deepcopy.go b/apis/rds/v1alpha1/zz_generated.deepcopy.go
index b4e061d18f..b459804463 100644
--- a/apis/rds/v1alpha1/zz_generated.deepcopy.go
+++ b/apis/rds/v1alpha1/zz_generated.deepcopy.go
@@ -728,6 +728,11 @@ func (in *CustomDBInstanceParameters) DeepCopyInto(out *CustomDBInstanceParamete
 		*out = new(bool)
 		**out = **in
 	}
+	if in.TagIgnorePrefixes != nil {
+		in, out := &in.TagIgnorePrefixes, &out.TagIgnorePrefixes
+		*out = make([]string, len(*in))
+		copy(*out, *in)
+	}
 }
 
 // DeepCopy is an autogenerated deepcopy function, copying the receiver, creating a new CustomDBInstanceParameters.
diff --git a/package/crds/rds.aws.crossplane.io_dbinstances.yaml b/package/crds/rds.aws.crossplane.io_dbinstances.yaml
index 0fcbee3742..6638bd70f1 100644
--- a/package/crds/rds.aws.crossplane.io_dbinstances.yaml
+++ b/package/crds/rds.aws.crossplane.io_dbinstances.yaml
@@ -1770,6 +1770,11 @@ spec:
 
                       Default: io1, if the Iops parameter is specified. Otherwise, gp2.
                     type: string
+                  tagIgnorePrefixes:
+                    description: List of tag prefixes to be ignored during reconciliation.
+                    items:
+                      type: string
+                    type: array
                   tags:
                     description: Tags to assign to the DB instance.
                     items:
diff --git a/pkg/controller/rds/dbinstance/setup.go b/pkg/controller/rds/dbinstance/setup.go
index 027ebf29ad..e1f6bf7ac0 100644
--- a/pkg/controller/rds/dbinstance/setup.go
+++ b/pkg/controller/rds/dbinstance/setup.go
@@ -534,7 +534,20 @@ func (e *custom) isUpToDate(ctx context.Context, cr *svcapitypes.DBInstance, out
 		cmpopts.IgnoreFields(svcapitypes.CustomDBInstanceParameters{}, "DeleteAutomatedBackups"),
 	)
 
-	e.cache.addTags, e.cache.removeTags = utils.DiffTags(cr.Spec.ForProvider.Tags, db.TagList)
+	ignore := append([]string{"aws:"}, cr.Spec.ForProvider.TagIgnorePrefixes...)
+	var observedTags []*svcsdk.Tag
+	if db.TagList != nil {
+		for _, tag := range db.TagList { // index discarded with _
+			if utils.ShouldIgnore(pointer.StringValue(tag.Key), ignore) {
+				continue
+			}
+			observedTags = append(observedTags, &svcsdk.Tag{
+				Key:   tag.Key,
+				Value: tag.Value,
+			})
+		}
+	}
+	e.cache.addTags, e.cache.removeTags = utils.DiffTags(cr.Spec.ForProvider.Tags, observedTags)
 	tagsChanged := len(e.cache.addTags) != 0 || len(e.cache.removeTags) != 0
 
 	if diff == "" && !maintenanceWindowChanged && !backupWindowChanged && !iopsChanged && !storageThroughputChanged && !versionChanged && !vpcSGsChanged && !dbParameterGroupChanged && !optionGroupChanged && !tagsChanged {
diff --git a/pkg/controller/rds/utils/tags.go b/pkg/controller/rds/utils/tags.go
index f3da92849a..c0e7160b3a 100644
--- a/pkg/controller/rds/utils/tags.go
+++ b/pkg/controller/rds/utils/tags.go
@@ -19,6 +19,7 @@ package utils
 import (
 	"context"
 	"sort"
+	"strings"
 
 	svcsdk "github.com/aws/aws-sdk-go/service/rds"
 	"github.com/aws/aws-sdk-go/service/rds/rdsiface"
@@ -35,6 +36,16 @@ const (
 	errCreateTags          = "cannot create tags"
 )
 
+// ShouldIgnore returns true if `key` starts with any supplied prefix.
+func ShouldIgnore(key string, prefixes []string) bool {
+	for _, p := range prefixes {
+		if strings.HasPrefix(key, p) {
+			return true
+		}
+	}
+	return false
+}
+
 // AreTagsUpToDate for spec and resourceName
 func AreTagsUpToDate(ctx context.Context, client rdsiface.RDSAPI, spec []*svcapitypes.Tag, resourceName *string) (bool, []*svcsdk.Tag, []*string, error) {
 	current, err := ListTagsForResource(ctx, client, resourceName)