diff --git a/infra/azure/terraform/capz/capz-monitoring/main.tf b/infra/azure/terraform/capz/capz-monitoring/main.tf
new file mode 100644
index 00000000000..3b7c1b75d35
--- /dev/null
+++ b/infra/azure/terraform/capz/capz-monitoring/main.tf
@@ -0,0 +1,79 @@
+/*
+Copyright 2024 The Kubernetes Authors.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+variable "resource_group_name" {
+  type = string
+}
+
+variable "location" {
+  type = string
+}
+
+variable "subscription_id" {
+  type = string
+}
+
+# Create the "capz-monitoring" resource group
+resource "azurerm_resource_group" "capz-monitoring" {
+  location = var.location
+  name     = var.resource_group_name
+  tags = {
+    DO-NOT-DELETE     = "contact capz"
+    creationTimestamp = "2024-10-24T00:00:00Z"
+  }
+}
+
+resource "azurerm_user_assigned_identity" "capz_monitoring_user_identity" {
+  name                = "capz-monitoring-user-identity"
+  location            = azurerm_resource_group.capz-monitoring.location
+  resource_group_name = azurerm_resource_group.capz-monitoring.name
+}
+
+resource "azurerm_role_assignment" "monitoring_reader" {
+  principal_id         = azurerm_user_assigned_identity.capz_monitoring_user_identity.principal_id
+  role_definition_name = "Monitoring Reader"
+  scope                = "/subscriptions/${var.subscription_id}"
+  depends_on = [ azurerm_user_assigned_identity.capz_monitoring_user_identity ]
+}
+
+resource "azurerm_kubernetes_cluster" "capz-monitoring" {
+  dns_prefix            = var.resource_group_name
+  location              = var.location
+  name                  = var.resource_group_name
+  resource_group_name   = var.resource_group_name
+  tags = {
+    DO-NOT-DELETE     = "contact capz"
+    creationTimestamp = "2024-10-24T00:00:00Z"
+  }
+  depends_on = [
+    azurerm_resource_group.capz-monitoring,
+    azurerm_user_assigned_identity.capz_monitoring_user_identity,
+  ]
+  kubelet_identity {
+    user_assigned_identity_id = azurerm_user_assigned_identity.capz_monitoring_user_identity.id
+  }
+  identity {
+    type                     = "UserAssigned"
+    identity_ids = [
+      azurerm_user_assigned_identity.capz_monitoring_user_identity.id
+    ]
+  }
+  default_node_pool {
+    name       = "default"
+    node_count = 1
+    vm_size    = "Standard_Ds2_v2"
+  }
+}
diff --git a/infra/azure/terraform/capz/main.tf b/infra/azure/terraform/capz/main.tf
index b94b887c834..7e964485719 100644
--- a/infra/azure/terraform/capz/main.tf
+++ b/infra/azure/terraform/capz/main.tf
@@ -133,3 +133,11 @@ module "cluster_api_gallery" {
   location            = var.location
   depends_on          = module.role_assignments
 }
+
+# Import CAPZ monitoring module
+module "capz_monitoring" {
+  source              = "./capz-monitoring"
+  resource_group_name = var.resource_group_name
+  location            = var.location
+  subscription_id     = data.azurerm_client_config.current.subscription_id
+}