diff --git a/modules/trusted-firmware-m/Kconfig b/modules/trusted-firmware-m/Kconfig
index 1530017e0d6..31492d4437a 100644
--- a/modules/trusted-firmware-m/Kconfig
+++ b/modules/trusted-firmware-m/Kconfig
@@ -120,10 +120,10 @@ config TFM_CMAKE_BUILD_TYPE_DEBUG
 endchoice
 
 config TFM_ISOLATION_LEVEL
-	int "Isolation level setting." if TFM_PROFILE_TYPE_NOT_SET
+	int "Isolation level setting." if (TFM_PROFILE_TYPE_NOT_SET && TFM_IPC)
 	range 1 3
 	depends on BUILD_WITH_TFM
-	default 1 if TFM_PROFILE_TYPE_SMALL
+	default 1 if TFM_PROFILE_TYPE_SMALL || !TFM_IPC
 	default 2 if TFM_PROFILE_TYPE_MEDIUM
 	default 3 if TFM_PROFILE_TYPE_LARGE
 	help
@@ -131,6 +131,8 @@ config TFM_ISOLATION_LEVEL
 	  1,2 or 3; the default is set by build configuration. When TF-M
 	  Profile option is supplied, do not allow manual setting of the
 	  isolation level, as it is determined by the profile setting.
+	  As isolation levels 2 and 3 require PSA_API (TFM_IPC) support,
+	  force level 1 when TFM_IPC is not enabled.
 
 config TFM_BL2
 	bool "Add MCUboot to TFM"