diff --git a/cmake/nuttx_kconfig.cmake b/cmake/nuttx_kconfig.cmake
index 923b2a03d67..f9364ea9a2c 100644
--- a/cmake/nuttx_kconfig.cmake
+++ b/cmake/nuttx_kconfig.cmake
@@ -122,59 +122,77 @@ function(nuttx_generate_kconfig)
     REQUIRED
     ARGN
     ${ARGN})
+
+  # Exit early if: - The current directory does NOT contain a CMakeLists.txt
+  # (not an app dir), OR - The output Kconfig already exists in the apps binary
+  # directory
   if(NOT EXISTS "${CMAKE_CURRENT_LIST_DIR}/CMakeLists.txt"
      OR EXISTS "${NUTTX_APPS_BINDIR}/Kconfig")
     return()
   endif()
 
+  # Determine output Kconfig file path
   set(KCONFIG_OUTPUT_FILE)
   if(MENUDESC)
     string(REPLACE "/" "_" KCONFIG_PREFIX ${CMAKE_CURRENT_LIST_DIR})
     if(WIN32)
+      # On Windows, also replace drive letter separators like "C:".
       string(REPLACE ":" "_" KCONFIG_PREFIX ${KCONFIG_PREFIX})
     endif()
+
+    # Output Kconfig file path: <apps_bindir>/<prefix>_Kconfig
     string(APPEND KCONFIG_OUTPUT_FILE ${NUTTX_APPS_BINDIR} "/"
            ${KCONFIG_PREFIX} "_Kconfig")
+
+    # Start a menu block
     file(WRITE ${KCONFIG_OUTPUT_FILE} "menu \"${MENUDESC}\"\n")
   else()
+    # Without MENUDESC, generate the root Kconfig file.
     set(KCONFIG_OUTPUT_FILE ${NUTTX_APPS_BINDIR}/Kconfig)
   endif()
 
-  file(
-    GLOB SUB_CMAKESCRIPTS
-    LIST_DIRECTORIES false
-    ${CMAKE_CURRENT_LIST_DIR} ${CMAKE_CURRENT_LIST_DIR}/*/CMakeLists.txt)
+  # Collect valid directories that contain Kconfig or CMakeLists
+  set(DIR_LIST)
+  foreach(external_dir ${EXTERNAL_DIRECTORIES})
+    get_filename_component(external_reldir "${external_dir}" REALPATH)
+    if(IS_DIRECTORY ${external_reldir})
+      list(APPEND DIR_LIST "${external_reldir}")
+    endif()
+  endforeach()
 
-  if(NOT MENUDESC)
-    set(EXTERNAL_CMAKESCRIPTS)
-    foreach(external_dir ${EXTERNAL_DIRECTORIES})
-      if(EXISTS ${external_dir}/CMakeLists.txt)
-        list(APPEND EXTERNAL_CMAKESCRIPTS "${external_dir}/CMakeLists.txt")
+  # Get all entries directly under the current app directory
+  file(GLOB FIRST_LEVEL_DIRS "${CMAKE_CURRENT_SOURCE_DIR}/*")
+
+  # Add directories that contain either CMakeLists.txt or Kconfig
+  foreach(dir IN LISTS FIRST_LEVEL_DIRS)
+    if(IS_DIRECTORY "${dir}")
+      if(EXISTS "${dir}/CMakeLists.txt" OR EXISTS "${dir}/Kconfig")
+        list(APPEND DIR_LIST "${dir}")
       endif()
-    endforeach()
-  endif()
+    endif()
+  endforeach()
 
-  # we need to recursively generate the Kconfig menus of multi-level
-  # directories.
-  #
-  # when generating a Kconfig file for the current directory, it should include
-  # and invoke all the Kconfig files gathered from its subdirectories.
-  foreach(SUB_CMAKESCRIPT ${SUB_CMAKESCRIPTS} ${EXTERNAL_CMAKESCRIPTS})
-    string(REPLACE "CMakeLists.txt" "Kconfig" SUB_KCONFIG ${SUB_CMAKESCRIPT})
+  # Generate "source" entries for each discovered Kconfig
+  foreach(dir ${DIR_LIST})
+    set(SUB_KCONFIG "${dir}/Kconfig")
     string(REPLACE "/" "_" MENUCONFIG ${SUB_KCONFIG})
     if(WIN32)
       string(REPLACE ":" "_" MENUCONFIG ${MENUCONFIG})
     endif()
-    # check whether the subdirectory will include a generated Kconfig file.
+
+    # Source Kconfig from the corresponding apps binary directory if present
     if(EXISTS ${NUTTX_APPS_BINDIR}/${MENUCONFIG})
       file(APPEND ${KCONFIG_OUTPUT_FILE}
            "source \"${NUTTX_APPS_BINDIR}/${MENUCONFIG}\"\n")
     endif()
+
+    # Source Kconfig from the directory if present
     if(EXISTS ${SUB_KCONFIG})
       file(APPEND ${KCONFIG_OUTPUT_FILE} "source \"${SUB_KCONFIG}\"\n")
     endif()
   endforeach()
 
+  # Close the menu block if MENUDESC was used
   if(MENUDESC)
     file(APPEND ${KCONFIG_OUTPUT_FILE} "endmenu # ${MENUDESC}\n")
   endif()