diff --git a/src/axolotl/integrations/cut_cross_entropy/__init__.py b/src/axolotl/integrations/cut_cross_entropy/__init__.py
index 9b155ca8a..c29bb55d4 100644
--- a/src/axolotl/integrations/cut_cross_entropy/__init__.py
+++ b/src/axolotl/integrations/cut_cross_entropy/__init__.py
@@ -71,7 +71,7 @@ class CutCrossEntropyPlugin(BasePlugin):
         if cfg.cut_cross_entropy:
             self._check_requirements()
 
-            from axolotl.integrations.cut_cross_entropy.monkeypatch.patch import (
+            from .monkeypatch.patch import (
                 cce_patch,
             )
 
diff --git a/src/axolotl/loaders/patch_manager.py b/src/axolotl/loaders/patch_manager.py
index ca8fd1258..7c4e75796 100644
--- a/src/axolotl/loaders/patch_manager.py
+++ b/src/axolotl/loaders/patch_manager.py
@@ -50,6 +50,7 @@ class PatchManager:
     def apply_pre_model_load_patches(self):
         """Apply pre-model load patches based on config."""
         self._apply_flash_attention_patches()
+        self._apply_chunked_cross_entropy_patch()
         self._apply_fsdp_patches()
         self._apply_adapter_patches()
         self._apply_flex_attention_patches()
@@ -78,6 +79,15 @@ class PatchManager:
             patch_xformers_attn_over_fa2()
             self.cfg.flash_attention = True
 
+    def _apply_chunked_cross_entropy_patch(self):
+        if self.cfg.chunked_cross_entropy:
+            from axolotl.monkeypatch.loss.chunked import patch_chunked_ce_loss_fn
+
+            if self.cfg.chunked_cross_entropy_num_chunks:
+                patch_chunked_ce_loss_fn(self.cfg.chunked_cross_entropy_num_chunks)
+            else:
+                patch_chunked_ce_loss_fn()
+
     def _apply_fsdp_patches(self):
         """Apply patches for FSDP configurations."""
         if self.cfg.fsdp_config and str(self.cfg.fsdp_config.fsdp_version) == "2":
diff --git a/src/axolotl/monkeypatch/loss/__init__.py b/src/axolotl/monkeypatch/loss/__init__.py
new file mode 100644
index 000000000..e69de29bb
diff --git a/src/axolotl/monkeypatch/loss/chunked.py b/src/axolotl/monkeypatch/loss/chunked.py
new file mode 100644
index 000000000..0a9d0de82
--- /dev/null
+++ b/src/axolotl/monkeypatch/loss/chunked.py
@@ -0,0 +1,134 @@
+"""
+chunked ce loss
+"""
+
+from typing import List, Optional
+
+import torch
+import torch.nn.functional as F
+
+
+# copied and modified from torchtune.modules.loss.CEWithChunkedOutputLoss
+class CEWithChunkedOutputLoss(torch.nn.Module):
+    """
+    Cross-entropy with chunked outputs that saves memory by only upcasting one chunk at a time.
+
+    For more details, please refer to: https://github.com/pytorch/torchtune/pull/1390
+    """
+
+    def __init__(self, num_output_chunks: int = 8, ignore_index: int = -100):
+        super().__init__()
+        self.num_output_chunks = num_output_chunks
+        self.ignore_index = ignore_index
+
+    def compute_cross_entropy(
+        self,
+        logits: torch.Tensor,
+        labels: torch.Tensor,
+        normalize: bool = True,  # pylint: disable=unused-argument
+    ) -> torch.Tensor:
+        """
+        Upcast logits to fp32 and compute cross entropy loss.
+        """
+        return F.cross_entropy(
+            logits.float(), labels, ignore_index=self.ignore_index, reduction="sum"
+        )
+
+    def forward(
+        self, logits: List[torch.Tensor], labels: torch.Tensor, reduction="sum"
+    ) -> torch.Tensor:
+        """
+        Args:
+            logits (List[torch.Tensor]): List of chunked logits of length
+                ``self.num_output_chunks``, where each chunk has shape
+                ``(batch_size, num_tokens / num_output_chunks, vocab_size)``.
+            labels (torch.Tensor): Ground truth labels of shape ``(batch_size, num_tokens)``.
+            reduction (str): The reduction to apply to the output.
+
+        Returns:
+            torch.Tensor: Cross entropy loss of shape (1,).
+        """
+
+        total_elements = (labels != self.ignore_index).sum()
+
+        # chunk and reshape labels (bsz, num_tokens, vocab) -> [(bsz*num_tokens/num_chunks, vocab)]
+        labels = [
+            target_chunk.reshape(-1)
+            for target_chunk in labels.chunk(self.num_output_chunks, dim=1)
+        ]
+        # reshape logits [(bsz, num_tokens/num_chunks, vocab)] -> [(bsz*num_tokens/num_chunks, vocab)]
+        logits = [
+            logit_chunk.reshape(-1, logit_chunk.size(-1)) for logit_chunk in logits
+        ]
+
+        # compute one chunk at a time
+        total_loss = 0.0
+        for logits_chunk, labels_chunk in zip(logits, labels):
+            total_loss += self.compute_cross_entropy(logits_chunk, labels_chunk)
+
+        if reduction == "sum":
+            return total_loss
+        return total_loss / total_elements
+
+
+def _build_chunked_ce_loss_fn(num_output_chunks: int = 8, ignore_index: int = -100):
+    loss_fn_ce = CEWithChunkedOutputLoss(num_output_chunks, ignore_index)
+    loss_fn_ce.compute_cross_entropy = torch.compile(
+        loss_fn_ce.compute_cross_entropy, backend="inductor"
+    )
+    return loss_fn_ce
+
+
+def get_causal_lm_loss(num_output_chunks: int = 8, ignore_index: int = -100):
+    loss_fn_ce = _build_chunked_ce_loss_fn(num_output_chunks, ignore_index)
+
+    def chunked_fix_cross_entropy(
+        source,
+        target,
+        num_items_in_batch: int = None,
+        ignore_index: int = -100,
+        **kwargs,
+    ):  # pylint: disable=unused-argument
+        reduction = "sum" if num_items_in_batch is not None else "mean"
+        logit_chunks = [  # pylint: disable=unnecessary-comprehension
+            chunk for chunk in source.chunk(loss_fn_ce.num_output_chunks, dim=1)
+        ]
+        loss = loss_fn_ce(logit_chunks, target, reduction=reduction)
+        if reduction == "sum":
+            loss = loss / num_items_in_batch
+        return loss
+
+    def for_causal_lm_chunked_loss(
+        logits,
+        labels,
+        vocab_size: int = None,  # pylint: disable=unused-argument
+        num_items_in_batch: Optional[int] = None,
+        ignore_index: int = -100,
+        shift_labels: Optional[torch.Tensor] = None,
+        **kwargs,
+    ) -> torch.Tensor:
+        # skip the upcast to float since we handle that in the chunking loss
+        if shift_labels is None:
+            # Shift so that tokens < n predict n
+            labels = F.pad(labels, (0, 1), value=ignore_index)
+            shift_labels = labels[..., 1:].contiguous()
+
+        # Skip Flattening the tokens
+        # Enable model parallelism
+        shift_labels = shift_labels.to(logits.device)
+        loss = chunked_fix_cross_entropy(
+            logits, shift_labels, num_items_in_batch, ignore_index, **kwargs
+        )
+        return loss
+
+    return for_causal_lm_chunked_loss
+
+
+def patch_chunked_ce_loss_fn(num_output_chunks: int = 8, ignore_index: int = -100):
+    import transformers.loss.loss_utils
+
+    for_causal_lm_chunked_loss = get_causal_lm_loss(num_output_chunks, ignore_index)
+    transformers.loss.loss_utils.ForCausalLMLoss = for_causal_lm_chunked_loss
+    transformers.loss.loss_utils.LOSS_MAPPING["ForCausalLM"] = (
+        for_causal_lm_chunked_loss
+    )
diff --git a/src/axolotl/utils/schemas/config.py b/src/axolotl/utils/schemas/config.py
index 460043272..c698fc3b6 100644
--- a/src/axolotl/utils/schemas/config.py
+++ b/src/axolotl/utils/schemas/config.py
@@ -523,6 +523,19 @@ class AxolotlInputConfig(
         },
     )
 
+    chunked_cross_entropy: bool | None = Field(
+        default=None,
+        json_schema_extra={
+            "description": "Whether to use chunked cross entropy loss for memory efficiency"
+        },
+    )
+    chunked_cross_entropy_num_chunks: int | None = Field(
+        default=None,
+        json_schema_extra={
+            "description": "Number of chunks to use for chunked cross entropy loss"
+        },
+    )
+
     llama4_linearized_experts: bool | None = None
 
     deepspeed: str | dict[str, Any] | None = Field(
diff --git a/tests/test_chunked_xentropy.py b/tests/test_chunked_xentropy.py
new file mode 100644
index 000000000..3e439f0a3
--- /dev/null
+++ b/tests/test_chunked_xentropy.py
@@ -0,0 +1,40 @@
+"""
+test suite for chunked cross entropy
+"""
+
+import pytest
+import torch
+from torch import nn
+
+from axolotl.monkeypatch.loss.chunked import get_causal_lm_loss
+
+
+@pytest.fixture
+def chunked_fixtures():
+    model_dim = 512
+    vocab_size = 1024 * 256
+    seq_len = 2048
+    batch_size = 1
+
+    lm_head = nn.Linear(model_dim, vocab_size)
+    hidden_state = torch.randn(batch_size, seq_len, model_dim)
+    labels = torch.randint(low=0, high=vocab_size, size=(batch_size, seq_len))
+    return lm_head, hidden_state, labels, vocab_size
+
+
+def test_chunked_forward(chunked_fixtures):  # pylint: disable=redefined-outer-name
+    lm_head, hidden_state, labels, vocab_size = chunked_fixtures
+    lm_loss = get_causal_lm_loss()
+
+    logits = lm_head(hidden_state)
+
+    chunked_lm_loss = lm_loss(logits, labels)
+
+    logits_flattened = logits.view(-1, vocab_size)
+    labels_flattened = labels.view(-1)
+
+    loss = nn.functional.cross_entropy(
+        logits_flattened.float(), labels_flattened, reduction="mean"
+    )
+
+    assert torch.allclose(chunked_lm_loss, loss, atol=1e-2, rtol=1e-2)