diff --git a/src/axolotl/monkeypatch/accelerate/fsdp2.py b/src/axolotl/monkeypatch/accelerate/fsdp2.py
index af6f24a63..242bcc667 100644
--- a/src/axolotl/monkeypatch/accelerate/fsdp2.py
+++ b/src/axolotl/monkeypatch/accelerate/fsdp2.py
@@ -182,10 +182,57 @@ def get_state_dict(self, model, unwrap=True):
     return state_dict
 
 
+def patch_peft_param_wrapper_for_fsdp2():
+    """Patch PEFT's _LoraParameterProxy.forward for FSDP2 DTensor compatibility.
+
+    PEFT's ParamWrapper applies LoRA via torch.nn.utils.parametrize, which adds
+    delta_weight to the base weight W inside _LoraParameterProxy.forward().
+    Under FSDP2, W may be a DTensor (from FSDP unshard) while delta_weight is a
+    regular Tensor (or vice versa), causing a RuntimeError on mixed types.
+
+    This patch promotes the non-DTensor operand to match the DTensor's spec
+    using DTensor.from_local(), which is free for Replicate placement (just
+    metadata wrapping, no communication).
+    """
+    from peft.tuners.lora.layer import _LoraParameterProxy
+
+    if getattr(_LoraParameterProxy, "_axolotl_fsdp2_patched", False):
+        return
+
+    _original_forward = _LoraParameterProxy.forward
+
+    def _patched_forward(self, W):
+        from torch.distributed.tensor import DTensor
+
+        delta = self.delta_weight
+        w_is_dt = isinstance(W, DTensor)
+        d_is_dt = isinstance(delta, DTensor)
+
+        with torch.nn.utils.parametrize.cached():
+            if w_is_dt == d_is_dt:
+                return W + delta
+            if w_is_dt:
+                return W + DTensor.from_local(delta, W.device_mesh, W.placements)
+            return DTensor.from_local(W, delta.device_mesh, delta.placements) + delta
+
+    _LoraParameterProxy.forward = _patched_forward
+    _LoraParameterProxy._axolotl_fsdp2_patched = True
+    LOG.info("Patched PEFT _LoraParameterProxy.forward for FSDP2 DTensor compatibility")
+
+
 def _process_lora_module_for_fsdp(module, fsdp2_kwargs):
     """Helper function to process LoRA modules for FSDP2."""
+    from peft.tuners.lora.layer import ParamWrapper
     from torch.distributed.fsdp import fully_shard
 
+    # ParamWrapper's lora_A/B are only accessed via .weight in get_delta_weight(),
+    # not through forward().  Independent sharding leaves them as sharded DTensors
+    # outside the unshard context, causing incorrect reshape/einsum results.
+    # The parent decoder layer's FSDP wrapper manages them instead — properly
+    # unsharded (Replicate) during forward.
+    if isinstance(module, ParamWrapper):
+        return False
+
     log_bias_dtype_mismatch = False
 
     # Linear4Bit will keep it's bias term in fp32. If the weight dtype is in bf16 we are not able to
@@ -327,6 +374,14 @@ def fsdp2_prepare_model(accelerator, model: torch.nn.Module) -> torch.nn.Module:
 
     is_peft_model = isinstance(model, PeftModel)
 
+    # Patch PEFT's _LoraParameterProxy for DTensor compatibility if any
+    # ParamWrapper modules exist (used for target_parameters / 3D expert params).
+    if is_peft_model:
+        from peft.tuners.lora.layer import ParamWrapper
+
+        if any(isinstance(m, ParamWrapper) for m in model.modules()):
+            patch_peft_param_wrapper_for_fsdp2()
+
     auto_wrap_policy = fsdp2_prepare_auto_wrap_policy(fsdp2_plugin, model)
     log_bias_dtype_mismatch = False
     if auto_wrap_policy is not None: