diff --git a/src/axolotl/prompt_strategies/chat_template.py b/src/axolotl/prompt_strategies/chat_template.py
index a943a1448..be6a38800 100644
--- a/src/axolotl/prompt_strategies/chat_template.py
+++ b/src/axolotl/prompt_strategies/chat_template.py
@@ -394,8 +394,8 @@ class ChatTemplateStrategy(PromptTokenizingStrategy):
 
     def is_prompt_batched(self, prompt: dict[str, Any]) -> bool:
         try:
-            return all(isinstance(v, list) for v in prompt.values()) and all(
-                isinstance(v, list) for v in prompt[self.prompter.field_messages]
+            return all(isinstance(v, (str, list)) for v in prompt.values()) and all(
+                isinstance(v, (str, list)) for v in prompt[self.prompter.field_messages]
             )
         except KeyError:
             return False
@@ -1004,6 +1004,13 @@ class ChatTemplateStrategy(PromptTokenizingStrategy):
         if tools is None:
             return None
 
+        # Some datasets have tools set to str
+        if isinstance(tools, str):
+            try:
+                tools = json.loads(tools)
+            except json.JSONDecodeError as e:
+                LOG.error(f"Error parsing tool parameters as JSON. Error: {e}")
+                raise
         if isinstance(tools, list):
             # Process each tool to handle JSON string parameters
             for tool in tools:
@@ -1034,6 +1041,22 @@ class ChatTemplateStrategy(PromptTokenizingStrategy):
         if messages is None:
             raise ValueError("Messages is null. Please check `field_messages`.")
 
+        if isinstance(messages, str):
+            try:
+                messages = json.loads(messages)
+            except json.JSONDecodeError as e:
+                LOG.error(f"Error parsing messages as JSON. Error: {e}")
+                raise
+            assert isinstance(messages, list), (
+                f"For SFT datasets that are stored in `str` format, the turns must be saved in a list of dictionaries, got {type(message)}"
+            )
+
+            # Extra check here to make sure decoded json is a list of dicts.
+            for i, message in enumerate(messages):
+                assert isinstance(message, dict), (
+                    f"For SFT datasets that are stored in `str` format, each turns must be saved in a dictionary, got {type(message)} for the turn {i}"
+                )
+
         if isinstance(messages, list):
             return messages
 
diff --git a/tests/test_datasets.py b/tests/test_datasets.py
index 3b24ad580..bdb795e13 100644
--- a/tests/test_datasets.py
+++ b/tests/test_datasets.py
@@ -487,3 +487,70 @@ class TestDatasetPreparation:
             assert "attention_mask" in dataset.features
             assert "labels" in dataset.features
             shutil.rmtree(tmp_ds_path)
+
+    @enable_hf_offline
+    def test_load_dataset_with_str_json_data(self, tokenizer):
+        """
+        Test loading datasets where data is stored as str JSON instead of list of dicts.
+        see: https://github.com/axolotl-ai-cloud/axolotl/pull/3607 for more details.
+        """
+        with tempfile.TemporaryDirectory() as tmp_dir:
+            import json
+
+            str_json_ds = Dataset.from_list(
+                [
+                    {
+                        "messages": json.dumps(
+                            [
+                                {"role": "user", "content": "Hello how are you?"},
+                                {
+                                    "role": "assistant",
+                                    "content": "I am doing good thanks",
+                                },
+                            ]
+                        )
+                    },
+                    {
+                        "messages": json.dumps(
+                            [
+                                {"role": "user", "content": "What is 2+2?"},
+                                {"role": "assistant", "content": "2+2 equals 4."},
+                            ]
+                        )
+                    },
+                ]
+            )
+
+            tmp_ds_path = Path(tmp_dir) / "str_json_dataset.parquet"
+            str_json_ds.to_parquet(tmp_ds_path)
+
+            prepared_path = Path(tmp_dir) / "prepared"
+            cfg = DictDefault(
+                {
+                    "tokenizer_config": "huggyllama/llama-7b",
+                    "sequence_len": 512,
+                    "datasets": [
+                        {
+                            "path": str(tmp_ds_path),
+                            "name": "test_str_json",
+                            "type": "chat_template",
+                            "field_messages": "messages",
+                            "message_field_role": "role",
+                            "message_field_content": "content",
+                        },
+                    ],
+                    "dataset_num_proc": 4,
+                }
+            )
+
+            with patch(
+                "axolotl.common.const.DEFAULT_DATASET_PREPARED_PATH", str(prepared_path)
+            ):
+                dataset, _ = _load_tokenized_prepared_datasets(tokenizer, cfg)
+
+            assert len(dataset) == 2
+            assert "input_ids" in dataset.features
+            assert "attention_mask" in dataset.features
+            assert "labels" in dataset.features
+
+            assert len(dataset[0]["input_ids"]) > 0