diff --git a/trl/trainer/grpo_config.py b/trl/trainer/grpo_config.py
index 0fd0d9f5d28..5d41071f320 100644
--- a/trl/trainer/grpo_config.py
+++ b/trl/trainer/grpo_config.py
@@ -174,3 +174,12 @@ class GRPOConfig(TrainingArguments):
         default=0.04,
         metadata={"help": "KL coefficient."},
     )
+
+    per_device_micro_batch_size: int = field(
+        default=8,
+        metadata={
+            "help": "Micro batch size per GPU/TPU/MPS/NPU core/CPU for computing loss terms. "
+            "These microbatches will be accumulated over, resulting in the same effective "
+            "batch size as `per_device_train_batch_size*num_generations`, but with lower mem footprint."
+        },
+    )
diff --git a/trl/trainer/grpo_trainer.py b/trl/trainer/grpo_trainer.py
index f130d5155f0..5e8064fb21d 100644
--- a/trl/trainer/grpo_trainer.py
+++ b/trl/trainer/grpo_trainer.py
@@ -37,7 +37,7 @@
     is_wandb_available,
 )
 from transformers.integrations.deepspeed import is_deepspeed_zero3_enabled
-from transformers.utils import is_peft_available
+from transformers.utils import is_peft_available, logging
 
 from ..data_utils import apply_chat_template, is_conversational, maybe_apply_chat_template
 from ..import_utils import is_vllm_available
@@ -55,6 +55,9 @@
 if is_wandb_available():
     import wandb
 
+
+logger = logging.get_logger("GRPOTrainer")
+
 # What we call a reward function is a callable that takes a list of prompts and completions and returns a list of
 # rewards. When it's a string, it's a model ID, so it's loaded as a pretrained model.
 RewardFunc = Union[str, PreTrainedModel, Callable[[list, list], list[float]]]
@@ -145,6 +148,7 @@ class GRPOTrainer(Trainer):
     """
 
     _tag_names = ["trl", "grpo"]
+    args: GRPOConfig  # helps with type hinting
 
     def __init__(
         self,
@@ -383,6 +387,7 @@ def compute_loss(self, model, inputs, return_outputs=False, num_items_in_batch=N
             prompt_inputs["input_ids"] = prompt_inputs["input_ids"][:, -self.max_prompt_length :]
             prompt_inputs["attention_mask"] = prompt_inputs["attention_mask"][:, -self.max_prompt_length :]
 
+        logger.info("Starting generation")
         # Generate completions using either vLLM or regular generation
         if self.args.use_vllm:
             # First, have main process load weights if needed
@@ -419,80 +424,122 @@ def compute_loss(self, model, inputs, return_outputs=False, num_items_in_batch=N
         else:
             # Regular generation path
             with unwrap_model_for_generation(model, self.accelerator) as unwrapped_model:
+                unwrapped_model.eval()  # Needed to make sure use_cache works with gradient_checkpointing
                 prompt_completion_ids = unwrapped_model.generate(
                     **prompt_inputs, generation_config=self.generation_config
                 )
+            model.train()
+        logger.info("Finished generation")
 
+        bsz = prompt_completion_ids.size(0)
+        micro_bsz = self.args.per_device_micro_batch_size or bsz  # default to full batch if not set
         prompt_length = prompt_inputs["input_ids"].size(1)
-        completion_ids = prompt_completion_ids[:, prompt_length:]
-
-        # Get the per-token log probabilities for the completions for the model and the reference model
-        def get_per_token_logps(model, input_ids, logits_to_keep):
-            # We add 1 to `logits_to_keep` because the last logits of the sequence is later excluded
-            logits = model(input_ids, logits_to_keep=logits_to_keep + 1).logits  # (B, L, V)
-            logits = logits[:, :-1, :]  # (B, L-1, V), exclude the last logit: it corresponds to the next token pred
-
-            # Compute the log probabilities for the input tokens. Use a loop to reduce memory peak.
-            per_token_logps = []
-            for logits_row, input_ids_row in zip(logits, input_ids[:, -logits_to_keep:]):
-                log_probs = logits_row.log_softmax(dim=-1)
-                token_log_prob = torch.gather(log_probs, dim=1, index=input_ids_row.unsqueeze(1)).squeeze(1)
-                per_token_logps.append(token_log_prob)
-            return torch.stack(per_token_logps)
-
-        logits_to_keep = completion_ids.size(1)  # we only need to compute the logits for the completion tokens
-        per_token_logps = get_per_token_logps(model, prompt_completion_ids, logits_to_keep)
-
-        with torch.inference_mode():
-            if self.ref_model is not None:
-                ref_per_token_logps = get_per_token_logps(self.ref_model, prompt_completion_ids, logits_to_keep)
-            else:
-                with self.accelerator.unwrap_model(model).disable_adapter():
-                    ref_per_token_logps = get_per_token_logps(model, prompt_completion_ids, logits_to_keep)
-
-        # Compute the KL divergence between the model and the reference model
-        per_token_kl = torch.exp(ref_per_token_logps - per_token_logps) - (ref_per_token_logps - per_token_logps) - 1
-
-        # Mask everything after the first EOS token
-        is_eos = completion_ids == self.processing_class.eos_token_id
-        eos_idx = torch.full((is_eos.size(0),), is_eos.size(1), dtype=torch.long, device=device)
-        eos_idx[is_eos.any(dim=1)] = is_eos.int().argmax(dim=1)[is_eos.any(dim=1)]
-        sequence_indices = torch.arange(is_eos.size(1), device=device).expand(is_eos.size(0), -1)
-        completion_mask = (sequence_indices <= eos_idx.unsqueeze(1)).int()
+        prompts = [prompt for prompt in prompts for _ in range(self.num_generations)]
 
-        # Decode the generated completions
-        completions = self.processing_class.batch_decode(completion_ids, skip_special_tokens=True)
-        if is_conversational(inputs[0]):
-            completions = [[{"role": "assistant", "content": completion}] for completion in completions]
+        # Prepare reward kwargs before looping through microbatches
+        if any(not isinstance(reward_func, PreTrainedModel) for reward_func in self.reward_funcs):
+            # Repeat all input columns (but "prompt" and "completion") to match the number of generations
+            all_reward_kwargs = {key: [] for key in inputs[0].keys() if key not in ["prompt", "completion"]}
+            for key in all_reward_kwargs:
+                for example in inputs:
+                    all_reward_kwargs[key].extend([example[key]] * self.num_generations)
+
+        # iterate through bsz in loss_bsz chunks and accumulate:
+        # - rewards
+        # - per-token log probabilities
+        # - per-token KL divergences
+        # - masks of completion tokens
+        all_rewards_per_func = []
+        all_per_token_logps = []
+        all_per_token_kl = []
+        all_completion_mask = []
+        for i in range(0, bsz, micro_bsz):
+            current_batch_span = slice(i, i + micro_bsz)
+
+            micro_prompt_completion_ids = prompt_completion_ids[current_batch_span]
+            micro_completion_ids = micro_prompt_completion_ids[:, prompt_length:]
+            current_bsz = micro_completion_ids.size(0)  # last one may be <micro_bsz
+
+            # Get the per-token log probabilities for the completions for the model and the reference model
+            def get_per_token_logps(model, input_ids, logits_to_keep):
+                # We add 1 to `logits_to_keep` because the last logits of the sequence is later excluded
+                logits = model(input_ids, logits_to_keep=logits_to_keep + 1).logits  # (B, L, V)
+                logits = logits[
+                    :, :-1, :
+                ]  # (B, L-1, V), exclude the last logit: it corresponds to the next token pred
+
+                # Compute the log probabilities for the input tokens. Use a loop to reduce memory peak.
+                per_token_logps = []
+                for logits_row, input_ids_row in zip(logits, input_ids[:, -logits_to_keep:]):
+                    log_probs = logits_row.log_softmax(dim=-1)
+                    token_log_prob = torch.gather(log_probs, dim=1, index=input_ids_row.unsqueeze(1)).squeeze(1)
+                    per_token_logps.append(token_log_prob)
+                return torch.stack(per_token_logps)
+
+            # we only need to compute the logits for the completion tokens
+            logits_to_keep = micro_completion_ids.size(1)
+            per_token_logps = get_per_token_logps(model, micro_prompt_completion_ids, logits_to_keep)
+
+            with torch.inference_mode():
+                if self.ref_model is not None:
+                    ref_per_token_logps = get_per_token_logps(
+                        self.ref_model, micro_prompt_completion_ids, logits_to_keep
+                    )
+                else:
+                    with self.accelerator.unwrap_model(model).disable_adapter():
+                        ref_per_token_logps = get_per_token_logps(model, micro_prompt_completion_ids, logits_to_keep)
 
-        # Compute the rewards
-        prompts = [prompt for prompt in prompts for _ in range(self.num_generations)]
+            # Compute the KL divergence between the model and the reference model
+            per_token_kl = (
+                torch.exp(ref_per_token_logps - per_token_logps) - (ref_per_token_logps - per_token_logps) - 1
+            )
 
-        rewards_per_func = torch.zeros(len(prompts), len(self.reward_funcs), device=device)
-        for i, (reward_func, reward_processing_class) in enumerate(
-            zip(self.reward_funcs, self.reward_processing_classes)
-        ):
-            if isinstance(reward_func, PreTrainedModel):
-                if is_conversational(inputs[0]):
-                    messages = [{"messages": p + c} for p, c in zip(prompts, completions)]
-                    texts = [apply_chat_template(x, reward_processing_class)["text"] for x in messages]
+            # Mask everything after the first EOS token
+            is_eos = micro_completion_ids == self.processing_class.eos_token_id
+            eos_idx = torch.full((is_eos.size(0),), is_eos.size(1), dtype=torch.long, device=device)
+            eos_idx[is_eos.any(dim=1)] = is_eos.int().argmax(dim=1)[is_eos.any(dim=1)]
+            sequence_indices = torch.arange(is_eos.size(1), device=device).expand(is_eos.size(0), -1)
+            completion_mask = (sequence_indices <= eos_idx.unsqueeze(1)).int()
+
+            # Decode the generated completions
+            completions = self.processing_class.batch_decode(micro_completion_ids, skip_special_tokens=True)
+            if is_conversational(inputs[0]):
+                completions = [[{"role": "assistant", "content": completion}] for completion in completions]
+
+            # Compute the rewards
+            rewards_per_func = torch.zeros(current_bsz, len(self.reward_funcs), device=device)
+            for i, (reward_func, reward_processing_class) in enumerate(
+                zip(self.reward_funcs, self.reward_processing_classes)
+            ):
+                if isinstance(reward_func, PreTrainedModel):
+                    if is_conversational(inputs[0]):
+                        messages = [{"messages": p + c} for p, c in zip(prompts[current_batch_span], completions)]
+                        texts = [apply_chat_template(x, reward_processing_class)["text"] for x in messages]
+                    else:
+                        texts = [p + c for p, c in zip(prompts[current_batch_span], completions)]
+                    reward_inputs = reward_processing_class(
+                        texts, return_tensors="pt", padding=True, padding_side="right", add_special_tokens=False
+                    )
+                    reward_inputs = super()._prepare_inputs(reward_inputs)
+                    with torch.inference_mode():
+                        rewards_per_func[:, i] = reward_func(**reward_inputs).logits[:, 0]  # Shape (B*G,)
                 else:
-                    texts = [p + c for p, c in zip(prompts, completions)]
-                reward_inputs = reward_processing_class(
-                    texts, return_tensors="pt", padding=True, padding_side="right", add_special_tokens=False
-                )
-                reward_inputs = super()._prepare_inputs(reward_inputs)
-                with torch.inference_mode():
-                    rewards_per_func[:, i] = reward_func(**reward_inputs).logits[:, 0]  # Shape (B*G,)
-            else:
-                # Repeat all input columns (but "prompt" and "completion") to match the number of generations
-                reward_kwargs = {key: [] for key in inputs[0].keys() if key not in ["prompt", "completion"]}
-                for key in reward_kwargs:
-                    for example in inputs:
-                        # Repeat each value in the column for `num_generations` times
-                        reward_kwargs[key].extend([example[key]] * self.num_generations)
-                output_reward_func = reward_func(prompts=prompts, completions=completions, **reward_kwargs)
-                rewards_per_func[:, i] = torch.tensor(output_reward_func, dtype=torch.float32, device=device)
+                    reward_kwargs = {k: v[current_batch_span] for k, v in all_reward_kwargs.items()}
+                    output_reward_func = reward_func(
+                        prompts=prompts[current_batch_span], completions=completions, **reward_kwargs
+                    )
+                    rewards_per_func[:, i] = torch.tensor(output_reward_func, dtype=torch.float32, device=device)
+
+            all_rewards_per_func.append(rewards_per_func)
+            all_per_token_logps.append(per_token_logps)
+            all_per_token_kl.append(per_token_kl)
+            all_completion_mask.append(completion_mask)
+
+        # Concatenate and compute the loss
+        rewards_per_func = torch.concatenate(all_rewards_per_func, dim=0)
+        per_token_logps = torch.concatenate(all_per_token_logps, dim=0)
+        per_token_kl = torch.concatenate(all_per_token_kl, dim=0)
+        completion_mask = torch.concatenate(all_completion_mask, dim=0)
 
         # Sum the rewards from all reward functions
         rewards = rewards_per_func.sum(dim=1)