diff --git a/megatron/core/inference/batch_dimensions_utils.py b/megatron/core/inference/batch_dimensions_utils.py
index 77354d59320..1a202c35af5 100644
--- a/megatron/core/inference/batch_dimensions_utils.py
+++ b/megatron/core/inference/batch_dimensions_utils.py
@@ -235,6 +235,25 @@ def _calculate_cuda_graph_token_counts(
             (tp_size=2, num_cuda_graphs=4, cuda_graph_max_tokens=1000)
             [1000, 752, 504, 256]
         """
+        if num_cuda_graphs == -1:
+            # automatically determine the number of CUDA graphs to
+            # capture based on the `max_requests` value
+            cuda_graph_token_counts = (
+                [1, 2, 4] + list(range(8, 256, 8)) + list(range(256, cuda_graph_max_tokens + 1, 16))
+            )
+            # Align each entry to TP size
+            cuda_graph_token_counts = list(
+                dict.fromkeys(math.ceil(s / tp_size) * tp_size for s in cuda_graph_token_counts)
+            )
+            # Clamp to max tokens
+            cuda_graph_token_counts = [
+                s for s in cuda_graph_token_counts if s <= cuda_graph_max_tokens
+            ]
+            if not cuda_graph_token_counts or cuda_graph_token_counts[-1] != cuda_graph_max_tokens:
+                cuda_graph_token_counts.append(cuda_graph_max_tokens)
+            cuda_graph_token_counts.reverse()
+            return cuda_graph_token_counts
+
         assert num_cuda_graphs >= 1, f"num_cuda_graphs must be >= 1, got {num_cuda_graphs}"
         assert (
             cuda_graph_max_tokens > 0
@@ -340,7 +359,12 @@ def add_if_valid(token_count: int, prefill_req_count: int, decode_req_count: int
                 or cuda_graph_max_tokens <= 0
             ):
                 cuda_graph_max_tokens = max_tokens
-            num_cuda_graphs = min(max(num_cuda_graphs, 1), cuda_graph_max_tokens)
+
+            if num_cuda_graphs != -1:
+                # if -1, no need to adjust. This will be taken care of in
+                # the _calculate_cuda_graph_token_counts function where we will generate
+                # the token counts based on the max_tokens value and the step size.
+                num_cuda_graphs = min(max(num_cuda_graphs, 1), cuda_graph_max_tokens)
 
             # Calculate token counts for prefill and mixed graphs.
             # These need the full cuda_graph_max_tokens to handle variable-length sequences.
diff --git a/megatron/training/arguments.py b/megatron/training/arguments.py
index bd6143409e7..b1525396647 100644
--- a/megatron/training/arguments.py
+++ b/megatron/training/arguments.py
@@ -857,6 +857,11 @@ def validate_args(args, defaults={}):
         assert args.fp8 is None, \
             "fp8 is not supported with inference dynamic batching and full_iteration_inference CUDA graph"
 
+    if args.cuda_graph_impl == 'local':
+        assert args.inference_dynamic_batching_num_cuda_graphs > 0 or args.inference_dynamic_batching_num_cuda_graphs == -1, \
+            'inference_dynamic_batching_num_cuda_graphs should be a positive integer or -1' \
+            '-1 means that we will automatically determine the number of CUDA graphs to capture based on the `max_requests` value.'
+
     print_rank_0('using {} for parameters ...'.format(args.params_dtype))
 
     if args.dataloader_type is None:
@@ -1655,7 +1660,9 @@ def _add_inference_args(parser):
                        'cuda graph batch sizes range from 1 to `max_requests`. '
                        '(See `dynamic_context.py` for details on how '
                        '`max_requests` is computed). Due to rounding, the actual '
-                       'number of cuda graphs may not equal this argument.')
+                       'number of cuda graphs may not equal this argument.'
+                       'The user can also pass -1, in which case we automatically determine the number of graphs ' \
+                       'to capture based on the `max_requests`.')
     group.add_argument('--inference-dynamic-batching-track-paused-request-events',
                        action='store_true',
                        help='Track paused request ids by adding \'paused\' events '
diff --git a/tests/unit_tests/inference/engines/test_dynamic_engine.py b/tests/unit_tests/inference/engines/test_dynamic_engine.py
index 02be5c136fd..e679b5d7c64 100644
--- a/tests/unit_tests/inference/engines/test_dynamic_engine.py
+++ b/tests/unit_tests/inference/engines/test_dynamic_engine.py
@@ -543,7 +543,7 @@ def teardown_method(self, method):
         not is_fa_min_version("2.7.3"), reason="need latest flash attn for dynamic batching"
     )
     @pytest.mark.parametrize("model_provider", ["gpt", "mamba"])
-    @pytest.mark.parametrize("num_cuda_graphs", [None, 1, 4])
+    @pytest.mark.parametrize("num_cuda_graphs", [None, 1, 4, -1])
     @pytest.mark.parametrize("cuda_graph_scope", [[], [CudaGraphScope.full_iteration_inference]])
     def test_simple(self, model_provider, num_cuda_graphs, cuda_graph_scope) -> None:
         """Simple test that runs without errors, and validates output."""
@@ -557,6 +557,7 @@ def test_simple(self, model_provider, num_cuda_graphs, cuda_graph_scope) -> None
             num_cuda_graphs=num_cuda_graphs,
             cuda_graph_scope=cuda_graph_scope,
             force_build_cuda_graphs=True,
+            context_max_requests=128,
         )
 
         # Validate max_requests, max_tokens.