diff --git a/src/megatron/bridge/data/datasets/sft.py b/src/megatron/bridge/data/datasets/sft.py
index f29900223b..b12d564474 100644
--- a/src/megatron/bridge/data/datasets/sft.py
+++ b/src/megatron/bridge/data/datasets/sft.py
@@ -1197,7 +1197,7 @@ def collate_fn(self, batch):
         if self.pad_to_max_length:
             max_length = self.max_seq_length
         else:
-            max_length = min(self.max_seq_length, self._ceil_to_nearest(max_length, 16))
+            max_length = min(self.max_seq_length, self._ceil_to_nearest(max_length, self.pad_seq_length_to_mult))
         assert max_length <= self.max_seq_length
 
         position_ids = [list(range(max_length)) for _ in batch]
diff --git a/tests/unit_tests/data/datasets/test_sft.py b/tests/unit_tests/data/datasets/test_sft.py
index c819a7668a..0eb3b67f0a 100755
--- a/tests/unit_tests/data/datasets/test_sft.py
+++ b/tests/unit_tests/data/datasets/test_sft.py
@@ -325,6 +325,52 @@ def test_collate_fn(self, tmp_path):
         ]
         dataset.collate_fn(batch)
 
+    def test_collate_fn_respects_pad_seq_length_to_mult(self, tmp_path):
+        datasets_dir = tmp_path / "datasets"
+        datasets_dir.mkdir(exist_ok=True)
+        path = str(datasets_dir / "sft.jsonl")
+        line = {"input": "hi how are you?", "output": "I'm fine, thanks."}
+        with open(path, "w") as f:
+            for _ in range(10):
+                f.write(json.dumps(line) + "\n")
+
+        tokenizer = create_mock_tokenizer()
+        dataset = GPTSFTChatDataset(
+            file_path=path,
+            tokenizer=tokenizer,
+            label_key="output",
+            prompt_template="{input}\n\n### Response:\n{output}",
+            truncation_field="output",
+            pad_seq_length_to_mult=32,
+        )
+        batch = [
+            {
+                "input_ids": np.array([101, 102, 103, 104, 105]),
+                "context_ids": np.array([101, 102]),
+                "answer_start_idx": 2,
+                "context_length": 2,
+                "answer_ids": np.array([104, 105]),
+                "seq_boundaries": (0, 3),
+                "loss_mask": np.array([0, 0, 0, 1, 1]),
+                "metadata": {},
+                "token_count": 5,
+            },
+            {
+                "input_ids": np.array([201, 202, 203, 204]),
+                "context_ids": np.array([201]),
+                "answer_start_idx": 1,
+                "context_length": 1,
+                "answer_ids": np.array([203, 204]),
+                "seq_boundaries": (0, 2),
+                "loss_mask": np.array([0, 0, 1, 1]),
+                "metadata": {},
+                "token_count": 4,
+            },
+        ]
+        result = dataset.collate_fn(batch)
+        seq_length = result["tokens"].shape[1]
+        assert seq_length % 32 == 0, f"Expected sequence length divisible by 32, got {seq_length}"
+
     def test_build_samples_mapping(self, tmp_path):
         dataset, _ = get_gpt_sft(tmp_path, dataset_type="chat")
         dataset._build_samples_mapping()