diff --git a/nemo_rl/experience/rollouts.py b/nemo_rl/experience/rollouts.py
index a556a32a42..567add0dfc 100644
--- a/nemo_rl/experience/rollouts.py
+++ b/nemo_rl/experience/rollouts.py
@@ -311,7 +311,9 @@ def run_multi_turn_rollout(
                 >= max_seq_len
             ):
                 # truncate
-                tokenized_obs = tokenized_obs[: max_seq_len - active_input_lengths[i]]
+                tokenized_obs = tokenized_obs[
+                    : max_seq_len - (len(generated_ids[i]) + active_input_lengths[i])
+                ]
                 truncation_mask[i] = True
                 # Record truncation
                 sample_truncated[active_indices[i]] = True
diff --git a/tests/unit/experience/test_rollouts.py b/tests/unit/experience/test_rollouts.py
index b45811d4f8..bcfa1b84d2 100644
--- a/tests/unit/experience/test_rollouts.py
+++ b/tests/unit/experience/test_rollouts.py
@@ -20,6 +20,7 @@
 import torch
 from transformers import AutoTokenizer
 
+from nemo_rl.data.llm_message_utils import batched_message_log_to_flat_message
 from nemo_rl.distributed.batched_data_dict import BatchedDataDict
 from nemo_rl.distributed.virtual_cluster import RayVirtualCluster
 from nemo_rl.environments.games.sliding_puzzle import (
@@ -440,6 +441,45 @@ def test_run_multi_step_calculator_vllm(multi_step_setup_vllm):
     print("\nMulti-Step Calculator VLLM Test assertions passed.")
 
 
+@pytest.mark.skipif(
+    not torch.cuda.is_available() or torch.cuda.device_count() < 1,
+    reason="VLLM test requires at least 1 GPU",
+)
+def test_max_seqlen_respected(multi_step_setup_vllm):
+    """Tests multi-step calculator rollout with VllmGeneration."""
+    vllm_generation, rollout_tokenizer, task_to_env, initial_batch, rollout_cluster = (
+        multi_step_setup_vllm
+    )
+    max_rollout_turns = initial_batch["extra_env_info"][0]["max_steps"] + 1
+    max_seq_len = 290
+
+    print("\nRunning multi-step calculator rollout (VLLM)...")
+    vllm_generation.prepare_for_generation()
+    final_batch, rollout_metrics = run_multi_turn_rollout(
+        policy_generation=vllm_generation,
+        input_batch=initial_batch,
+        tokenizer=rollout_tokenizer,
+        task_to_env=task_to_env,
+        max_seq_len=max_seq_len,
+        max_rollout_turns=max_rollout_turns,
+    )
+    vllm_generation.finish_generation()
+    print("Multi-step calculator rollout complete (VLLM).")
+
+    # --- Assertions ---
+    assert isinstance(final_batch, BatchedDataDict)
+    assert "message_log" in final_batch
+    assert "total_reward" in final_batch
+    assert len(final_batch["message_log"]) == len(initial_batch["message_log"])
+    flattened_message_log, _ = batched_message_log_to_flat_message(
+        final_batch["message_log"]
+    )
+    # Check that the sequence length is respected by flattening the message log and checking the length
+    assert len(flattened_message_log["token_ids"][0]) == max_seq_len, (
+        f"Sequence length {len(flattened_message_log['token_ids'][0])} is not equal to max_seq_len {max_seq_len}"
+    )
+
+
 # --- Fixture for Sliding Puzzle Environment ---
 @pytest.fixture(scope="function")
 def sliding_puzzle_environment(rollout_cluster):