diff --git a/skyrl/backends/skyrl_train/workers/megatron/megatron_model_wrapper.py b/skyrl/backends/skyrl_train/workers/megatron/megatron_model_wrapper.py
index 925a4b8a65..152348590a 100644
--- a/skyrl/backends/skyrl_train/workers/megatron/megatron_model_wrapper.py
+++ b/skyrl/backends/skyrl_train/workers/megatron/megatron_model_wrapper.py
@@ -248,7 +248,7 @@ def loss_func(logits, data):
             action_mask = data.get("action_mask")
             num_microbatches = data.get("num_microbatches")
 
-            dp_size = mpu.get_data_parallel_world_size()
+            dp_size = mpu.get_data_parallel_world_size(with_context_parallel=True)
             tp_grp = mpu.get_tensor_model_parallel_group()
             tp_rank = mpu.get_tensor_model_parallel_rank()
 
@@ -346,14 +346,18 @@ def loss_func(logits, data):
             # when summing across the entire minibatch (see `apply_loss_reduction_to_advantages_minibatch`).
             # Megatron divides loss by num_microbatches
             # (https://github.com/NVIDIA/Megatron-LM/blob/core_v0.15.2/megatron/core/pipeline_parallel/schedules.py#L248)
-            # and the data parallel all-reduce averages gradients across dp_size
+            # and the data parallel all-reduce averages gradients across dp_size (including CP ranks)
             # (https://github.com/NVIDIA/Megatron-LM/blob/core_v0.15.2/megatron/core/distributed/distributed_data_parallel.py#L285)
             # so we multiply by both factors to recover the correct sum reduction.
             grad_sum_correction_factor = num_microbatches * dp_size
 
             # NOTE: The KL and entropy loss terms are not pre-scaled,
             # so we just average them across microbatches and DP workers.
-            loss = policy_loss * grad_sum_correction_factor + kl_loss_term - entropy_loss_term
+            # Megatron's DDP averages gradients across the full DP+CP group,
+            # but KL/entropy should only be averaged across DP (not CP).
+            # Multiply by cp_size to counteract the unwanted CP averaging.
+            cp_size = mpu.get_context_parallel_world_size()
+            loss = policy_loss * grad_sum_correction_factor + (kl_loss_term - entropy_loss_term) * cp_size
             unscaled_loss = loss / grad_sum_correction_factor
 
             # Build per-sequence loss_fn_outputs with logprobs.
diff --git a/skyrl/backends/skyrl_train/workers/megatron/megatron_worker.py b/skyrl/backends/skyrl_train/workers/megatron/megatron_worker.py
index 138dfb2916..363267c7f3 100644
--- a/skyrl/backends/skyrl_train/workers/megatron/megatron_worker.py
+++ b/skyrl/backends/skyrl_train/workers/megatron/megatron_worker.py
@@ -740,7 +740,7 @@ def forward_backward(
         # NOTE: Sum loss metrics because scaling is already applied at the advantage level
         status = reduce_metrics(all_metrics, sum_loss_metrics=sum_loss_metrics)
         status["policy_lr"] = self.optimizer.param_groups[0]["lr"]
-        group = mpu.get_data_parallel_group(with_context_parallel=True)
+        group = mpu.get_data_parallel_group(with_context_parallel=False)
         status = all_reduce_metrics(status, self.strategy, group=group, sum_loss_metrics=sum_loss_metrics)
 
         # Add loss_fn_outputs back (not reduced, kept as list)
diff --git a/tests/backends/skyrl_train/gpu/gpu_ci/test_megatron_worker.py b/tests/backends/skyrl_train/gpu/gpu_ci/test_megatron_worker.py
index 6befe51e43..7c959e68fd 100644
--- a/tests/backends/skyrl_train/gpu/gpu_ci/test_megatron_worker.py
+++ b/tests/backends/skyrl_train/gpu/gpu_ci/test_megatron_worker.py
@@ -590,7 +590,7 @@ async def test_megatron_train(
                 # the entropy calculation is different (fsdp has random logits for padding tokens)
                 continue
             assert isinstance(result[k], (int, float)), f"{k} should be an int or float"
-            assert abs(result[k] - results_megatron[i][k]) < 1.5e-1, f"diff in {k} is too large!"
+            assert abs(result[k] - results_megatron[i][k]) < 2.5e-1, f"diff in {k} is too large!"
 
 
 @pytest.mark.asyncio