diff --git a/optimum/habana/transformers/models/llama/modeling_llama.py b/optimum/habana/transformers/models/llama/modeling_llama.py
index 42a3a6f4cb..82fcf6f0c3 100755
--- a/optimum/habana/transformers/models/llama/modeling_llama.py
+++ b/optimum/habana/transformers/models/llama/modeling_llama.py
@@ -76,19 +76,38 @@ def gaudi_llama_rmsnorm_forward(self, hidden_states):
         return self.weight * hidden_states.to(input_dtype)
 
 
-def gaudi_llama_repeat_kv(hidden_states: torch.Tensor, n_rep: int) -> torch.Tensor:
+def gaudi_llama_repeat_kv(
+    query_states: torch.Tensor,
+    key_states: torch.Tensor,
+    value_states: torch.Tensor,
+    attention_mask: torch.Tensor,
+    n_rep: int,
+):
     """
     Copied from repeat_kv: https://github.com/huggingface/transformers/blob/main/src/transformers/models/llama/modeling_llama.py
     The only differences are:
         - Append num_key_value_heads == 1 check as kv states can be broadcasted during matmuls so need to expand and reshape them.
-    This is the equivalent of torch.repeat_interleave(x, dim=1, repeats=n_rep). The hidden states go from (batch,
-    num_key_value_heads, seqlen, head_dim) to (batch, num_attention_heads, seqlen, head_dim)
+        - Add new args query_states, key_states, value_states and attention_mask and update the logic for expansion.
+    The query states go from (batch, num_heads, seqlen, head_dim) to (batch, num_key_value_heads, n_rep, seqlen, head_dim)
+    The key/value states go from (batch, num_key_value_heads, seqlen, head_dim) to (batch, num_key_value_heads, 1, seqlen, head_dim)
     """
-    batch, num_key_value_heads, slen, head_dim = hidden_states.shape
+    batch, num_key_value_heads, kv_len, head_dim = key_states.shape
     if n_rep == 1 or num_key_value_heads == 1:
-        return hidden_states
-    hidden_states = hidden_states[:, :, None, :, :].expand(batch, num_key_value_heads, n_rep, slen, head_dim)
-    return hidden_states.reshape(batch, num_key_value_heads * n_rep, slen, head_dim)
+        return query_states, key_states, value_states, attention_mask
+
+    new_kv_shape = (batch, num_key_value_heads, 1, kv_len, head_dim)
+    key_states = key_states.reshape(new_kv_shape)
+    value_states = value_states.reshape(new_kv_shape)
+
+    batch, _, q_len, head_dim = query_states.shape
+    new_q_shape = (batch, num_key_value_heads, n_rep, q_len, head_dim)
+    query_states = query_states.reshape(new_q_shape)
+
+    if attention_mask is not None:
+        # Add groups dim and set to 1
+        attention_mask = attention_mask.unsqueeze(1)
+
+    return query_states, key_states, value_states, attention_mask
 
 
 class Matmul(torch.nn.Module):
@@ -251,21 +270,27 @@ def pre_attn_forward(
                     )
 
         else:
-            key_states = gaudi_llama_repeat_kv(key_states, self.num_key_value_groups)
-            value_states = gaudi_llama_repeat_kv(value_states, self.num_key_value_groups)
+            query_states, key_states, value_states, attention_mask = gaudi_llama_repeat_kv(
+                query_states, key_states, value_states, attention_mask, self.num_key_value_groups
+            )
 
-            attn_weights = self.matmul_qk(query_states, key_states.transpose(2, 3)) * self.norm_factor
+            attn_weights = self.matmul_qk(query_states, key_states.transpose(-2, -1)) * self.norm_factor
 
-            if attn_weights.size() != (bsz, self.num_heads, q_len, kv_seq_len):
+            if attn_weights.size() not in [
+                (bsz, self.num_heads, q_len, kv_seq_len),
+                (bsz, self.num_key_value_heads, self.num_key_value_groups, q_len, kv_seq_len),
+            ]:
                 raise ValueError(
-                    f"Attention weights should be of size {(bsz, self.num_heads, q_len, kv_seq_len)}, but is"
+                    f"Attention weights should be of size {(bsz, self.num_heads, q_len, kv_seq_len)} or"
+                    f" {(bsz, self.num_key_value_heads, self.num_key_value_groups, q_len, kv_seq_len)}, but is"
                     f" {attn_weights.size()}"
                 )
 
             if attention_mask is not None:
-                if attention_mask.size() != (bsz, 1, q_len, kv_seq_len):
+                if attention_mask.size() not in [(bsz, 1, q_len, kv_seq_len), (bsz, 1, 1, q_len, kv_seq_len)]:
                     raise ValueError(
-                        f"Attention mask should be of size {(bsz, 1, q_len, kv_seq_len)}, but is {attention_mask.size()}"
+                        f"Attention mask should be of size {(bsz, 1, q_len, kv_seq_len)} or {(bsz, 1, 1, q_len, kv_seq_len)},"
+                        f" but is {attention_mask.size()}"
                     )
                 attn_weights = attn_weights + attention_mask
 
@@ -278,6 +303,7 @@ def pre_attn_forward(
                 )
 
             attn_output = self.matmul_av(attn_weights, value_states)
+            attn_output = attn_output.reshape(bsz, -1, q_len, self.head_dim)
 
         if attn_output.size() != (bsz, self.num_heads, q_len, self.head_dim):
             raise ValueError(