diff --git a/vllm_spyre_next/vllm_spyre_next/custom_ops/__init__.py b/vllm_spyre_next/vllm_spyre_next/custom_ops/__init__.py
index 8324f22be..8e8569061 100644
--- a/vllm_spyre_next/vllm_spyre_next/custom_ops/__init__.py
+++ b/vllm_spyre_next/vllm_spyre_next/custom_ops/__init__.py
@@ -4,6 +4,7 @@
 from . import silu_and_mul
 from . import vocab_parallel_embedding
 from . import linear
+from . import rotary_embedding
 from vllm.logger import init_logger
 
 logger = init_logger(__name__)
@@ -15,3 +16,4 @@ def register_all():
     silu_and_mul.register()
     vocab_parallel_embedding.register()
     linear.register()
+    rotary_embedding.register()
diff --git a/vllm_spyre_next/vllm_spyre_next/custom_ops/rotary_embedding.py b/vllm_spyre_next/vllm_spyre_next/custom_ops/rotary_embedding.py
new file mode 100644
index 000000000..ab980c16a
--- /dev/null
+++ b/vllm_spyre_next/vllm_spyre_next/custom_ops/rotary_embedding.py
@@ -0,0 +1,325 @@
+# SPDX-License-Identifier: Apache-2.0
+# SPDX-FileCopyrightText: Copyright contributors to the vLLM project
+"""Spyre-specific RotaryEmbedding implementation using out-of-tree (OOT) registration.
+
+This module provides a custom RoPE (Rotary Position Embedding) layer for IBM's Spyre device,
+replacing the upstream vLLM implementation (vllm/model_executor/layers/rotary_embedding.py)
+when instantiated.
+
+Architecture:
+    - OOT Registration: @RotaryEmbedding.register_oot() replaces upstream at instantiation
+    - Custom Op Boundary: torch.ops.vllm.spyre_rotary_embedding is opaque to torch.compile,
+      so _forward_spyre_impl runs eagerly outside the compiled graph
+    - Separate Compilation: forward_spyre is compiled independently via maybe_compile
+
+Spyre Device Constraints:
+    - Device dtype: float16 (converted for Spyre)
+    - Output dtype: matches input dtype (converted on CPU)
+    - Cache management: cos/sin caches stored on Spyre device
+
+Limitations:
+    - No dtype promotion (torch-spyre limitation)
+    - rope_scaling not yet implemented
+    - sin/cos calculation use float32 dtype for accuracy
+
+References:
+    - Upstream RotaryEmbedding: vllm/model_executor/layers/rotary_embedding.py
+"""
+
+import torch
+
+from vllm.logger import init_logger
+from vllm.utils.torch_utils import direct_register_custom_op
+from vllm.model_executor.layers.rotary_embedding import RotaryEmbedding
+from functools import lru_cache
+import torch.utils._pytree as pytree
+
+from .utils import convert, register_layer, get_layer, _fake_impl
+
+logger = init_logger(__name__)
+
+
+@RotaryEmbedding.register_oot(name="RotaryEmbedding")
+class SpyreRotaryEmbedding(RotaryEmbedding):
+    """Out-of-tree (OOT) RotaryEmbedding implementation for IBM's Spyre device.
+
+    This replaces the upstream vLLM RotaryEmbedding when instantiated,
+    providing Spyre-specific optimizations and device handling.
+
+    Implements RoPE (Rotary Position Embedding) which applies position-dependent
+    rotations to query and key tensors in attention mechanisms.
+    """
+
+    _dynamic_arg_dims = {"positions": [], "query": [], "key": []}
+
+    def __init__(self, *args, **kwargs):
+        """Initialize SpyreRotaryEmbedding layer.
+        Compiles the Spyre kernel and registers this instance in static_forward_context.
+        Builds cos/sin cache for position embeddings.
+        """
+        super().__init__(*args, **kwargs)
+        # Validate supported configurations
+        scaling_type = getattr(self, "scaling_type", "default")
+        rope_parameters = getattr(self, "rope_parameters", {}) or {}
+
+        is_supported = (
+            scaling_type == "default"
+            and "mrope_section" not in rope_parameters
+            and ("use_fope" not in rope_parameters or not rope_parameters["use_fope"])
+        )
+
+        if not is_supported:
+            raise NotImplementedError(
+                f"SpyreRotaryEmbedding only supports default scaling without mrope_section or fope."
+                f"Got scaling_type={scaling_type}, rope_parameters={rope_parameters}"
+            )
+
+        logger.debug("Building custom RotaryEmbedding")
+        self._target_device = torch.device("spyre")
+        self._target_dtype = torch.float16
+        # Build cos/sin cache on initialization
+        self._build_cos_sin_cache()
+        # Compile the forward kernel
+        self.maybe_compiled_forward_spyre = self.maybe_compile(self.forward_spyre)
+        self._layer_name = register_layer(self, "spyre_rotary_embedding")
+
+    def _build_cos_sin_cache(self):
+        """Build cos/sin cache for position embeddings.
+
+        Creates frequency-based position encodings:
+        - frequencies = base^(-2i/rotary_dim) for i in [0, rotary_dim/2)
+        - cos_cache[pos] = cos(pos * frequencies)
+        - sin_cache[pos] = sin(pos * frequencies)
+
+        Note: sin/cos calculation use float32 dtype for accuracy.
+        Generated text differ from baseline when float16 used.
+        """
+        logger.warning_once(
+            "Sin/Cos computation use float32 for accuracy.All computations are run on CPU."
+        )
+        compute_dtype = torch.float32
+
+        """ Compute inverse frequencies: base^(-2i/rotary_dim)
+        Using negative exponent for numerical stability"""
+
+        i = torch.arange(0, self.rotary_dim, 2, dtype=compute_dtype)
+        ratio = i / self.rotary_dim
+
+        freq = torch.pow(self.base, ratio)
+
+        inv_freq = 1.0 / freq
+
+        # Create position indices [0, 1, 2, ..., max_position_embeddings-1]
+        pos_id = torch.arange(self.max_position_embeddings, dtype=compute_dtype)
+
+        # Compute frequencies for each position: pos * inv_freq
+        # Shape: [max_position_embeddings, rotary_dim // 2]
+
+        freqs = pos_id.unsqueeze(1) * inv_freq.unsqueeze(0)
+
+        # Duplicate frequencies for interleaved pattern
+        # Shape: [max_position_embeddings, rotary_dim]
+        emb = torch.cat([freqs, freqs], dim=-1)
+
+        # Compute cos and sin directly in float16, then move to device
+        self.cos_cache = convert(emb.cos(), None, compute_dtype)
+        self.sin_cache = convert(emb.sin(), None, compute_dtype)
+
+    def forward_oot(
+        self,
+        positions: torch.Tensor,
+        query: torch.Tensor,
+        key: torch.Tensor,
+    ) -> tuple[torch.Tensor, torch.Tensor]:
+        """Forward pass using custom op to bypass torch.compile.
+
+        Delegates to torch.ops.vllm.spyre_rotary_embedding which retrieves this layer
+        from forward_context.no_compile_layers and calls forward_impl outside
+        the compilation graph.
+
+        Args:
+            positions: Position indices [batch_size, seq_len] or [total_tokens]
+            query: Query tensor [batch_size, seq_len, num_heads, head_dim]
+            key: Key tensor [batch_size, seq_len, num_kv_heads, head_dim]
+
+        Returns:
+            Tuple of (rotated_query, rotated_key) with same shapes as inputs
+        """
+        rotated_query = torch.empty_like(query)
+        rotated_key = torch.empty_like(key)
+
+        # Custom op call - executes outside torch.compile graph
+        torch.ops.vllm.spyre_rotary_embedding(
+            positions, query, key, rotated_query, rotated_key, self._layer_name
+        )
+
+        return rotated_query, rotated_key
+
+    @staticmethod
+    def forward_spyre(
+        query: torch.Tensor,
+        query_half: torch.Tensor,
+        key: torch.Tensor,
+        key_half: torch.Tensor,
+        cos_q: torch.Tensor,
+        sin_q: torch.Tensor,
+        cos_k: torch.Tensor,
+        sin_k: torch.Tensor,
+    ) -> tuple[torch.Tensor, torch.Tensor]:
+        """Spyre-optimized RoPE computation (active implementation).
+
+        Applies rotary position embeddings to query and key tensors:
+        output = x * cos + rotate_half(x) * sin
+
+        Args:
+            positions: Position indices [batch_size, seq_len] or [total_tokens]
+            query: Query tensor [batch_size, seq_len, num_heads, head_dim]
+            key: Key tensor [batch_size, seq_len, num_kv_heads, head_dim]
+            cos_cache: Cosine cache [max_position_embeddings, rotary_dim]
+            sin_cache: Sine cache [max_position_embeddings, rotary_dim]
+            rotary_dim: Dimension to apply rotation
+
+        Returns:
+            Tuple of (rotated_query, rotated_key)
+        """
+
+        query_out = query * cos_q + query_half * sin_q
+        key_out = key * cos_k + key_half * sin_k
+
+        return query_out, key_out
+
+    def _forward_spyre_impl(
+        self,
+        positions: torch.Tensor,
+        query: torch.Tensor,
+        key: torch.Tensor,
+    ) -> tuple[torch.Tensor, torch.Tensor]:
+        """Spyre device execution with device transfer and dtype conversion.
+
+        Handles Spyre-specific constraints:
+            1. Device transfer: CPU -> Spyre, convert to float16
+            2. Kernel execution: Calls compiled _fwd
+            3. Result transfer: Spyre -> CPU, restore original dtype
+
+        Args:
+            positions: Position indices on CPU
+            query: Query tensor on CPU
+            key: Key tensor on CPU
+
+        Returns:
+            Tuple of (rotated_query, rotated_key) on CPU with original dtype
+        """
+        query_dtype = query.dtype
+        query_device = query.device
+        key_dtype = key.dtype
+        key_device = key.device
+
+        # Execute compiled kernel on Spyre device
+
+        positions = convert(positions, None, torch.int64)
+
+        Tq, q_hidden = query.shape
+        Tk, k_hidden = key.shape
+
+        assert Tq == Tk, f"Query/Key sequence mismatch: {Tq} != {Tk}"
+        T = Tq
+
+        q_heads = q_hidden // self.head_size
+        k_heads = k_hidden // self.head_size
+
+        query = query.reshape(T, q_heads, self.head_size)
+        key = key.reshape(T, k_heads, self.head_size)
+
+        # get cos/sin
+        cos = self.cos_cache[positions]  # [T, D]
+        sin = self.sin_cache[positions]
+
+        def expand_cos_sin(cos, sin, num_heads):
+            cos = cos.unsqueeze(1).expand(-1, num_heads, -1)
+            sin = sin.unsqueeze(1).expand(-1, num_heads, -1)
+            return cos.contiguous(), sin.contiguous()
+
+        # expand to heads
+        cos_q, sin_q = expand_cos_sin(cos, sin, q_heads)
+        cos_k, sin_k = expand_cos_sin(cos, sin, k_heads)
+
+        query_rot = query[..., : self.rotary_dim]
+        query_pass = query[..., self.rotary_dim :]
+
+        key_rot = key[..., : self.rotary_dim]
+        key_pass = key[..., self.rotary_dim :]
+
+        d = self.rotary_dim // 2
+
+        q1 = query_rot[..., :d]
+        q2 = query_rot[..., d:]
+        query_half = torch.cat([-q2, q1], dim=-1)
+
+        k1 = key_rot[..., :d]
+        k2 = key_rot[..., d:]
+        key_half = torch.cat([-k2, k1], dim=-1)
+
+        assert cos_q.shape == query_rot.shape, f"{cos_q.shape} != {query.shape}"
+        assert sin_q.shape == query_rot.shape
+
+        query_spyre = convert(query_rot, self._target_device, self._target_dtype)
+        query_half_spyre = convert(query_half, self._target_device, self._target_dtype)
+
+        key_spyre = convert(key_rot, self._target_device, self._target_dtype)
+        key_half_spyre = convert(key_half, self._target_device, self._target_dtype)
+
+        cos_q_spyre = convert(cos_q, self._target_device, self._target_dtype)
+        sin_q_spyre = convert(sin_q, self._target_device, self._target_dtype)
+
+        cos_k_spyre = convert(cos_k, self._target_device, self._target_dtype)
+        sin_k_spyre = convert(sin_k, self._target_device, self._target_dtype)
+
+        rotated_query, rotated_key = self.maybe_compiled_forward_spyre(
+            query_spyre,
+            query_half_spyre,
+            key_spyre,
+            key_half_spyre,
+            cos_q_spyre,
+            sin_q_spyre,
+            cos_k_spyre,
+            sin_k_spyre,
+        )
+
+        # Transfer back to CPU and restore original dtype
+        rotated_query = convert(rotated_query, query_device, query_dtype)
+        rotated_key = convert(rotated_key, key_device, key_dtype)
+
+        rotated_query = torch.cat([rotated_query, query_pass], dim=-1)
+        rotated_key = torch.cat([rotated_key, key_pass], dim=-1)
+
+        rotated_query = rotated_query.reshape(T, -1)
+        rotated_key = rotated_key.reshape(T, -1)
+
+        return rotated_query, rotated_key
+
+
+def _op_func(
+    positions: torch.Tensor,
+    query: torch.Tensor,
+    key: torch.Tensor,
+    rotated_query: torch.Tensor,
+    rotated_key: torch.Tensor,
+    layer_name: str,
+) -> None:
+    """Custom op implementation — runs outside torch.compile graph."""
+    layer = get_layer(layer_name)
+    result = list(layer._forward_spyre_impl(positions, query, key))
+    outputs = [rotated_query, rotated_key]
+    pytree.tree_map(lambda out, res: out.copy_(res), outputs, result)
+
+
+@lru_cache(maxsize=1)
+def register():
+    """Register the spyre_rotary_embedding custom op with vLLM."""
+    direct_register_custom_op(
+        op_name="spyre_rotary_embedding",
+        op_func=_op_func,
+        mutates_args=["rotated_query", "rotated_key"],
+        fake_impl=_fake_impl,
+    )
+    logger.info("Registered custom op: SpyreRotaryEmbedding")