diff --git a/vllm/model_executor/kernels/linear/mixed_precision/dynamic_4bit.py b/vllm/model_executor/kernels/linear/mixed_precision/dynamic_4bit.py
index 3dfe06f1b130..d0515027628e 100644
--- a/vllm/model_executor/kernels/linear/mixed_precision/dynamic_4bit.py
+++ b/vllm/model_executor/kernels/linear/mixed_precision/dynamic_4bit.py
@@ -42,12 +42,13 @@ def can_implement(cls, c: MPLinearLayerConfig) -> tuple[bool, str | None]:
             not in [
                 torch.float32,
                 torch.bfloat16,
+                torch.float16,
             ]
         ):
             return (
                 False,
                 "Dynamic4bitLinearKernel on Arm requires Float32 or"
-                " BFloat16 activations",
+                " BFloat16 or Float16 activations",
             )
         if c.full_weight_shape[0] % c.group_size != 0:
             return (
@@ -118,8 +119,30 @@ def apply_weights(
         x: torch.Tensor,
         bias: torch.Tensor | None = None,
     ) -> torch.Tensor:
+        # PyTorch / KleidiAI kernels natively support the following configs:
+        # - channelwise with bfloat16 / float32 activations
+        # - groupwise with float32 activations
+        # To support:
+        # - groupwise with bfloat16/float16 activations: we need to upcast
+        #   activations to float32 before matmul and downcast back to bfloat16/float16
+        # - channelwise with float16 activations, we need to upcast activations to
+        #   float32 before matmul and downcast back to float16
+        # Note: these activations will be dynamically quantized to int8 by the kernel.
+
         c = self.config
+        is_groupwise = c.group_size != c.partition_weight_shape[0]
+        # dtype of activations before they get dynamically quantized to int8
+        original_pre_quant_act_dtype = x.dtype
+        pre_quant_act_dtype = original_pre_quant_act_dtype
+        if (
+            is_groupwise and pre_quant_act_dtype == torch.bfloat16
+        ) or pre_quant_act_dtype == torch.float16:
+            pre_quant_act_dtype = torch.float32
+
         x_2d = x.reshape(-1, x.shape[-1])
+        if pre_quant_act_dtype != original_pre_quant_act_dtype:
+            x_2d = x_2d.to(pre_quant_act_dtype)
+
         out_shape = x.shape[:-1] + (c.partition_weight_shape[1],)
 
         w_q = getattr(layer, self.w_q_name)
@@ -129,5 +152,8 @@ def apply_weights(
             c.group_size,
             c.partition_weight_shape[0],
             c.partition_weight_shape[1],
-        )
-        return output.reshape(out_shape)
+        ).reshape(out_shape)
+
+        if pre_quant_act_dtype != original_pre_quant_act_dtype:
+            output = output.to(original_pre_quant_act_dtype)
+        return output