diff --git a/deepspeed/runtime/config.py b/deepspeed/runtime/config.py
index c31b9671296f..9fb9eba44a38 100755
--- a/deepspeed/runtime/config.py
+++ b/deepspeed/runtime/config.py
@@ -238,8 +238,10 @@ def get_sparse_gradients_enabled(param_dict):
     return get_scalar_param(param_dict, SPARSE_GRADIENTS, SPARSE_GRADIENTS_DEFAULT)
 
 
-def get_communication_data_type(param_dict):
-    val = get_scalar_param(param_dict, COMMUNICATION_DATA_TYPE, COMMUNICATION_DATA_TYPE_DEFAULT)
+def get_communication_data_type(param_dict,
+                                comm_type=COMMUNICATION_DATA_TYPE,
+                                comm_data_type_default=COMMUNICATION_DATA_TYPE_DEFAULT):
+    val = get_scalar_param(param_dict, comm_type, comm_data_type_default)
     val = val.lower() if val is not None else val
     if val is None:
         return val  # we must determine it by other parameters
@@ -784,6 +786,8 @@ def _initialize_params(self, param_dict):
 
         self.disable_allgather = get_disable_allgather(param_dict)
         self.communication_data_type = get_communication_data_type(param_dict)
+        self.seq_parallel_communication_data_type = get_communication_data_type(
+            param_dict, SEQ_PARALLEL_COMMUNICATION_DATA_TYPE, SEQ_PARALLEL_COMMUNICATION_DATA_TYPE_DEFAULT)
         self.prescale_gradients = get_prescale_gradients(param_dict)
         self.gradient_predivide_factor = get_gradient_predivide_factor(param_dict)
         self.sparse_gradients_enabled = get_sparse_gradients_enabled(param_dict)
diff --git a/deepspeed/runtime/constants.py b/deepspeed/runtime/constants.py
index 0bdac2557847..cc493ee007c5 100755
--- a/deepspeed/runtime/constants.py
+++ b/deepspeed/runtime/constants.py
@@ -223,6 +223,19 @@
 COMMUNICATION_DATA_TYPE = "communication_data_type"
 COMMUNICATION_DATA_TYPE_DEFAULT = None
 
+###########################################################
+# Gradient communication data type for sequence parallelism
+###########################################################
+# Supported types: ['fp16', 'bf16','fp32']
+# Default value is fp32
+# Users can configure in ds_config.json as below example:
+SEQ_PARALLEL_COMMUNICATION_DATA_TYPE_FORMAT = '''
+Optional comm data type for seq paralleism should be set as:
+"seq_parallel_communication_data_type": "fp32"
+'''
+SEQ_PARALLEL_COMMUNICATION_DATA_TYPE = "seq_parallel_comm_data_type"
+SEQ_PARALLEL_COMMUNICATION_DATA_TYPE_DEFAULT = "fp32"
+
 #########################################
 # Scale/predivide gradients before allreduce
 #########################################
diff --git a/deepspeed/runtime/engine.py b/deepspeed/runtime/engine.py
index d2cb93394a53..e5f9d0ec8d03 100644
--- a/deepspeed/runtime/engine.py
+++ b/deepspeed/runtime/engine.py
@@ -808,6 +808,10 @@ def communication_data_type(self):
 
         return torch.float32
 
+    @communication_data_type.setter
+    def communication_data_type(self, value):
+        self._config.communication_data_type = value
+
     def postscale_gradients(self):
         return not self._config.prescale_gradients
 
@@ -1114,6 +1118,9 @@ def _configure_distributed_model(self, model):
         self.mp_world_size = groups._get_model_parallel_world_size()
         self.expert_parallel_group = groups._get_expert_parallel_group_dict()
         self.expert_data_parallel_group = groups._get_expert_data_parallel_group_dict()
+        self.sequence_parallel_size = groups._get_sequence_parallel_world_size()
+        if self.sequence_parallel_size > 1:
+            self.communication_data_type = self._config.seq_parallel_communication_data_type
 
         if not (self.amp_enabled() or is_zero_init_model):
             self._broadcast_model()
@@ -2370,7 +2377,7 @@ def _reduce_non_expert_gradients(self, grads, elements_per_buffer):
             if self.pipeline_parallelism:
                 dp_group = self.mpu.get_data_parallel_group()
             else:
-                dp_group = groups._get_data_parallel_group()
+                dp_group = groups._get_sequence_data_parallel_group()
 
             if bucket_type == SparseTensor.type():
                 self.sparse_allreduce_no_retain(bucket, dp_group=dp_group)
@@ -2431,9 +2438,10 @@ def sparse_allreduce(self, sparse, dp_group):
 
         if self.postscale_gradients():
             if self.gradient_average:
-                values.mul_(self.gradient_predivide_factor() / dist.get_world_size(group=dp_group))
+                values.mul_(self.gradient_predivide_factor() /
+                            (dist.get_world_size(group=dp_group) / float(self.sequence_parallel_size)))
         else:
-            values.mul_(1. / dist.get_world_size(group=dp_group))
+            values.mul_(1. / (dist.get_world_size(group=dp_group) / float(self.sequence_parallel_size)))
 
         indices_device_list = self.sparse_all_gather(indices, dp_group)
         values_device_list = self.sparse_all_gather(values, dp_group)
diff --git a/deepspeed/runtime/zero/stage3.py b/deepspeed/runtime/zero/stage3.py
index 3c5128744848..38539ba57033 100644
--- a/deepspeed/runtime/zero/stage3.py
+++ b/deepspeed/runtime/zero/stage3.py
@@ -219,6 +219,7 @@ def __init__(
         self.reduce_scatter = reduce_scatter
 
         self.dp_process_group = self.parameter_offload.dp_process_group
+        self.sequence_parallel_size = groups._get_sequence_parallel_world_size()
 
         self.all2all_process_group = all2all_process_group
 
@@ -1177,7 +1178,7 @@ def __avg_scatter_contiguous_grads(self, buffer_to_reduce: Tensor) -> List[Tenso
 
         world_sz = dist.get_world_size(self.dp_process_group)
         rank = dist.get_rank(self.dp_process_group)
-        buffer_to_reduce.div_(world_sz)
+        buffer_to_reduce.div_(world_sz / float(self.sequence_parallel_size))
 
         dist.all_reduce(buffer_to_reduce, group=self.dp_process_group)
 
@@ -1476,7 +1477,7 @@ def allreduce_bucket(self, bucket, rank=None, log=None):
         if communication_data_type != tensor.dtype:
             tensor_to_allreduce = tensor.to(communication_data_type)
 
-        tensor_to_allreduce.div_(dist.get_world_size(group=self.dp_process_group))
+        tensor_to_allreduce.div_(dist.get_world_size(group=self.dp_process_group) / float(self.sequence_parallel_size))
 
         if rank is None:
             #    "All Reducing"
diff --git a/deepspeed/runtime/zero/stage_1_and_2.py b/deepspeed/runtime/zero/stage_1_and_2.py
index 32fe74b02a58..c3b4160ebf31 100755
--- a/deepspeed/runtime/zero/stage_1_and_2.py
+++ b/deepspeed/runtime/zero/stage_1_and_2.py
@@ -31,6 +31,7 @@
 from deepspeed.utils import link_hp_params
 from deepspeed.checkpoint import enable_universal_checkpoint
 
+from deepspeed.utils import groups
 # Toggle this to true to enable correctness test
 # with gradient partitioning and without
 pg_correctness_test = False
@@ -182,7 +183,7 @@ def __init__(self,
         self.device = get_accelerator().current_device_name() if not self.cpu_offload else 'cpu'
 
         self.dp_process_group = dp_process_group
-
+        self.sequence_parallel_size = groups._get_sequence_parallel_world_size()
         #expert parallel group
         self.ep_process_group = expert_parallel_group
 
@@ -941,9 +942,10 @@ def gradient_reduction_w_predivide(self, tensor):
             dist.all_reduce(tensor_to_allreduce, group=self.dp_process_group)
 
             if self.gradient_predivide_factor != dp_world_size:
-                tensor_to_allreduce.mul_(self.gradient_predivide_factor / dp_world_size)
+                tensor_to_allreduce.mul_(self.gradient_predivide_factor /
+                                         (dp_world_size / float(self.sequence_parallel_size)))
         else:
-            tensor_to_allreduce.div_(dp_world_size)
+            tensor_to_allreduce.div_(dp_world_size / float(self.sequence_parallel_size))
             dist.all_reduce(tensor_to_allreduce, group=self.dp_process_group)
 
         if self.communication_data_type != tensor.dtype and tensor is not tensor_to_allreduce:
@@ -985,7 +987,7 @@ def average_tensor(self, tensor):
                 if self.ipg_bucket_has_moe_params:
                     process_group = self.expert_dp_process_group[param.group_name] if is_moe_param(
                         param) else self.dp_process_group
-                    grad_reduc.data.div_(dist.get_world_size(group=process_group))
+                    grad_reduc.data.div_(dist.get_world_size(group=process_group) / float(self.sequence_parallel_size))
 
                 partition_ids = self.param_to_partition_ids[i][param_id]
                 assert all([p_id < dist.get_world_size(group=process_group) for p_id in partition_ids
@@ -1025,7 +1027,7 @@ def average_tensor(self, tensor):
                     prev_id, prev_process_group = partition_id, process_group
 
             if not self.ipg_bucket_has_moe_params:
-                tensor.div_(dist.get_world_size(group=self.dp_process_group))
+                tensor.div_(dist.get_world_size(group=self.dp_process_group) / float(self.sequence_parallel_size))
 
             tensor_to_reduce = tensor
             if self.communication_data_type != tensor.dtype:
@@ -1395,7 +1397,7 @@ def allreduce_bucket(self, bucket, rank=None, log=None):
 
         tensor_to_allreduce = tensor
 
-        if pg_correctness_test:
+        if pg_correctness_test or self.sequence_parallel_size > 1:
             communication_data_type = torch.float32
         else:
             communication_data_type = self.communication_data_type
@@ -1403,7 +1405,7 @@ def allreduce_bucket(self, bucket, rank=None, log=None):
         if communication_data_type != tensor.dtype:
             tensor_to_allreduce = tensor.to(communication_data_type)
 
-        tensor_to_allreduce.div_(dist.get_world_size(group=self.dp_process_group))
+        tensor_to_allreduce.div_(dist.get_world_size(group=self.dp_process_group) / float(self.sequence_parallel_size))
 
         if rank is None:
             #    "All Reducing"