diff --git a/vllm_gaudi/v1/worker/hpu_model_runner.py b/vllm_gaudi/v1/worker/hpu_model_runner.py
index 21c729e71..6b1f27c65 100644
--- a/vllm_gaudi/v1/worker/hpu_model_runner.py
+++ b/vllm_gaudi/v1/worker/hpu_model_runner.py
@@ -1635,6 +1635,29 @@ def _get_prompt_bucketing_fn(self):
             return self._bucketize_2d_prompt
 
     def _can_merge_prefill_contents(self, lhs, rhs):
+        # --- Logic to handle chunked prefill/prefix caching for HPU ---
+        # 1. Check basic states of LHS (accumulated batch) and RHS (incoming request).
+        # lhs_is_not_empty: Check if the accumulated batch actually contains any requests.
+        # lhs_has_history: Check if any request in the accumulated batch has a non-zero context (history).
+        lhs_is_not_empty = len(lhs.context_lens) > 0
+        lhs_has_history = any(length > 0 for length in lhs.context_lens)
+
+        # 2. Check if RHS (the incoming request) has context_len > 0 (history).
+        rhs_has_history = any(length > 0 for length in rhs.context_lens)
+
+        # 3. Apply merging restrictions based on history states:
+
+        # Condition A: If the accumulated batch is not empty, we cannot append a request that has history.
+        # This implies that a request with history (e.g., prefix caching hit) must start as a new batch.
+        if lhs_is_not_empty and rhs_has_history:
+            return False
+
+        # Condition B: If the accumulated batch already contains requests with history,
+        # we cannot append *any* new request (regardless of whether RHS has history or not).
+        # This locks the batch once it contains history (likely for decode phase or chunked prefill).
+        if lhs_has_history:
+            return False
+
         combined_num_tokens = lhs.get_num_tokens() + rhs.get_num_tokens()
         bucketing_fn = self._get_prompt_bucketing_fn()
         try: