diff --git a/python/sglang/multimodal_gen/configs/models/encoders/base.py b/python/sglang/multimodal_gen/configs/models/encoders/base.py
index 0e0568dfc..88ddbae4b 100644
--- a/python/sglang/multimodal_gen/configs/models/encoders/base.py
+++ b/python/sglang/multimodal_gen/configs/models/encoders/base.py
@@ -76,16 +76,16 @@ class EncoderConfig(ModelConfig):
     quant_config: QuantizationConfig | None = None
     lora_config: Any | None = None
 
+    # Parallel folding: during the encoding stage the whole DiT replica is idle,
+    # so TP-shard the encoder across those otherwise-unused GPUs instead of
+    # running it on a single rank
+    parallel_folding_mode: str | None = None
+
 
 @dataclass
 class TextEncoderConfig(EncoderConfig):
     arch_config: ArchConfig = field(default_factory=TextEncoderArchConfig)
 
-    # Use the SP Group of the transformer as the TP Group of T5.
-    parallel_folding: bool = False
-    # "sp" or "ulysses" or "ring"
-    parallel_folding_mode: str = "sp"
-
 
 @dataclass
 class ImageEncoderConfig(EncoderConfig):
diff --git a/python/sglang/multimodal_gen/configs/models/encoders/t5.py b/python/sglang/multimodal_gen/configs/models/encoders/t5.py
index 7de1aae3b..766510077 100644
--- a/python/sglang/multimodal_gen/configs/models/encoders/t5.py
+++ b/python/sglang/multimodal_gen/configs/models/encoders/t5.py
@@ -78,10 +78,6 @@ class T5Config(TextEncoderConfig):
     arch_config: TextEncoderArchConfig = field(default_factory=T5ArchConfig)
 
     prefix: str = "t5"
-    # Use the SP Group of the transformer as the TP Group of T5.
-    parallel_folding: bool = False
-    # "sp" or "ulysses" or "ring"
-    parallel_folding_mode: str = "sp"
 
     @staticmethod
     def add_cli_args(
diff --git a/python/sglang/multimodal_gen/runtime/loader/component_loaders/image_encoder_loader.py b/python/sglang/multimodal_gen/runtime/loader/component_loaders/image_encoder_loader.py
index 04de08f20..d2b11c55e 100644
--- a/python/sglang/multimodal_gen/runtime/loader/component_loaders/image_encoder_loader.py
+++ b/python/sglang/multimodal_gen/runtime/loader/component_loaders/image_encoder_loader.py
@@ -2,6 +2,7 @@ from sglang.multimodal_gen.configs.models import ModelConfig
 from sglang.multimodal_gen.runtime.loader.component_loaders.text_encoder_loader import (
     TextEncoderLoader,
 )
+from sglang.multimodal_gen.runtime.models.encoders.base import finalize_encoder_folding
 from sglang.multimodal_gen.runtime.server_args import ServerArgs
 from sglang.multimodal_gen.runtime.utils.hf_diffusers_utils import (
     get_diffusers_component_config,
@@ -49,6 +50,9 @@ class ImageEncoderLoader(TextEncoderLoader):
 
         encoder_config = server_args.pipeline_config.image_encoder_config
         encoder_config.update_model_arch(model_config)
+        # Keep the proposed fold group only if the encoder is wide enough
+        # (image encoders are small, so this normally reverts to replicated).
+        finalize_encoder_folding(encoder_config)
 
         # Always start with local device; load_model will adjust for offload if needed
         # TODO(will): add support for other dtypes
diff --git a/python/sglang/multimodal_gen/runtime/loader/component_loaders/text_encoder_loader.py b/python/sglang/multimodal_gen/runtime/loader/component_loaders/text_encoder_loader.py
index 553f5ac85..296910b79 100644
--- a/python/sglang/multimodal_gen/runtime/loader/component_loaders/text_encoder_loader.py
+++ b/python/sglang/multimodal_gen/runtime/loader/component_loaders/text_encoder_loader.py
@@ -3,6 +3,7 @@ import glob
 import os
 import re
 from collections.abc import Generator, Iterable
+from contextlib import nullcontext
 from typing import cast
 
 import torch
@@ -15,7 +16,14 @@ from sglang.multimodal_gen.configs.models import EncoderConfig, ModelConfig
 from sglang.multimodal_gen.configs.pipeline_configs.qwen_image import (
     QwenImageEditPipelineConfig,
 )
-from sglang.multimodal_gen.runtime.distributed import get_local_torch_device
+from sglang.multimodal_gen.runtime.distributed import (
+    get_local_torch_device,
+    get_tp_group,
+)
+from sglang.multimodal_gen.runtime.distributed.group_coordinator import GroupCoordinator
+from sglang.multimodal_gen.runtime.distributed.parallel_state import (
+    patch_tensor_parallel_group,
+)
 from sglang.multimodal_gen.runtime.loader.component_loaders.component_loader import (
     ComponentLoader,
 )
@@ -30,6 +38,10 @@ from sglang.multimodal_gen.runtime.loader.weight_utils import (
     pt_weights_iterator,
     safetensors_weights_iterator,
 )
+from sglang.multimodal_gen.runtime.models.encoders.base import (
+    finalize_encoder_folding,
+    get_folding_tp_group,
+)
 from sglang.multimodal_gen.runtime.models.registry import ModelRegistry
 from sglang.multimodal_gen.runtime.platforms import current_platform
 from sglang.multimodal_gen.runtime.server_args import ServerArgs
@@ -302,6 +314,9 @@ class TextEncoderLoader(ComponentLoader):
         )
         if post_diffusers_config_update is not None:
             post_diffusers_config_update()
+        # Real dims are populated now; keep the proposed fold group only if this
+        # encoder is actually wide enough to benefit at its real size.
+        finalize_encoder_folding(encoder_config)
         encoder_dtype = server_args.pipeline_config.text_encoder_precisions[
             encoder_index
         ]
@@ -374,7 +389,20 @@ class TextEncoderLoader(ComponentLoader):
         else:
             model_device = local_torch_device
 
-        with set_default_torch_dtype(PRECISION_TO_TYPE[dtype]):
+        # Parallel folding: build + shard the encoder over the folding group (the
+        # idle DiT replica during the encoding stage) instead of the default TP
+        # group, so every encoder folds without threading the group through each layer.
+        fold_ctx = nullcontext()
+        if getattr(model_config, "parallel_folding_mode", None) is not None:
+            folding_group = get_folding_tp_group(model_config)
+            if (
+                isinstance(folding_group, GroupCoordinator)
+                and folding_group is not get_tp_group()
+            ):
+                fold_ctx = patch_tensor_parallel_group(folding_group)
+
+        # patch tp group with folding group to achieve TP among folding group
+        with fold_ctx, set_default_torch_dtype(PRECISION_TO_TYPE[dtype]):
             with model_device, skip_init_modules():
                 architectures = getattr(model_config, "architectures", [])
                 model_cls, _ = ModelRegistry.resolve_model_cls(architectures)
diff --git a/python/sglang/multimodal_gen/runtime/models/encoders/base.py b/python/sglang/multimodal_gen/runtime/models/encoders/base.py
index 70d2cb906..4d0ed7095 100644
--- a/python/sglang/multimodal_gen/runtime/models/encoders/base.py
+++ b/python/sglang/multimodal_gen/runtime/models/encoders/base.py
@@ -9,15 +9,98 @@ from torch import nn
 
 from sglang.multimodal_gen.configs.models.encoders import (
     BaseEncoderOutput,
+    EncoderConfig,
     ImageEncoderConfig,
     TextEncoderConfig,
 )
+from sglang.multimodal_gen.runtime.distributed import (
+    get_sp_group,
+    get_tp_group,
+    get_world_group,
+)
 from sglang.multimodal_gen.runtime.managers.memory_managers.layerwise_offload import (
     LayerwiseOffloadableModuleMixin,
 )
 from sglang.multimodal_gen.runtime.platforms import AttentionBackendEnum
 
 
+def get_folding_tp_group(config: EncoderConfig):
+    """Group an encoder should tensor-parallel over.
+
+    ``config.parallel_folding_mode`` is set by ServerArgs.adjust_pipeline_config
+    when the encoder is folded over a larger group than its own TP (the idle DiT
+    replica during the encoding stage); when it is None the encoder uses the
+    default TP group. Shared by every text/image encoder so the choice lives in
+    one place.
+    """
+    mode = config.parallel_folding_mode
+    if mode == "sp":
+        return get_sp_group()
+    elif mode == "ulysses":
+        return get_sp_group().ulysses_group
+    elif mode == "ring":
+        return get_sp_group().ring_group
+    elif mode == "world":
+        # the whole single-replica DiT (all GPUs), regardless of tp/sp/cfg.
+        return get_world_group()
+    return get_tp_group()
+
+
+# Folding pays off only for wide encoders: measured ~-22% encode latency for
+# T5-XXL (hidden 4096) and larger for Mistral-24B (hidden 5120), but a net loss
+# for narrower ones (Qwen3 hidden 2560, CLIP 512) whose per-layer all_reduce
+# dominates the sharded compute. Decided on the real (post-load) hidden size.
+FOLD_MIN_HIDDEN_SIZE = 4096
+
+
+def _encoder_dims(config: EncoderConfig):
+    """Best-effort (hidden, attention_heads, mlp_intermediate) from a config,
+    spelled differently across families (hidden_size/d_model, num_heads, d_ff)."""
+
+    def first(names):
+        for name in names:
+            value = getattr(config, name, None)
+            if isinstance(value, int) and value > 0:
+                return value
+        return None
+
+    return (
+        first(("hidden_size", "d_model")),
+        first(("num_attention_heads", "num_heads", "n_heads")),
+        first(("intermediate_size", "d_ff", "ffn_dim")),
+    )
+
+
+def encoder_folding_worthwhile(config: EncoderConfig, group_size: int) -> bool:
+    """Fold only encoders wide enough to benefit whose heads and MLP divide the
+    fold group. Size-based (not per-architecture), so the same encoder family at
+    different parameter counts is handled correctly."""
+    hidden, heads, inter = _encoder_dims(config)
+    return (
+        group_size > 1
+        and hidden is not None
+        and hidden >= FOLD_MIN_HIDDEN_SIZE
+        and heads is not None
+        and heads % group_size == 0
+        and inter is not None
+        and inter % group_size == 0
+    )
+
+
+def finalize_encoder_folding(config: EncoderConfig) -> None:
+    """Loader hook: call after the encoder's real dims are populated
+    (update_model_arch) and before construction. adjust_pipeline_config proposes
+    a fold group from the parallelism alone; here we keep it only if the encoder
+    is actually worth folding at its real size, otherwise fall back to
+    replicated by clearing the mode.
+    """
+    if config.parallel_folding_mode is None:
+        return
+    group_size = getattr(get_folding_tp_group(config), "world_size", 1)
+    if not encoder_folding_worthwhile(config, group_size):
+        config.parallel_folding_mode = None
+
+
 class TextEncoder(nn.Module, ABC, LayerwiseOffloadableModuleMixin):
     layerwise_offload_dit_group_enabled = False
     layer_names = [
diff --git a/python/sglang/multimodal_gen/runtime/models/encoders/gemma_3.py b/python/sglang/multimodal_gen/runtime/models/encoders/gemma_3.py
index e9c639d83..7e6f67b70 100644
--- a/python/sglang/multimodal_gen/runtime/models/encoders/gemma_3.py
+++ b/python/sglang/multimodal_gen/runtime/models/encoders/gemma_3.py
@@ -529,6 +529,9 @@ class SiglipAttention(nn.Module):
         tp_size = get_tp_world_size()
         self.head_dim = hidden_size // num_heads
         self.num_heads_per_partition = num_heads // tp_size
+        # Cache the per-rank projection width so forward() does not re-read the
+        # global TP size (which is not patched to the folding group at run time).
+        self.embed_dim_per_partition = self.num_heads_per_partition * self.head_dim
         self.scaling = self.head_dim**-0.5
 
         self.qkv_proj = QKVParallelLinear(
@@ -559,7 +562,7 @@ class SiglipAttention(nn.Module):
 
     def forward(self, hidden_states: torch.Tensor) -> torch.Tensor:
         qkv, _ = self.qkv_proj(hidden_states)
-        q, k, v = qkv.split([self.hidden_size // get_tp_world_size()] * 3, dim=-1)
+        q, k, v = qkv.split([self.embed_dim_per_partition] * 3, dim=-1)
 
         batch_size, seq_len, _ = q.shape
         q = q.view(batch_size, seq_len, self.num_heads_per_partition, self.head_dim)
@@ -569,7 +572,7 @@ class SiglipAttention(nn.Module):
         attn_output = self.attn(q, k, v)
 
         attn_output = attn_output.reshape(
-            batch_size, seq_len, self.hidden_size // get_tp_world_size()
+            batch_size, seq_len, self.embed_dim_per_partition
         )
 
         output, _ = self.out_proj(attn_output)
diff --git a/python/sglang/multimodal_gen/runtime/models/encoders/t5.py b/python/sglang/multimodal_gen/runtime/models/encoders/t5.py
index 3a1b931ab..94c09c5f8 100644
--- a/python/sglang/multimodal_gen/runtime/models/encoders/t5.py
+++ b/python/sglang/multimodal_gen/runtime/models/encoders/t5.py
@@ -30,7 +30,6 @@ import torch.nn.functional as F
 from torch import nn
 
 from sglang.multimodal_gen.configs.models.encoders import BaseEncoderOutput, T5Config
-from sglang.multimodal_gen.runtime.distributed import get_sp_group, get_tp_group
 from sglang.multimodal_gen.runtime.layers.activation import get_act_fn
 from sglang.multimodal_gen.runtime.layers.layernorm import RMSNorm
 from sglang.multimodal_gen.runtime.layers.linear import (
@@ -44,23 +43,13 @@ from sglang.multimodal_gen.runtime.layers.vocab_parallel_embedding import (
     VocabParallelEmbedding,
 )
 from sglang.multimodal_gen.runtime.loader.weight_utils import default_weight_loader
-from sglang.multimodal_gen.runtime.models.encoders.base import TextEncoder
+from sglang.multimodal_gen.runtime.models.encoders.base import (
+    TextEncoder,
+    get_folding_tp_group,
+)
 from sglang.multimodal_gen.runtime.platforms import current_platform
 
 
-def _get_folding_tp_group(
-    config: T5Config,
-) -> torch.distributed.ProcessGroup | None:
-    if config.parallel_folding:
-        if config.parallel_folding_mode == "sp":
-            return get_sp_group()
-        elif config.parallel_folding_mode == "ulysses":
-            return get_sp_group().ulysses_group
-        elif config.parallel_folding_mode == "ring":
-            return get_sp_group().ring_group
-    return get_tp_group()
-
-
 class AttentionType:
     """
     Attention type.
@@ -88,7 +77,7 @@ class T5DenseActDense(nn.Module):
         self, config: T5Config, quant_config: QuantizationConfig | None = None
     ):
         super().__init__()
-        tp_group = _get_folding_tp_group(config)
+        tp_group = get_folding_tp_group(config)
         self.wi = MergedColumnParallelLinear(
             config.d_model, [config.d_ff], bias=False, tp_group=tp_group
         )
@@ -114,7 +103,7 @@ class T5DenseGatedActDense(nn.Module):
         self, config: T5Config, quant_config: QuantizationConfig | None = None
     ):
         super().__init__()
-        tp_group = _get_folding_tp_group(config)
+        tp_group = get_folding_tp_group(config)
         self.wi_0 = MergedColumnParallelLinear(
             config.d_model,
             [config.d_ff],
@@ -210,7 +199,7 @@ class T5Attention(nn.Module):
         self.total_num_heads = self.total_num_kv_heads = config.num_heads
 
         # Partition heads across multiple tensor parallel GPUs.
-        self.tp_group = _get_folding_tp_group(config)
+        self.tp_group = get_folding_tp_group(config)
         self.tp_world_size = get_group_size(self.tp_group)
         assert config.num_heads % self.tp_world_size == 0
         self.n_heads = config.num_heads // self.tp_world_size
@@ -584,7 +573,7 @@ class T5EncoderModel(TextEncoder):
         super().__init__(config)
 
         quant_config = None
-        tp_group = _get_folding_tp_group(config)
+        tp_group = get_folding_tp_group(config)
         self.shared = VocabParallelEmbedding(
             config.vocab_size,
             config.d_model,
@@ -673,7 +662,7 @@ class UMT5EncoderModel(TextEncoder):
         super().__init__(config)
 
         quant_config = None
-        tp_group = _get_folding_tp_group(config)
+        tp_group = get_folding_tp_group(config)
         self.shared = VocabParallelEmbedding(
             config.vocab_size,
             config.d_model,
diff --git a/python/sglang/multimodal_gen/runtime/server_args.py b/python/sglang/multimodal_gen/runtime/server_args.py
index 2c899b8b8..58060adc2 100644
--- a/python/sglang/multimodal_gen/runtime/server_args.py
+++ b/python/sglang/multimodal_gen/runtime/server_args.py
@@ -20,7 +20,6 @@ import addict
 import yaml
 
 from sglang.multimodal_gen import envs
-from sglang.multimodal_gen.configs.models.encoders import T5Config
 from sglang.multimodal_gen.configs.pipeline_configs.base import PipelineConfig
 from sglang.multimodal_gen.configs.pipeline_configs.ltx_2 import (
     LTX2PipelineConfig,
@@ -442,24 +441,44 @@ class ServerArgs(DisaggServerArgsMixin):
         self.nunchaku_config = resolution.nunchaku_config
 
     def adjust_pipeline_config(self):
-        # enable parallel folding when SP is enabled
-        if self.tp_size != 1 or self.sp_degree <= 1:
+        # 1. adjust for encoder parallel folding
+        tp_size = self.tp_size or 1
+        dp_size = self.dp_size or 1
+        sp_degree = self.sp_degree or 1
+        # one replica = all its GPUs
+        replica_size = (self.num_gpus or tp_size) // dp_size
+        fold_world = dp_size == 1 and not self.disagg_mode and replica_size > tp_size
+
+        if fold_world:
+            mode = "world"
+        elif tp_size == 1 and sp_degree > 1:
+            # Preserve prior behavior for dp>1 / disaggregated SP runs.
+            mode = "sp"
+        else:
             return
 
-        enabled = False
-        for text_encoder_config in self.pipeline_config.text_encoder_configs:
-            if isinstance(text_encoder_config, T5Config):
-                text_encoder_config.parallel_folding = True
-                enabled = True
-                text_encoder_config.parallel_folding_mode = "sp"
+        # Propose the fold group from the parallelism for every encoder. The
+        # loader keeps it only for encoders wide enough to benefit at their real
+        # (post-load) size and whose dims divide the group -- see
+        # finalize_encoder_folding. Deciding on real size (not architecture)
+        # handles the same encoder family at different parameter counts.
+        encoder_configs = list(self.pipeline_config.text_encoder_configs) + list(
+            getattr(self.pipeline_config, "image_encoder_configs", ()) or ()
+        )
+        for encoder_config in encoder_configs:
+            encoder_config.parallel_folding_mode = mode
 
-        if enabled:
-            logger.info(
-                "Enabled T5 text encoder parallel folding (mode=sp) for %s (tp_size=%s, sp_degree=%s).",
-                self.__class__.__name__,
-                self.tp_size,
-                self.sp_degree,
-            )
+        logger.info(
+            "Proposed encoder parallel folding (mode=%s) for %s "
+            "(tp=%s sp=%s cfg=%s replica=%s); the loader keeps it for encoders "
+            "wide enough to benefit.",
+            mode,
+            self.__class__.__name__,
+            tp_size,
+            sp_degree,
+            self.cfg_parallel_degree or 1,
+            replica_size,
+        )
 
     def _adjust_offload(self):
         if current_platform.is_cpu():
diff --git a/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/engine.py b/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/engine.py
index 23e7913f2..d34277633 100644
--- a/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/engine.py
+++ b/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/engine.py
@@ -66,6 +66,7 @@ from sglang.multimodal_gen.test.single_test_file.component_accuracy.utils import
     generate_name_candidates,
     initialize_parallel_runtime,
     load_checkpoint_weights,
+    load_param_with_weight_loader,
     materialize_module,
     read_json_file,
     resolve_text_encoder_forward_module,
@@ -498,7 +499,13 @@ class AccuracyEngine:
                 shard_context.world_size if shard_context is not None else tp_world
             )
             shard_rank = shard_context.rank if shard_context is not None else rank
-            if copy_tensor(tensor, src_tensor, shard_world_size, shard_rank):
+            # TP-sharded params must load via their own weight_loader; the
+            # generic narrow mis-slices fused QKV/gate_up projections.
+            if shard_world_size > 1 and load_param_with_weight_loader(
+                tensor, name, lookup, reverse_mapping
+            ):
+                matched += 1
+            elif copy_tensor(tensor, src_tensor, shard_world_size, shard_rank):
                 matched += 1
             else:
                 unmatched_details.append(
diff --git a/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/utils.py b/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/utils.py
index 22e4d8cb8..bf7d5e20d 100644
--- a/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/utils.py
+++ b/python/sglang/multimodal_gen/test/single_test_file/component_accuracy/utils.py
@@ -866,3 +866,53 @@ def run_native_component_accuracy_case(
 
 def run_text_encoder_accuracy_case(engine_cls: Any, case: Any, num_gpus: int) -> None:
     _run_staged_text_encoder_accuracy_case(engine_cls, case, num_gpus)
+
+
+def _find_split_shard_parts(lookup, cand):
+    """(shard_id, tensor) pairs when a fused target param ships split in the
+    source state dict (q/k/v or gate/up)."""
+    if "qkv_proj" in cand:
+        for repl in ("q_proj", "q"):
+            q_name = cand.replace("qkv_proj", repl)
+            k_name = q_name.replace(".q_proj", ".k_proj").replace(".q", ".k")
+            v_name = q_name.replace(".q_proj", ".v_proj").replace(".q", ".v")
+            if q_name in lookup and k_name in lookup and v_name in lookup:
+                return [
+                    ("q", lookup[q_name]),
+                    ("k", lookup[k_name]),
+                    ("v", lookup[v_name]),
+                ]
+    if "gate_up_proj" in cand:
+        for gate_token, up_token in (("gate_proj", "up_proj"), ("wi_0", "wi_1")):
+            gate_name = cand.replace("gate_up_proj", gate_token)
+            up_name = cand.replace("gate_up_proj", up_token)
+            if gate_name in lookup and up_name in lookup:
+                return [(0, lookup[gate_name]), (1, lookup[up_name])]
+    return None
+
+
+def load_param_with_weight_loader(param, name, lookup, reverse_mapping) -> bool:
+    """Route the source tensor through the parameter's own ``weight_loader`` so
+    TP sharding matches production checkpoint loading. The generic narrow in
+    ``copy_tensor`` mis-slices fused QKV/gate_up weights (it splits the fused
+    dim evenly instead of per-projection), which corrupts any TP/folded module.
+    Any failure falls back to the legacy path."""
+    loader = getattr(param, "weight_loader", None)
+    if loader is None or getattr(param, "device_mesh", None) is not None:
+        return False
+    try:
+        candidates = generate_name_candidates(name, reverse_mapping)
+        for cand in candidates:
+            parts = _find_split_shard_parts(lookup, cand)
+            if parts is not None:
+                for shard_id, tensor in parts:
+                    loader(param, tensor.to(dtype=param.dtype), shard_id)
+                return True
+        for cand in candidates:
+            src = lookup.get(cand)
+            if src is not None:
+                loader(param, src.to(dtype=param.dtype))
+                return True
+    except Exception:
+        return False
+    return False
diff --git a/python/sglang/multimodal_gen/test/test_utils.py b/python/sglang/multimodal_gen/test/test_utils.py
index d72b8eb4d..f48af149b 100644
--- a/python/sglang/multimodal_gen/test/test_utils.py
+++ b/python/sglang/multimodal_gen/test/test_utils.py
@@ -34,7 +34,7 @@ if TYPE_CHECKING:
 
 logger = init_logger(__name__)
 
-SGL_TEST_FILES_CI_DATA_REVISION = "46b9b53a429606cb6739c861f275c1277c314a10"
+SGL_TEST_FILES_CI_DATA_REVISION = "916cbff23aa4e89f78128397ede7ce29a73d6d8c"
 
 if current_platform.is_npu():
     SGL_TEST_FILES_CI_DATA_REVISION = "670d66a8a290b62c0c3c077b3e9b0f4a4d9a44e7"
diff --git a/python/sglang/multimodal_gen/test/unit/test_encoder_world_folding.py b/python/sglang/multimodal_gen/test/unit/test_encoder_world_folding.py
new file mode 100644
index 000000000..4d79194cb
--- /dev/null
+++ b/python/sglang/multimodal_gen/test/unit/test_encoder_world_folding.py
@@ -0,0 +1,166 @@
+"""Unit test for the encoder parallel-folding decision (two stages).
+
+Stage 1 - ServerArgs.adjust_pipeline_config proposes a fold group from the
+parallelism alone (mode = "world"/"sp"/None), the same for every encoder.
+
+Stage 2 - encoder_folding_worthwhile (applied by the loader once real dims are
+known) keeps the fold only for encoders wide enough to benefit and whose heads
+and MLP divide the group. Being size-based (not per-architecture) it handles the
+same encoder family at different parameter counts.
+
+Pure logic, no GPU / distributed init.
+"""
+
+from types import SimpleNamespace
+
+from sglang.multimodal_gen.configs.models.encoders import (
+    EncoderConfig,
+    ImageEncoderConfig,
+    TextEncoderConfig,
+)
+from sglang.multimodal_gen.configs.models.encoders.t5 import T5Config
+from sglang.multimodal_gen.runtime.models.encoders.base import (
+    FOLD_MIN_HIDDEN_SIZE,
+    encoder_folding_worthwhile,
+)
+from sglang.multimodal_gen.runtime.server_args import ServerArgs
+
+
+def _run(encoders, tp, sp, cfg, dp=1, disagg=False, num_gpus=None, image=()):
+    self = SimpleNamespace(
+        tp_size=tp,
+        sp_degree=sp,
+        cfg_parallel_degree=cfg,
+        dp_size=dp,
+        disagg_mode=disagg,
+        num_gpus=num_gpus if num_gpus is not None else tp * sp * cfg * dp,
+        pipeline_config=SimpleNamespace(
+            text_encoder_configs=tuple(encoders),
+            image_encoder_configs=tuple(image),
+        ),
+    )
+    ServerArgs.adjust_pipeline_config(self)
+
+
+def _proposed_mode(tp, sp, cfg, dp=1, disagg=False, num_gpus=None):
+    enc = T5Config()
+    enc.parallel_folding_mode = None
+    _run([enc], tp, sp, cfg, dp=dp, disagg=disagg, num_gpus=num_gpus)
+    return enc.parallel_folding_mode
+
+
+# --- stage 1: adjust proposes a fold group from the parallelism --------------
+
+
+def test_pure_tp_not_folded():
+    # replica == tp: encoder already uses every replica GPU; nothing to fold.
+    assert _proposed_mode(tp=2, sp=1, cfg=1) is None
+
+
+def test_single_gpu_not_folded():
+    assert _proposed_mode(tp=1, sp=1, cfg=1) is None
+
+
+def test_cfg_parallel_proposes_world():
+    assert _proposed_mode(tp=1, sp=1, cfg=2) == "world"
+
+
+def test_sp_dp1_proposes_world():
+    assert _proposed_mode(tp=1, sp=2, cfg=1) == "world"
+
+
+def test_tp_times_cfg_proposes_world():
+    assert _proposed_mode(tp=2, sp=1, cfg=2) == "world"
+
+
+def test_sp_times_cfg_proposes_world():
+    assert _proposed_mode(tp=1, sp=2, cfg=2) == "world"
+
+
+def test_dp_gt_1_keeps_sp():
+    # dp>1: world group spans replicas, so fold over the per-replica SP group.
+    assert _proposed_mode(tp=1, sp=2, cfg=1, dp=2) == "sp"
+    # dp>1 pure cfg has no SP group to fall back to -> nothing proposed.
+    assert _proposed_mode(tp=1, sp=1, cfg=2, dp=2) is None
+
+
+def test_disagg_keeps_sp():
+    assert _proposed_mode(tp=1, sp=2, cfg=2, disagg=True) == "sp"
+
+
+def test_num_gpus_is_authoritative_for_replica():
+    assert _proposed_mode(tp=2, sp=1, cfg=1, num_gpus=8) == "world"
+
+
+def test_all_encoders_get_the_same_proposed_mode():
+    # adjust no longer size-gates: every encoder in the pipeline (text + image)
+    # gets the proposed group; the loader trims it later by real size.
+    t5 = T5Config()
+    clip = TextEncoderConfig()
+    img = ImageEncoderConfig()
+    for e in (t5, clip, img):
+        e.parallel_folding_mode = None
+    _run([t5, clip], tp=1, sp=2, cfg=1, image=[img])
+    assert t5.parallel_folding_mode == "world"
+    assert clip.parallel_folding_mode == "world"
+    assert img.parallel_folding_mode == "world"
+
+
+# --- stage 2: size + divisibility gate (loader, on real dims) ----------------
+
+
+def _enc(hidden, heads, inter):
+    enc = TextEncoderConfig()
+    enc.hidden_size = hidden
+    enc.num_attention_heads = heads
+    enc.intermediate_size = inter
+    return enc
+
+
+def test_wide_encoder_worth_folding():
+    # T5-XXL / Mistral-24B class: hidden >= threshold and dims divide the group.
+    assert encoder_folding_worthwhile(_enc(4096, 64, 10240), group_size=2) is True
+    assert encoder_folding_worthwhile(_enc(5120, 32, 32768), group_size=2) is True
+
+
+def test_narrow_encoder_not_worth_folding():
+    # Qwen3 (2560) measured a net loss -> below the bar.
+    assert encoder_folding_worthwhile(_enc(2560, 32, 9728), group_size=2) is False
+
+
+def test_tiny_encoder_not_worth_folding():
+    # CLIP-L (512): far too small.
+    assert encoder_folding_worthwhile(_enc(512, 8, 2048), group_size=2) is False
+
+
+def test_indivisible_dims_not_folded():
+    # wide enough but heads/intermediate do not divide the group -> cannot shard.
+    assert encoder_folding_worthwhile(_enc(4096, 6, 10240), group_size=4) is False
+    assert encoder_folding_worthwhile(_enc(4096, 64, 10250), group_size=4) is False
+
+
+def test_group_size_one_not_folded():
+    assert encoder_folding_worthwhile(_enc(4096, 64, 10240), group_size=1) is False
+
+
+def test_unknown_dims_not_folded():
+    # a bare encoder whose dims we cannot introspect is left replicated (safe).
+    assert encoder_folding_worthwhile(TextEncoderConfig(), group_size=2) is False
+
+
+def test_threshold_is_the_boundary():
+    assert encoder_folding_worthwhile(_enc(FOLD_MIN_HIDDEN_SIZE, 8, 8192), 2) is True
+    assert (
+        encoder_folding_worthwhile(_enc(FOLD_MIN_HIDDEN_SIZE - 128, 8, 8192), 2)
+        is False
+    )
+
+
+# --- config defaults ---------------------------------------------------------
+
+
+def test_parallel_folding_mode_defaults_none():
+    assert EncoderConfig().parallel_folding_mode is None
+    assert TextEncoderConfig().parallel_folding_mode is None
+    assert ImageEncoderConfig().parallel_folding_mode is None
+    assert T5Config().parallel_folding_mode is None