diff --git a/deepspeed/runtime/engine.py b/deepspeed/runtime/engine.py
index dac7aa10a7fb..94f662b66f3d 100755
--- a/deepspeed/runtime/engine.py
+++ b/deepspeed/runtime/engine.py
@@ -2470,12 +2470,20 @@ def _backward_prologue(self):
     def _backward_epilogue(self):
         self._stop_timers(self.engine_timers.backward_inner_timers)
         self._start_timers(self.engine_timers.backward_reduce_timers)
+        # BF16_Optimizer (without immediate_grad_update) accumulates low
+        # precision grads into a separate fp32 buffer in backward_epilogue().
+        # Run it before allreduce so the boundary microbatch is reduced.
+        bf16_optimizer = isinstance(self.optimizer, BF16_Optimizer)
+        if bf16_optimizer:
+            self.optimizer.backward_epilogue()
+
         if self.enable_backward_allreduce and not self.inside_no_sync_ctxt:
             # Traditional code path that allreduces the module parameter grads
             self.allreduce_gradients()
 
         if isinstance(self.optimizer, ZeROOptimizer):
-            self.optimizer.backward_epilogue()
+            if not bf16_optimizer:
+                self.optimizer.backward_epilogue()
             self.optimizer.exit_backward()
 
         see_memory_usage("Engine after backward", force=self.memory_breakdown())
diff --git a/tests/unit/v1/zero/test_zero.py b/tests/unit/v1/zero/test_zero.py
index fb0e393dd5da..fde4a42bfb15 100644
--- a/tests/unit/v1/zero/test_zero.py
+++ b/tests/unit/v1/zero/test_zero.py
@@ -21,6 +21,7 @@
 
 import deepspeed
 from deepspeed.runtime.engine import DeepSpeedEngine
+from deepspeed.runtime.bf16_optimizer import BF16_Optimizer
 from deepspeed.runtime.zero.partition_parameters import ZeroParamStatus
 from deepspeed.utils.zero_to_fp32 import load_state_dict_from_zero_checkpoint
 from deepspeed.runtime.zero.utils import ZeRORuntimeException
@@ -53,6 +54,68 @@ def dump_state_dict(model):
             print(f"{name} {param.data}")
 
 
+class TestBF16OptimizerGradReduction(DistributedTest):
+    world_size = 2
+
+    def test_boundary_microbatch_grad_is_reduced(self):
+        if not get_accelerator().is_bf16_supported():
+            pytest.skip("bfloat16 is not supported on this accelerator")
+
+        class ScaleModel(Module):
+
+            def __init__(self):
+                super().__init__()
+                self.weight = Parameter(torch.ones(4))
+
+            def forward(self, x):
+                return (self.weight * x).sum()
+
+        config_dict = {
+            "train_micro_batch_size_per_gpu": 1,
+            "gradient_accumulation_steps": 2,
+            "zero_optimization": {
+                "stage": 1
+            },
+            "optimizer": {
+                "type": "Adam",
+                "params": {
+                    "lr": 1e-3
+                }
+            },
+            "bf16": {
+                "enabled": True,
+                "immediate_grad_update": False,
+            },
+            "data_types": {
+                "grad_accum_dtype": "fp32"
+            }
+        }
+
+        model = ScaleModel()
+        engine, _, _, _ = deepspeed.initialize(config=config_dict, model=model, model_parameters=model.parameters())
+        assert isinstance(engine.optimizer, BF16_Optimizer)
+
+        rank = dist.get_rank()
+        rank_offset = 18 * rank
+        inputs = [
+            torch.tensor([1, 3, 5, 7], dtype=torch.bfloat16, device=engine.device) + rank_offset,
+            torch.tensor([11, 13, 15, 17], dtype=torch.bfloat16, device=engine.device) + rank_offset,
+        ]
+        for i, x in enumerate(inputs):
+            engine.set_gradient_accumulation_boundary(i == len(inputs) - 1)
+            engine.backward(engine(x))
+
+        grad = engine.optimizer.fp32_groups_gradients_flat[0].detach().clone()
+        expected = torch.tensor([15, 17, 19, 21], dtype=grad.dtype, device=grad.device)
+        torch.testing.assert_close(grad, expected)
+
+        gathered_grads = [torch.zeros_like(grad) for _ in range(dist.get_world_size())]
+        dist.all_gather(gathered_grads, grad)
+        torch.testing.assert_close(gathered_grads[0], gathered_grads[1])
+
+        engine.destroy()
+
+
 @pytest.mark.parametrize("zero_stage", [1, 2, 3])
 class TestZeroUnbalancedGradients(DistributedTest):
     world_size = 1