diff --git a/docs/.nav.yml b/docs/.nav.yml
index 4ff9493c7..ac5ee2b28 100644
--- a/docs/.nav.yml
+++ b/docs/.nav.yml
@@ -120,6 +120,7 @@ nav:
       - design/feature/omni_async_output_materialization.md
       - design/feature/vae_parallel.md
       - design/feature/diffusion_continuous_batching.md
+      - design/feature/distributed_layerwise_offload.md
     - Module Design:
       - design/module/ar_module.md
       - design/module/dit_module.md
diff --git a/docs/design/feature/distributed_layerwise_offload.md b/docs/design/feature/distributed_layerwise_offload.md
new file mode 100644
index 000000000..a52b0b8ea
--- /dev/null
+++ b/docs/design/feature/distributed_layerwise_offload.md
@@ -0,0 +1,154 @@
+# Distributed Layerwise Offload
+
+This document describes distributed layerwise offload (DLO) for diffusion
+models. DLO keeps only a small number of DiT blocks on the accelerator and
+streams the remaining blocks from host memory. The distributed backend can
+either shard those host-side weights across an existing parallel group or keep
+the standard loader's rank-local weights and avoid an additional collective.
+
+For user-facing commands, see the
+[distributed layerwise offloading guide](../../user_guide/diffusion/cpu_offload_diffusion.md)
+and the [Cosmos3 recipe](https://github.com/vllm-project/vllm-omni/blob/main/recipes/cosmos3/Cosmos3-DistOffload.md).
+
+## Status
+
+DLO is implemented for multi-device diffusion execution. The default
+AllGather path is the primary path for DP and SP deployments. The
+`--dlo-no-use-allgather` path is a rank-local compatibility mode: it is useful
+for standard-loader sharding, workstation bring-up, and systems where an
+additional DLO collective is undesirable, but it does not reduce host weight
+storage across ranks.
+
+The compatibility matrix below describes the current implementation. The
+unit-level guards are covered, but not every parallelism combination has a
+full model-and-hardware end-to-end test.
+
+## Design
+
+### DLO consumes the existing parallel topology
+
+DLO does not create a new DP, TP, or SP topology. It reads the configured
+`DiffusionParallelConfig` and attaches offload hooks to the DiT blocks after the
+standard distributed groups have been initialized.
+
+The DLO weight-sharding group is selected as follows:
+
+1. Use the existing DP group when `data_parallel_size > 1`.
+2. When DP is one and SP is greater than one, use the SP group.
+3. Otherwise, run rank-locally without a DLO process group.
+
+TP is deliberately not used as DLO's AllGather group. HSDP has its own
+parameter-sharding lifecycle and is not allowed to be sharded a second time by
+DLO's AllGather path.
+
+### AllGather path
+
+With the default `dlo_use_allgather=True`, each rank stores approximately
+`1 / group_size` of each streamable block in pinned host memory. The next
+block's shard is copied to a device buffer and reconstructed with
+`all_gather_into_tensor` on a communication stream while the current block is
+executing.
+
+```text
+Compute:    [Block N]             [Block N+1]          [Block N+2]
+H2D:                      [shard N+1]           [shard N+2]
+AllGather:                [full N+1]             [full N+2]
+Buffers:    [current slot]       [prefetch slot]       [current slot]
+```
+
+The backend uses two shared device buffers, so accelerator weight residency is
+bounded by the largest streamed blocks rather than the complete model.
+
+When DP is greater than one, the engine can process one request per DP rank in
+the same denoising wave. Because AllGather is a collective, all participating
+requests must take the same execution path at every denoising step.
+
+### Rank-local path without DLO AllGather
+
+With `--dlo-no-use-allgather`, DLO forces its internal offload shard size to
+one. The regular model loader remains responsible for preparing each rank's
+weights, including TP-local tensors or HSDP-managed parameters. DLO then
+streams those rank-local tensors block by block using H2D copies only.
+
+This mode means:
+
+- DP still provides independent replicas, but DLO does not shard weights
+  across DP ranks.
+- SP still performs its normal activation/attention collectives, but DLO does
+  not shard weights across SP ranks.
+- TP/HSDP/SP collectives, if configured, are not disabled by this flag; only
+  DLO's additional weight AllGather is disabled.
+- Pure DP deployments keep a full host-side model copy per rank, subject to
+  shared OS page-cache behavior.
+- The scheduler does not require a synchronized DP request wave for DLO.
+
+This path is intentionally not implemented by reusing the AllGather mmap
+loader. It relies on the standard loader so model-specific TP/HSDP transforms
+remain intact.
+
+## Parallelism compatibility
+
+| Parallelism | DLO + AllGather | DLO without AllGather |
+|---|---|---|
+| **DP** | Supported primary path. DLO shards host weights across the DP group and can run DP multi-concurrency. | Supported rank-local path. DP replicas remain independent; no DLO weight sharding or cross-DP DLO collective. |
+| **SP** | Supported in the implementation. With DP=1, DLO uses the SP group for host-weight sharding; SP still shards sequence/activation work. | SP remains active, but DLO keeps standard-loader rank-local weights and adds no SP weight collective. |
+| **TP > 1** | Unsupported in the DLO mmap path. TP-aware loader callbacks are bypassed, so the backend rejects this configuration when it enters that path. | Standard loading is retained and TP-local tensors can be streamed. This is the intended compatibility path, but it still needs broader model and hardware validation. |
+| **HSDP** | Rejected. HSDP has already sharded parameters, so DLO AllGather would double-shard them. | Accepted by configuration. HSDP owns parameter sharding and its own gathers; DLO only stages rank-local parameters. End-to-end coverage is limited. |
+
+### Combined dimensions
+
+- **DP + SP:** DLO uses the DP group for weight sharding when DP is greater
+  than one; SP continues to use its own sequence-parallel group. If DP is one,
+  the SP group becomes DLO's sharding group in AllGather mode.
+- **DP + TP/SP without AllGather:** standard model loading defines the
+  rank-local tensor layout. DLO adds no cross-DP, cross-TP, or cross-SP weight
+  collective.
+- **HSDP + SP:** the general parallel configuration permits HSDP over SP, but
+  DLO must use `--dlo-no-use-allgather`. HSDP remains responsible for weight
+  materialization and synchronization.
+- **HSDP + DP or TP:** rejected independently by the diffusion parallel
+  configuration.
+
+## Request and loading constraints
+
+AllGather DP multi-concurrency requires:
+
+- explicit `num_inference_steps`;
+- the same `num_inference_steps` for all requests in a wave; and
+- identical request arguments that affect the collective execution path.
+
+The no-AllGather path does not impose these DLO-specific synchronized-wave
+requirements.
+
+The mmap loader is used only by the supported DLO+AllGather path when the
+model has a compatible checkpoint layout. Online quantization is incompatible
+with that sharded mmap path; use `--dlo-no-use-allgather` or disable online
+quantization. Models that do not meet the mmap requirements use the regular
+loader path.
+
+## Validation coverage
+
+Current source-level validation includes:
+
+- HSDP + DLO + AllGather rejection;
+- HSDP + DLO without AllGather acceptance at configuration level;
+- TP rejection in the DLO+AllGather mmap path;
+- resident-layer requests requiring no-AllGather;
+- DP request-wave validation for denoising-step compatibility;
+- sharding, double-buffer, AllGather-size, and heterogeneous-block regression
+  tests.
+
+The highest-value missing coverage is end-to-end numerical comparison against
+ordinary layerwise offload for DP+SP, TP+no-AllGather, and HSDP+SP+no-AllGather
+on the target CUDA/NCCL or CANN/HCCL hardware.
+
+## Recommendations
+
+- Use **DP + DLO AllGather** for the supported throughput and host-memory
+  scaling path.
+- Use **SP + DLO AllGather** for long-sequence workloads when DP concurrency is
+  not the goal.
+- Use **no-AllGather** to bring up TP or workstation PCIe configurations, with
+  the expectation of higher host-memory use and lower validation confidence.
+- Prefer **HSDP alone** for production HSDP deployments until the combined
+  HSDP + DLO no-AllGather path has broader end-to-end coverage.
diff --git a/docs/design/index.md b/docs/design/index.md
index 0da17cce4..e8df11b77 100644
--- a/docs/design/index.md
+++ b/docs/design/index.md
@@ -12,6 +12,7 @@ This section contains design documents and architecture specifications for vLLM-
 - [Ray-based Execution](feature/ray_based_execution.md)
 - [Async Omni Output Materialization](feature/omni_async_output_materialization.md)
 - [Diffusion Continuous Batching](feature/diffusion_continuous_batching.md)
+- [Distributed Layerwise Offload](feature/distributed_layerwise_offload.md)
 
 ## Infrastructure Design Documents
 
diff --git a/docs/user_guide/diffusion/cpu_offload_diffusion.md b/docs/user_guide/diffusion/cpu_offload_diffusion.md
index 86a0e9201..02ab9f074 100644
--- a/docs/user_guide/diffusion/cpu_offload_diffusion.md
+++ b/docs/user_guide/diffusion/cpu_offload_diffusion.md
@@ -184,10 +184,15 @@ class Flux2Transformer2DModel(nn.Module):
 ### How It Works
 
 Distributed layerwise offloading extends single-GPU layerwise offloading to
-multi-device deployments.  Each DP rank stores only **1/dp_size** of the model
-weights in host memory; full layer weights are reconstructed at runtime via
-**AllGather** on a dedicated communication stream, overlapped with computation
-via a fixed double-buffer scheme.
+multi-device deployments. In the default mode, each rank stores only
+**1/dp_size** of the model weights in host memory; full layer weights are
+reconstructed at runtime via **AllGather** on a dedicated communication stream,
+overlapped with computation via a fixed double-buffer scheme. The
+`--dlo-no-use-allgather` mode instead streams standard-loader rank-local
+weights independently and does not shard weights across ranks.
+
+For the implementation design and compatibility matrix, see
+[Distributed Layerwise Offload](../../design/feature/distributed_layerwise_offload.md).
 
 **Key features:**
 - **Weight sharding + AllGather**: each rank stores 1/dp_size of weights,
@@ -219,7 +224,7 @@ vllm serve /path/to/model --omni \
   --enable-distributed-layerwise-offload \
   --data-parallel-size 4
 
-# Without AllGather (each rank loads full weights, no sharding)
+# Without DLO AllGather (each rank streams standard-loader rank-local weights)
 vllm serve /path/to/model --omni \
   --enable-distributed-layerwise-offload \
   --data-parallel-size 4 \
@@ -247,9 +252,9 @@ m = Omni(
 | Flag | Description | Default |
 |------|-------------|---------|
 | `--enable-distributed-layerwise-offload` | Enable DLO | `false` |
-| `--data-parallel-size N` | Number of DP ranks for weight sharding | `1` |
+| `--data-parallel-size N` | Number of DP ranks; DLO weight-sharding group when AllGather is enabled | `1` |
 | `--dlo-use-allgather` | Shard + AllGather (saves CPU, requires concurrent requests) | `true` |
-| `--dlo-no-use-allgather` | Full weights per rank (no sharding, no AllGather) | `false` |
+| `--dlo-no-use-allgather` | Use standard-loader rank-local weights; no DLO sharding or AllGather | `false` |
 
 ### How model weights are loaded (mmap path)
 
@@ -303,9 +308,15 @@ request while AllGather synchronizes only weight shards (request-independent).
 
 ### Limitations
 - Online quantization (FP8) is incompatible with mmap loading — falls back to
-  regular `load_weights()` automatically
-- Tensor Parallel is not supported (DLO uses DP-based sharding)
-- HSDP + AllGather is rejected (would double-shard weights)
+  regular loading only when the model is outside the DLO+AllGather mmap path;
+  online quantization with DLO+AllGather is rejected. Use
+  `--dlo-no-use-allgather` or disable online quantization.
+- Tensor Parallel > 1 is rejected in the DLO+AllGather mmap path because TP-aware
+  weight-loader callbacks are bypassed. The no-AllGather path retains the
+  standard TP loader and is experimental.
+- HSDP + AllGather is rejected because it would double-shard parameters. HSDP
+  with no-AllGather is accepted at configuration level, but has limited
+  end-to-end validation.
 - `num_inference_steps=None` is not allowed in DP multi-concurrency mode
 
 **Module Discovery**
@@ -338,7 +349,7 @@ OffloadBackend (base class)
 ├── LayerWiseOffloadBackend → uses LayerwiseOffloadHook
 │                          (single-GPU, full weights on host)
 └── DistributedLayerwiseOffloadBackend → uses DistributedLayerwiseOffloadHook
-                                         (multi-GPU, 1/dp_size sharded weights + AllGather)
+                                         (multi-GPU, sharded AllGather or rank-local mode)
 ```
 
 Factory function `get_offload_backend()` selects the appropriate backend based on
@@ -369,4 +380,10 @@ reasoner/generator components inside the model forward pass.
 **Notes:**
 - Model-Level Offloading is expected to be supported by all common diffusion models (DiT and encoders) naturally
 - Layerwise Offloading requires DiT class to define `_layerwise_offload_blocks_attrs` pointing to transformer blocks
-- Distributed Layerwise Offloading works with any model that supports Layerwise Offloading — no additional model changes required.  See [Cosmos3 DistOffload recipe](https://github.com/vllm-project/vllm-omni/blob/main/recipes/cosmos3/Cosmos3-DistOffload.md) for usage examples.
+- Distributed Layerwise Offloading reuses the layerwise block topology, but the
+  model and parallelism combination still needs validation. AllGather mode
+  additionally requires a compatible checkpoint/mmap layout; no-AllGather mode
+  retains the standard loader's rank-local tensors. See the
+  [DLO design](../../design/feature/distributed_layerwise_offload.md) and
+  [Cosmos3 DistOffload recipe](https://github.com/vllm-project/vllm-omni/blob/main/recipes/cosmos3/Cosmos3-DistOffload.md)
+  for usage examples.
diff --git a/recipes/cosmos3/Cosmos3-DistOffload.md b/recipes/cosmos3/Cosmos3-DistOffload.md
index 27d1c77bd..8eeea5cc2 100644
--- a/recipes/cosmos3/Cosmos3-DistOffload.md
+++ b/recipes/cosmos3/Cosmos3-DistOffload.md
@@ -56,10 +56,14 @@ vllm serve /path/to/Cosmos3-Super \
   --data-parallel-size 4
 ```
 
-### Without AllGather (full weights per rank, no sharding)
+### Without DLO AllGather (rank-local weights, no DLO sharding)
 
-Use `--dlo-no-use-allgather` when you want each rank to load full weights independently —
-no AllGather synchronization, no concurrent request requirement, but N× host memory.
+Use `--dlo-no-use-allgather` when you want each rank to stream the standard
+loader's rank-local weights independently — no DLO AllGather synchronization,
+no concurrent request requirement, but no DLO weight sharding and higher host
+memory use. In pure DP, this is equivalent to independent full-weight
+layerwise-offload replicas; with TP or HSDP, each rank retains the standard
+loader's local tensor layout.
 
 ```bash
 vllm serve /path/to/Cosmos3-Nano \
@@ -154,9 +158,9 @@ wait
 | Flag | Description | Default |
 |------|-------------|---------|
 | `--enable-distributed-layerwise-offload` | Enable DLO with H2D + AllGather overlap | `false` |
-| `--data-parallel-size N` | Number of DP ranks (weight sharding + concurrent requests) | `1` |
+| `--data-parallel-size N` | Number of DP ranks; DLO weight sharding + concurrent requests when AllGather is enabled | `1` |
 | `--dlo-use-allgather` | Use shard + AllGather for weight reconstruction (recommended) | `true` |
-| `--dlo-no-use-allgather` | Each rank loads full weights independently (no sharding, no AllGather) | `false` |
+| `--dlo-no-use-allgather` | Stream standard-loader rank-local weights independently (no DLO sharding, no DLO AllGather) | `false` |
 | `--usp N` | Use SP instead of DP for weight sharding (long sequences) | `1` |
 
 ## Mode comparison
@@ -166,7 +170,7 @@ wait
 | DLO + AllGather (DP4) | `--enable-distributed-layerwise-offload --data-parallel-size 4` | 1/4 model | 2 blocks | **3.3× HSDP** | Max throughput, short sequences |
 | DLO + AllGather (DP2) | `--enable-distributed-layerwise-offload --data-parallel-size 2` | 1/2 model | 2 blocks | 2× HSDP | Balanced throughput + memory |
 | DLO + AllGather (SP4) | `--enable-distributed-layerwise-offload --usp 4` | 1/4 model | 2 blocks | 1× (single req) | Long sequences (720p+) |
-| DLO no-AllGather | `--enable-distributed-layerwise-offload --dlo-no-use-allgather` | Full model | 2 blocks | 0.4× HSDP | No AllGather overhead, high CPU |
+| DLO no-AllGather | `--enable-distributed-layerwise-offload --dlo-no-use-allgather` | Standard-loader rank-local weights | 2 blocks | 0.4× HSDP | No DLO AllGather overhead, high CPU |
 | HSDP | `--use-hsdp --hsdp-shard-size 4` | 0 | 1/4 model | 1× (baseline) | Weights fit in HBM |
 
 ## Memory expectations
@@ -185,7 +189,11 @@ wait
 
 - `--dlo-use-allgather` (default) requires all concurrent requests to have the same
   `num_inference_steps` (AllGather is a collective that needs all ranks synchronized)
-- Online quantization (FP8) is incompatible with mmap loading — falls back to regular
-  `load_weights()` automatically
-- Tensor Parallel is not supported (DLO uses DP-based sharding, a different dimension)
-- HSDP + AllGather is rejected (would double-shard weights)
+- Online quantization (FP8) is incompatible with the DLO+AllGather mmap path;
+  use `--dlo-no-use-allgather` or disable online quantization
+- Tensor Parallel > 1 is rejected in the DLO+AllGather mmap path. TP with
+  `--dlo-no-use-allgather` retains the standard TP loader and should be treated
+  as an experimental compatibility path
+- HSDP + AllGather is rejected (would double-shard weights). HSDP with
+  `--dlo-no-use-allgather` is accepted at configuration level, but is not yet a
+  broadly validated production combination