diff --git a/modelopt/torch/distill/losses.py b/modelopt/torch/distill/losses.py
index 258824bf0..832437b7e 100644
--- a/modelopt/torch/distill/losses.py
+++ b/modelopt/torch/distill/losses.py
@@ -31,7 +31,7 @@ class LogitsDistillationLoss(Loss):
     This function implements the distillation loss found in the paper: https://arxiv.org/abs/1503.02531.
     """
 
-    def __init__(self, temperature: float = 1.0, reduction: str = "batchmean"):
+    def __init__(self, temperature: float = 1.0, reduction: str = "mean"):
         """Constructor.
 
         Args:
@@ -57,11 +57,12 @@ def forward(self, logits_s: torch.Tensor, logits_t: torch.Tensor) -> torch.Tenso
         soft_log_probs = F.log_softmax(logits_s / self._temperature, dim=-1)
         soft_targets = F.softmax(logits_t / self._temperature, dim=-1)
 
-        soft_log_probs = soft_log_probs.view(-1, soft_log_probs.size(-1))
-        soft_targets = soft_targets.view(-1, soft_targets.size(-1))
-
         kd_loss = F.kl_div(soft_log_probs, soft_targets.detach(), reduction=self._reduction)
 
+        if self._reduction == "none":
+            # Remove vocab dimension
+            kd_loss = kd_loss.sum(dim=-1)
+
         # Since the magnitudes of the gradients produced by the soft logits scale as 1/(T^2),
         # multiplying them by T^2 ensures that the relative contributions of the logits
         # remain roughly unchanged while experimenting with meta-parameters.
diff --git a/modelopt/torch/distill/plugins/huggingface.py b/modelopt/torch/distill/plugins/huggingface.py
index ff5cdc426..c865d8857 100644
--- a/modelopt/torch/distill/plugins/huggingface.py
+++ b/modelopt/torch/distill/plugins/huggingface.py
@@ -15,12 +15,16 @@
 
 """ModelOpt plugin to train HuggingFace models with knowledge distillation."""
 
+from torch import Tensor
 from transformers.modeling_outputs import CausalLMOutputWithPast
+from transformers.trainer_pt_utils import LabelSmoother
 
 import modelopt.torch.distill as mtd
 from modelopt.torch.opt.plugins import ModelOptHFTrainer
 from modelopt.torch.utils import print_rank_0
 
+IGNORE_TOKEN_ID = LabelSmoother.ignore_index  # equals -100
+
 
 class KDTrainer(ModelOptHFTrainer):
     """Distillation trainer for HuggingFace models."""
@@ -98,12 +102,37 @@ def save_model(
 
     def train(self, *args, **kwargs):
         """Train the model."""
-        self.compute_loss_func = lambda *args, **kwargs: self.model.compute_kd_loss()
+
+        def _compute_kd_loss(outputs: Tensor, labels: Tensor | None, **kwargs):
+            def loss_reduction_fn(loss: Tensor):
+                if labels is None:
+                    return loss.mean()
+                loss_mask = labels != IGNORE_TOKEN_ID
+                return (loss * loss_mask).sum() / loss_mask.sum().clamp(min=1)
+
+            return self.model.compute_kd_loss(loss_reduction_fn=loss_reduction_fn)
+
+        self.compute_loss_func = _compute_kd_loss
         return super().train(*args, **kwargs)
 
 
 class LMLogitsLoss(mtd.LogitsDistillationLoss):
-    """Logits loss for knowledge distillation."""
+    """Logits loss for language-model knowledge distillation.
+
+    Defaults to ``reduction="none"`` to support per-token loss masking via ``loss_reduction_fn``
+    in :meth:`DistillationModel.compute_kd_loss`. This allows masking out padding and non-assistant
+    tokens before reducing the loss.
+    """
+
+    def __init__(self, temperature: float = 1.0, reduction: str = "none"):
+        """Constructor.
+
+        Args:
+            temperature: A value used to soften the logits before computing loss.
+            reduction: How to reduce the final pointwise loss. Defaults to ``"none"`` to
+                allow loss-masking via ``loss_reduction_fn`` in ``compute_kd_loss``.
+        """
+        super().__init__(temperature=temperature, reduction=reduction)
 
     def forward(self, out_student: CausalLMOutputWithPast, out_teacher: CausalLMOutputWithPast):
         """Forward pass for logits distillation loss.
@@ -112,4 +141,5 @@ def forward(self, out_student: CausalLMOutputWithPast, out_teacher: CausalLMOutp
             out_student: The student model output.
             out_teacher: The teacher model output.
         """
-        return super().forward(out_student.logits, out_teacher.logits)
+        student_logits, teacher_logits = out_student.logits.float(), out_teacher.logits.float()
+        return super().forward(student_logits, teacher_logits)