diff --git a/vllm_hpu_extension/bucketing/common.py b/vllm_hpu_extension/bucketing/common.py
index cde63fef3..6e4751cb1 100644
--- a/vllm_hpu_extension/bucketing/common.py
+++ b/vllm_hpu_extension/bucketing/common.py
@@ -141,8 +141,12 @@ def generate_fallback_bucket(self, batch_size, seq_len, ctx):
         return (new_batch_size, new_seq_len, new_ctx)
 
     def find_prompt_bucket(self, batch_size, seq_len, ctx=0, use_fallback=True):
+        target_shape = (batch_size, seq_len, ctx)
         if self.initialized:
-            found_bucket = find_equal_or_closest_greater_config(self.prompt_buckets, (batch_size, seq_len, ctx))
+            if get_config().prefix_caching:
+                found_bucket = find_bucket_with_prefix_caching(self.prompt_buckets, target_shape, self.block_size)
+            else:
+                found_bucket = find_equal_or_closest_greater_config(self.prompt_buckets, target_shape)
             if found_bucket is None:
                 if use_fallback:
                     new_bucket = self.generate_fallback_bucket(batch_size, seq_len, ctx)
@@ -154,7 +158,7 @@ def find_prompt_bucket(self, batch_size, seq_len, ctx=0, use_fallback=True):
                 else:
                     return (None, None, None)
             return found_bucket
-        return (batch_size, seq_len, ctx)
+        return target_shape
 
     def find_decode_bucket(self, batch_size, num_blocks):
         if self.initialized:
@@ -198,3 +202,33 @@ def find_equal_or_closest_greater_config(sorted_list, target_tuple):
             return sorted_list[i]
     return None
 
+def find_bucket_with_prefix_caching(prompt_buckets, target_shape, block_size):
+        batch_size, seq_len, ctx = target_shape
+        import bisect
+        def find_ge(a, x):
+            'Find leftmost item greater than or equal to x'
+            i = bisect.bisect_left(a, x)
+            if i != len(a):
+                return a[i]
+            raise ValueError
+
+        def find_le(a, x):
+            'Find rightmost value less than or equal to x'
+            i = bisect.bisect_right(a, x)
+            if i:
+                return a[i-1]
+            raise ValueError
+        
+        bs_buckets = list(sorted(set([b[0] for b in prompt_buckets])))
+        seq_buckets = list(sorted(set([b[1] for b in prompt_buckets])))
+        ctx_buckets = list(sorted(set([b[2] for b in prompt_buckets])))
+
+        try:
+            found_bs = find_ge(bs_buckets, batch_size)
+            found_ctx = find_le(ctx_buckets, ctx)
+            pad_seq_len = seq_len + (ctx - found_ctx) * block_size
+            found_seq = find_ge(seq_buckets, pad_seq_len)
+            found_bucket = (found_bs, found_seq, found_ctx)
+            return found_bucket
+        except ValueError:
+            return target_shape
\ No newline at end of file
diff --git a/vllm_hpu_extension/bucketing/linear.py b/vllm_hpu_extension/bucketing/linear.py
index b0f58cda1..34d4a85df 100644
--- a/vllm_hpu_extension/bucketing/linear.py
+++ b/vllm_hpu_extension/bucketing/linear.py
@@ -144,22 +144,27 @@ def generate_prompt_buckets(bs_bucket_config,
                             block_size,
                             prefix_caching,
                             max_num_batched_tokens=None):
-    _, _, bmax, _ = seq_bucket_config
-    batch_size_buckets = warmup_range_with_limit(bs_bucket_config)
-    seq_bucket_config = warmup_range_with_limit(seq_bucket_config)
+    _, seq_step, seq_max, limit = seq_bucket_config
+    bs_buckets = warmup_range_with_limit(bs_bucket_config)
+    seq_buckets = warmup_range_with_limit(seq_bucket_config)
+    context_bucket_step = max(seq_step // block_size, 1)
 
     if prefix_caching:
         buckets_3d = []
-        for bs in batch_size_buckets:
-            for b in seq_bucket_config:
-                max_blocks_range = (bmax - b) // block_size
-                for i in range(0, max_blocks_range + 2):
-                    buckets_3d.append((bs, b, i))
+        context_bucket_config = (context_bucket_step, context_bucket_step, seq_max * 2 // block_size + 2, limit)
+        context_buckets = [0] + warmup_range_with_limit(context_bucket_config)
+        for bs in bs_buckets:
+            for seq in seq_buckets:
+                for i in range(len(context_buckets)):
+                    ctx = context_buckets[i]
+                    if ctx * block_size + seq > seq_max:
+                        break
+                    buckets_3d.append((bs, seq, ctx))
         buckets = buckets_3d
     else:
         buckets = list(
-                itertools.product(batch_size_buckets,
-                                seq_bucket_config, [0]))
+                itertools.product(bs_buckets,
+                                seq_buckets, [0]))
 
     if len(buckets) == 0:
         msg = ("No buckets could be captured with following config "
@@ -171,10 +176,17 @@ def generate_prompt_buckets(bs_bucket_config,
     filtered_buckets = buckets
     if max_num_batched_tokens is not None:
         # Remove buckets exceeding batch token budget
-        filtered_buckets = list(
-            filter(
-                lambda bucket: bucket[0] * (bucket[1] +  bucket[2] * block_size) <= max_num_batched_tokens,
-                buckets))
+        if prefix_caching:
+            max_tokens = max_num_batched_tokens + context_bucket_step * block_size
+            filtered_buckets = list(
+                filter(
+                    lambda bucket: bucket[0] * (bucket[1] +  bucket[2] * block_size) <= max_tokens,
+                    buckets))
+        else:
+            filtered_buckets = list(
+                filter(
+                    lambda bucket: bucket[0] * (bucket[1] +  bucket[2] * block_size) <= max_num_batched_tokens,
+                    buckets))
 
         if len(filtered_buckets) == 0:
             # we can handle this if we ignore max_num_batched_tokens