diff --git a/lightrag/llm/openai.py b/lightrag/llm/openai.py
index 704edc8c..1e840d08 100644
--- a/lightrag/llm/openai.py
+++ b/lightrag/llm/openai.py
@@ -11,7 +11,6 @@ if not pm.is_installed("openai"):
     pm.install("openai")
 
 from openai import (
-    AsyncOpenAI,
     APIConnectionError,
     RateLimitError,
     APITimeoutError,
@@ -28,18 +27,6 @@ from lightrag.utils import (
     logger,
 )
 
-# Try to import Langfuse for LLM observability (optional)
-# Falls back to standard OpenAI client if not available
-try:
-    from langfuse.openai import AsyncOpenAI
-
-    LANGFUSE_ENABLED = True
-    logger.info("Langfuse observability enabled for OpenAI client")
-except ImportError:
-    from openai import AsyncOpenAI
-
-    LANGFUSE_ENABLED = False
-    logger.debug("Langfuse not available, using standard OpenAI client")
 from lightrag.types import GPTKeywordExtractionFormat
 from lightrag.api import __api_version__
 
@@ -49,6 +36,32 @@ from typing import Any, Union
 
 from dotenv import load_dotenv
 
+# Try to import Langfuse for LLM observability (optional)
+# Falls back to standard OpenAI client if not available
+# Langfuse requires proper configuration to work correctly
+LANGFUSE_ENABLED = False
+try:
+    # Check if required Langfuse environment variables are set
+    langfuse_public_key = os.environ.get("LANGFUSE_PUBLIC_KEY")
+    langfuse_secret_key = os.environ.get("LANGFUSE_SECRET_KEY")
+
+    # Only enable Langfuse if both keys are configured
+    if langfuse_public_key and langfuse_secret_key:
+        from langfuse.openai import AsyncOpenAI  # type: ignore[import-untyped]
+
+        LANGFUSE_ENABLED = True
+        logger.info("Langfuse observability enabled for OpenAI client")
+    else:
+        from openai import AsyncOpenAI
+
+        logger.debug(
+            "Langfuse environment variables not configured, using standard OpenAI client"
+        )
+except ImportError:
+    from openai import AsyncOpenAI
+
+    logger.debug("Langfuse not available, using standard OpenAI client")
+
 # use the .env that is inside the current folder
 # allows to use different .env file for each lightrag instance
 # the OS environment variables take precedence over the .env file
@@ -64,46 +77,73 @@ class InvalidResponseError(Exception):
 def create_openai_async_client(
     api_key: str | None = None,
     base_url: str | None = None,
+    use_azure: bool = False,
+    azure_deployment: str | None = None,
+    api_version: str | None = None,
+    timeout: int | None = None,
     client_configs: dict[str, Any] | None = None,
 ) -> AsyncOpenAI:
-    """Create an AsyncOpenAI client with the given configuration.
+    """Create an AsyncOpenAI or AsyncAzureOpenAI client with the given configuration.
 
     Args:
         api_key: OpenAI API key. If None, uses the OPENAI_API_KEY environment variable.
         base_url: Base URL for the OpenAI API. If None, uses the default OpenAI API URL.
+        use_azure: Whether to create an Azure OpenAI client. Default is False.
+        azure_deployment: Azure OpenAI deployment name (only used when use_azure=True).
+        api_version: Azure OpenAI API version (only used when use_azure=True).
+        timeout: Request timeout in seconds.
         client_configs: Additional configuration options for the AsyncOpenAI client.
             These will override any default configurations but will be overridden by
             explicit parameters (api_key, base_url).
 
     Returns:
-        An AsyncOpenAI client instance.
+        An AsyncOpenAI or AsyncAzureOpenAI client instance.
     """
-    if not api_key:
-        api_key = os.environ["OPENAI_API_KEY"]
+    if use_azure:
+        from openai import AsyncAzureOpenAI
 
-    default_headers = {
-        "User-Agent": f"Mozilla/5.0 (Macintosh; Intel Mac OS X 10_15_8) LightRAG/{__api_version__}",
-        "Content-Type": "application/json",
-    }
+        if not api_key:
+            api_key = os.environ.get("AZURE_OPENAI_API_KEY") or os.environ.get(
+                "LLM_BINDING_API_KEY"
+            )
 
-    if client_configs is None:
-        client_configs = {}
-
-    # Create a merged config dict with precedence: explicit params > client_configs > defaults
-    merged_configs = {
-        **client_configs,
-        "default_headers": default_headers,
-        "api_key": api_key,
-    }
-
-    if base_url is not None:
-        merged_configs["base_url"] = base_url
-    else:
-        merged_configs["base_url"] = os.environ.get(
-            "OPENAI_API_BASE", "https://api.openai.com/v1"
+        return AsyncAzureOpenAI(
+            azure_endpoint=base_url,
+            azure_deployment=azure_deployment,
+            api_key=api_key,
+            api_version=api_version,
+            timeout=timeout,
         )
+    else:
+        if not api_key:
+            api_key = os.environ["OPENAI_API_KEY"]
 
-    return AsyncOpenAI(**merged_configs)
+        default_headers = {
+            "User-Agent": f"Mozilla/5.0 (Macintosh; Intel Mac OS X 10_15_8) LightRAG/{__api_version__}",
+            "Content-Type": "application/json",
+        }
+
+        if client_configs is None:
+            client_configs = {}
+
+        # Create a merged config dict with precedence: explicit params > client_configs > defaults
+        merged_configs = {
+            **client_configs,
+            "default_headers": default_headers,
+            "api_key": api_key,
+        }
+
+        if base_url is not None:
+            merged_configs["base_url"] = base_url
+        else:
+            merged_configs["base_url"] = os.environ.get(
+                "OPENAI_API_BASE", "https://api.openai.com/v1"
+            )
+
+        if timeout is not None:
+            merged_configs["timeout"] = timeout
+
+        return AsyncOpenAI(**merged_configs)
 
 
 @retry(
@@ -125,6 +165,12 @@ async def openai_complete_if_cache(
     base_url: str | None = None,
     api_key: str | None = None,
     token_tracker: Any | None = None,
+    stream: bool | None = None,
+    timeout: int | None = None,
+    keyword_extraction: bool = False,
+    use_azure: bool = False,
+    azure_deployment: str | None = None,
+    api_version: str | None = None,
     **kwargs: Any,
 ) -> str:
     """Complete a prompt using OpenAI's API with caching support and Chain of Thought (COT) integration.
@@ -154,13 +200,15 @@ async def openai_complete_if_cache(
         api_key: Optional OpenAI API key. If None, uses the OPENAI_API_KEY environment variable.
         token_tracker: Optional token usage tracker for monitoring API usage.
         enable_cot: Whether to enable Chain of Thought (COT) processing. Default is False.
+        stream: Whether to stream the response. Default is False.
+        timeout: Request timeout in seconds. Default is None.
+        keyword_extraction: Whether to enable keyword extraction mode. When True, triggers
+            special response formatting for keyword extraction. Default is False.
         **kwargs: Additional keyword arguments to pass to the OpenAI API.
             Special kwargs:
             - openai_client_configs: Dict of configuration options for the AsyncOpenAI client.
                 These will be passed to the client constructor but will be overridden by
                 explicit parameters (api_key, base_url).
-            - hashing_kv: Will be removed from kwargs before passing to OpenAI.
-            - keyword_extraction: Will be removed from kwargs before passing to OpenAI.
 
     Returns:
         The completed text (with integrated COT content if available) or an async iterator
@@ -181,15 +229,22 @@ async def openai_complete_if_cache(
 
     # Remove special kwargs that shouldn't be passed to OpenAI
     kwargs.pop("hashing_kv", None)
-    kwargs.pop("keyword_extraction", None)
 
     # Extract client configuration options
     client_configs = kwargs.pop("openai_client_configs", {})
 
-    # Create the OpenAI client
+    # Handle keyword extraction mode
+    if keyword_extraction:
+        kwargs["response_format"] = GPTKeywordExtractionFormat
+
+    # Create the OpenAI client (supports both OpenAI and Azure)
     openai_async_client = create_openai_async_client(
         api_key=api_key,
         base_url=base_url,
+        use_azure=use_azure,
+        azure_deployment=azure_deployment,
+        api_version=api_version,
+        timeout=timeout,
         client_configs=client_configs,
     )
 
@@ -211,10 +266,16 @@ async def openai_complete_if_cache(
 
     messages = kwargs.pop("messages", messages)
 
+    # Add explicit parameters back to kwargs so they're passed to OpenAI API
+    if stream is not None:
+        kwargs["stream"] = stream
+    if timeout is not None:
+        kwargs["timeout"] = timeout
+
     try:
         # Don't use async with context manager, use client directly
         if "response_format" in kwargs:
-            response = await openai_async_client.beta.chat.completions.parse(
+            response = await openai_async_client.chat.completions.parse(
                 model=model, messages=messages, **kwargs
             )
         else:
@@ -383,18 +444,23 @@ async def openai_complete_if_cache(
                         )
 
                 # Ensure resources are released even if no exception occurs
-                if (
-                    iteration_started
-                    and hasattr(response, "aclose")
-                    and callable(getattr(response, "aclose", None))
-                ):
-                    try:
-                        await response.aclose()
-                        logger.debug("Successfully closed stream response")
-                    except Exception as close_error:
-                        logger.warning(
-                            f"Failed to close stream response in finally block: {close_error}"
-                        )
+                # Note: Some wrapped clients (e.g., Langfuse) may not implement aclose() properly
+                if iteration_started and hasattr(response, "aclose"):
+                    aclose_method = getattr(response, "aclose", None)
+                    if callable(aclose_method):
+                        try:
+                            await response.aclose()
+                            logger.debug("Successfully closed stream response")
+                        except (AttributeError, TypeError) as close_error:
+                            # Some wrapper objects may report hasattr(aclose) but fail when called
+                            # This is expected behavior for certain client wrappers
+                            logger.debug(
+                                f"Stream response cleanup not supported by client wrapper: {close_error}"
+                            )
+                        except Exception as close_error:
+                            logger.warning(
+                                f"Unexpected error during stream response cleanup: {close_error}"
+                            )
 
                 # This prevents resource leaks since the caller doesn't handle closing
                 try:
@@ -421,46 +487,57 @@ async def openai_complete_if_cache(
                 raise InvalidResponseError("Invalid response from OpenAI API")
 
             message = response.choices[0].message
-            content = getattr(message, "content", None)
-            reasoning_content = getattr(message, "reasoning_content", "")
 
-            # Handle COT logic for non-streaming responses (only if enabled)
-            final_content = ""
+            # Handle parsed responses (structured output via response_format)
+            # When using beta.chat.completions.parse(), the response is in message.parsed
+            if hasattr(message, "parsed") and message.parsed is not None:
+                # Serialize the parsed structured response to JSON
+                final_content = message.parsed.model_dump_json()
+                logger.debug("Using parsed structured response from API")
+            else:
+                # Handle regular content responses
+                content = getattr(message, "content", None)
+                reasoning_content = getattr(message, "reasoning_content", "")
 
-            if enable_cot:
-                # Check if we should include reasoning content
-                should_include_reasoning = False
-                if reasoning_content and reasoning_content.strip():
-                    if not content or content.strip() == "":
-                        # Case 1: Only reasoning content, should include COT
-                        should_include_reasoning = True
-                        final_content = (
-                            content or ""
-                        )  # Use empty string if content is None
+                # Handle COT logic for non-streaming responses (only if enabled)
+                final_content = ""
+
+                if enable_cot:
+                    # Check if we should include reasoning content
+                    should_include_reasoning = False
+                    if reasoning_content and reasoning_content.strip():
+                        if not content or content.strip() == "":
+                            # Case 1: Only reasoning content, should include COT
+                            should_include_reasoning = True
+                            final_content = (
+                                content or ""
+                            )  # Use empty string if content is None
+                        else:
+                            # Case 3: Both content and reasoning_content present, ignore reasoning
+                            should_include_reasoning = False
+                            final_content = content
                     else:
-                        # Case 3: Both content and reasoning_content present, ignore reasoning
-                        should_include_reasoning = False
-                        final_content = content
+                        # No reasoning content, use regular content
+                        final_content = content or ""
+
+                    # Apply COT wrapping if needed
+                    if should_include_reasoning:
+                        if r"\u" in reasoning_content:
+                            reasoning_content = safe_unicode_decode(
+                                reasoning_content.encode("utf-8")
+                            )
+                        final_content = (
+                            f"<think>{reasoning_content}</think>{final_content}"
+                        )
                 else:
-                    # No reasoning content, use regular content
+                    # COT disabled, only use regular content
                     final_content = content or ""
 
-                # Apply COT wrapping if needed
-                if should_include_reasoning:
-                    if r"\u" in reasoning_content:
-                        reasoning_content = safe_unicode_decode(
-                            reasoning_content.encode("utf-8")
-                        )
-                    final_content = f"<think>{reasoning_content}</think>{final_content}"
-            else:
-                # COT disabled, only use regular content
-                final_content = content or ""
-
-            # Validate final content
-            if not final_content or final_content.strip() == "":
-                logger.error("Received empty content from OpenAI API")
-                await openai_async_client.close()  # Ensure client is closed
-                raise InvalidResponseError("Received empty content from OpenAI API")
+                # Validate final content
+                if not final_content or final_content.strip() == "":
+                    logger.error("Received empty content from OpenAI API")
+                    await openai_async_client.close()  # Ensure client is closed
+                    raise InvalidResponseError("Received empty content from OpenAI API")
 
             # Apply Unicode decoding to final content if needed
             if r"\u" in final_content:
@@ -494,15 +571,13 @@ async def openai_complete(
 ) -> Union[str, AsyncIterator[str]]:
     if history_messages is None:
         history_messages = []
-    keyword_extraction = kwargs.pop("keyword_extraction", None)
-    if keyword_extraction:
-        kwargs["response_format"] = "json"
     model_name = kwargs["hashing_kv"].global_config["llm_model_name"]
     return await openai_complete_if_cache(
         model_name,
         prompt,
         system_prompt=system_prompt,
         history_messages=history_messages,
+        keyword_extraction=keyword_extraction,
         **kwargs,
     )
 
@@ -517,15 +592,13 @@ async def gpt_4o_complete(
 ) -> str:
     if history_messages is None:
         history_messages = []
-    keyword_extraction = kwargs.pop("keyword_extraction", None)
-    if keyword_extraction:
-        kwargs["response_format"] = GPTKeywordExtractionFormat
     return await openai_complete_if_cache(
         "gpt-4o",
         prompt,
         system_prompt=system_prompt,
         history_messages=history_messages,
         enable_cot=enable_cot,
+        keyword_extraction=keyword_extraction,
         **kwargs,
     )
 
@@ -540,15 +613,13 @@ async def gpt_4o_mini_complete(
 ) -> str:
     if history_messages is None:
         history_messages = []
-    keyword_extraction = kwargs.pop("keyword_extraction", None)
-    if keyword_extraction:
-        kwargs["response_format"] = GPTKeywordExtractionFormat
     return await openai_complete_if_cache(
         "gpt-4o-mini",
         prompt,
         system_prompt=system_prompt,
         history_messages=history_messages,
         enable_cot=enable_cot,
+        keyword_extraction=keyword_extraction,
         **kwargs,
     )
 
@@ -563,20 +634,20 @@ async def nvidia_openai_complete(
 ) -> str:
     if history_messages is None:
         history_messages = []
-    kwargs.pop("keyword_extraction", None)
     result = await openai_complete_if_cache(
         "nvidia/llama-3.1-nemotron-70b-instruct",  # context length 128k
         prompt,
         system_prompt=system_prompt,
         history_messages=history_messages,
         enable_cot=enable_cot,
+        keyword_extraction=keyword_extraction,
         base_url="https://integrate.api.nvidia.com/v1",
         **kwargs,
     )
     return result
 
 
-@wrap_embedding_func_with_attrs(embedding_dim=1536)
+@wrap_embedding_func_with_attrs(embedding_dim=1536, max_token_size=8192)
 @retry(
     stop=stop_after_attempt(3),
     wait=wait_exponential(multiplier=1, min=4, max=60),
@@ -591,8 +662,12 @@ async def openai_embed(
     model: str = "text-embedding-3-small",
     base_url: str | None = None,
     api_key: str | None = None,
+    embedding_dim: int | None = None,
     client_configs: dict[str, Any] | None = None,
     token_tracker: Any | None = None,
+    use_azure: bool = False,
+    azure_deployment: str | None = None,
+    api_version: str | None = None,
 ) -> np.ndarray:
     """Generate embeddings for a list of texts using OpenAI's API.
 
@@ -601,6 +676,12 @@ async def openai_embed(
         model: The OpenAI embedding model to use.
         base_url: Optional base URL for the OpenAI API.
         api_key: Optional OpenAI API key. If None, uses the OPENAI_API_KEY environment variable.
+        embedding_dim: Optional embedding dimension for dynamic dimension reduction.
+            **IMPORTANT**: This parameter is automatically injected by the EmbeddingFunc wrapper.
+            Do NOT manually pass this parameter when calling the function directly.
+            The dimension is controlled by the @wrap_embedding_func_with_attrs decorator.
+            Manually passing a different value will trigger a warning and be ignored.
+            When provided (by EmbeddingFunc), it will be passed to the OpenAI API for dimension reduction.
         client_configs: Additional configuration options for the AsyncOpenAI client.
             These will override any default configurations but will be overridden by
             explicit parameters (api_key, base_url).
@@ -614,15 +695,30 @@ async def openai_embed(
         RateLimitError: If the OpenAI API rate limit is exceeded.
         APITimeoutError: If the OpenAI API request times out.
     """
-    # Create the OpenAI client
+    # Create the OpenAI client (supports both OpenAI and Azure)
     openai_async_client = create_openai_async_client(
-        api_key=api_key, base_url=base_url, client_configs=client_configs
+        api_key=api_key,
+        base_url=base_url,
+        use_azure=use_azure,
+        azure_deployment=azure_deployment,
+        api_version=api_version,
+        client_configs=client_configs,
     )
 
     async with openai_async_client:
-        response = await openai_async_client.embeddings.create(
-            model=model, input=texts, encoding_format="base64"
-        )
+        # Prepare API call parameters
+        api_params = {
+            "model": model,
+            "input": texts,
+            "encoding_format": "base64",
+        }
+
+        # Add dimensions parameter only if embedding_dim is provided
+        if embedding_dim is not None:
+            api_params["dimensions"] = embedding_dim
+
+        # Make API call
+        response = await openai_async_client.embeddings.create(**api_params)
 
         if token_tracker and hasattr(response, "usage"):
             token_counts = {
@@ -639,3 +735,134 @@ async def openai_embed(
                 for dp in response.data
             ]
         )
+
+
+# Azure OpenAI wrapper functions for backward compatibility
+async def azure_openai_complete_if_cache(
+    model,
+    prompt,
+    system_prompt: str | None = None,
+    history_messages: list[dict[str, Any]] | None = None,
+    enable_cot: bool = False,
+    base_url: str | None = None,
+    api_key: str | None = None,
+    api_version: str | None = None,
+    keyword_extraction: bool = False,
+    **kwargs,
+):
+    """Azure OpenAI completion wrapper function.
+
+    This function provides backward compatibility by wrapping the unified
+    openai_complete_if_cache implementation with Azure-specific parameter handling.
+    """
+    # Handle Azure-specific environment variables and parameters
+    deployment = os.getenv("AZURE_OPENAI_DEPLOYMENT") or model or os.getenv("LLM_MODEL")
+    base_url = (
+        base_url or os.getenv("AZURE_OPENAI_ENDPOINT") or os.getenv("LLM_BINDING_HOST")
+    )
+    api_key = (
+        api_key or os.getenv("AZURE_OPENAI_API_KEY") or os.getenv("LLM_BINDING_API_KEY")
+    )
+    api_version = (
+        api_version
+        or os.getenv("AZURE_OPENAI_API_VERSION")
+        or os.getenv("OPENAI_API_VERSION")
+    )
+
+    # Pop timeout from kwargs if present (will be handled by openai_complete_if_cache)
+    timeout = kwargs.pop("timeout", None)
+
+    # Call the unified implementation with Azure-specific parameters
+    return await openai_complete_if_cache(
+        model=model,
+        prompt=prompt,
+        system_prompt=system_prompt,
+        history_messages=history_messages,
+        enable_cot=enable_cot,
+        base_url=base_url,
+        api_key=api_key,
+        timeout=timeout,
+        use_azure=True,
+        azure_deployment=deployment,
+        api_version=api_version,
+        keyword_extraction=keyword_extraction,
+        **kwargs,
+    )
+
+
+async def azure_openai_complete(
+    prompt,
+    system_prompt=None,
+    history_messages=None,
+    keyword_extraction=False,
+    **kwargs,
+) -> str:
+    """Azure OpenAI complete wrapper function.
+
+    Provides backward compatibility for azure_openai_complete calls.
+    """
+    if history_messages is None:
+        history_messages = []
+    result = await azure_openai_complete_if_cache(
+        os.getenv("LLM_MODEL", "gpt-4o-mini"),
+        prompt,
+        system_prompt=system_prompt,
+        history_messages=history_messages,
+        keyword_extraction=keyword_extraction,
+        **kwargs,
+    )
+    return result
+
+
+@wrap_embedding_func_with_attrs(embedding_dim=1536)
+@retry(
+    stop=stop_after_attempt(3),
+    wait=wait_exponential(multiplier=1, min=4, max=10),
+    retry=retry_if_exception_type(
+        (RateLimitError, APIConnectionError, APITimeoutError)
+    ),
+)
+async def azure_openai_embed(
+    texts: list[str],
+    model: str | None = None,
+    base_url: str | None = None,
+    api_key: str | None = None,
+    api_version: str | None = None,
+) -> np.ndarray:
+    """Azure OpenAI embedding wrapper function.
+
+    This function provides backward compatibility by wrapping the unified
+    openai_embed implementation with Azure-specific parameter handling.
+    """
+    # Handle Azure-specific environment variables and parameters
+    deployment = (
+        os.getenv("AZURE_EMBEDDING_DEPLOYMENT")
+        or model
+        or os.getenv("EMBEDDING_MODEL", "text-embedding-3-small")
+    )
+    base_url = (
+        base_url
+        or os.getenv("AZURE_EMBEDDING_ENDPOINT")
+        or os.getenv("EMBEDDING_BINDING_HOST")
+    )
+    api_key = (
+        api_key
+        or os.getenv("AZURE_EMBEDDING_API_KEY")
+        or os.getenv("EMBEDDING_BINDING_API_KEY")
+    )
+    api_version = (
+        api_version
+        or os.getenv("AZURE_EMBEDDING_API_VERSION")
+        or os.getenv("OPENAI_API_VERSION")
+    )
+
+    # Call the unified implementation with Azure-specific parameters
+    return await openai_embed(
+        texts=texts,
+        model=model or deployment,
+        base_url=base_url,
+        api_key=api_key,
+        use_azure=True,
+        azure_deployment=deployment,
+        api_version=api_version,
+    )