diff --git a/apps/grpo/main.py b/apps/grpo/main.py
index 0f8688f70..416ecbe05 100644
--- a/apps/grpo/main.py
+++ b/apps/grpo/main.py
@@ -24,10 +24,10 @@
 from forge.controller.actor import ForgeActor
 from forge.controller.provisioner import shutdown
 from forge.data.rewards import MathReward, ThinkingReward
+from forge.losses.grpo_loss import SimpleGRPOLoss
 from forge.util.metric_logging import get_metric_logger
 from monarch.actor import endpoint
 from omegaconf import DictConfig
-from torch import nn
 from torchstore.state_dict_utils import DELIM
 from torchtitan.config.job_config import Model as TitanJobModelConfig
 from transformers import AutoModelForCausalLM
@@ -49,27 +49,6 @@ def compute_logprobs(
     return logprobs
 
 
-class SimpleGRPOLoss(nn.Module):
-    """Simplified GRPO Loss for simplified single step updates
-    Inspired by the Hugging Face TRL implementation:
-        https://github.com/huggingface/trl/blob/417915a3e4d3e3bc8d7b196594308b8eabf928be/trl/trainer/grpo_trainer.py#L1624.
-    """
-
-    def __init__(self, beta: float = 0.1):
-        super().__init__()
-        self.beta = beta
-
-    def forward(self, logprobs, ref_logprobs, advantages, padding_mask):
-        kl = torch.exp(ref_logprobs - logprobs) - (ref_logprobs - logprobs) - 1
-        per_token_policy_loss = torch.exp(logprobs - logprobs.detach()) * advantages
-        per_token_loss = -(per_token_policy_loss - self.beta * kl)
-        loss = (
-            ((per_token_loss * padding_mask).sum(dim=1))
-            / (padding_mask.sum(dim=1).clamp(min=1.0))
-        ).mean()
-        return loss
-
-
 @dataclass
 class Episode:
     # TODO: add adtional layer for multi-turn
diff --git a/src/forge/losses/__init__.py b/src/forge/losses/__init__.py
new file mode 100644
index 000000000..2e41cd717
--- /dev/null
+++ b/src/forge/losses/__init__.py
@@ -0,0 +1,5 @@
+# Copyright (c) Meta Platforms, Inc. and affiliates.
+# All rights reserved.
+#
+# This source code is licensed under the BSD-style license found in the
+# LICENSE file in the root directory of this source tree.
diff --git a/src/forge/losses/grpo_loss.py b/src/forge/losses/grpo_loss.py
new file mode 100644
index 000000000..220367b47
--- /dev/null
+++ b/src/forge/losses/grpo_loss.py
@@ -0,0 +1,29 @@
+# Copyright (c) Meta Platforms, Inc. and affiliates.
+# All rights reserved.
+#
+# This source code is licensed under the BSD-style license found in the
+# LICENSE file in the root directory of this source tree.
+
+import torch
+from torch import nn
+
+
+class SimpleGRPOLoss(nn.Module):
+    """Simplified GRPO Loss for simplified single step updates
+    Inspired by the Hugging Face TRL implementation:
+        https://github.com/huggingface/trl/blob/417915a3e4d3e3bc8d7b196594308b8eabf928be/trl/trainer/grpo_trainer.py#L1624.
+    """
+
+    def __init__(self, beta: float = 0.1):
+        super().__init__()
+        self.beta = beta
+
+    def forward(self, logprobs, ref_logprobs, advantages, padding_mask):
+        kl = torch.exp(ref_logprobs - logprobs) - (ref_logprobs - logprobs) - 1
+        per_token_policy_loss = torch.exp(logprobs - logprobs.detach()) * advantages
+        per_token_loss = -(per_token_policy_loss - self.beta * kl)
+        loss = (
+            ((per_token_loss * padding_mask).sum(dim=1))
+            / (padding_mask.sum(dim=1).clamp(min=1.0))
+        ).mean()
+        return loss
diff --git a/tests/README.md b/tests/README.md
index 368356c5d..b47be687b 100644
--- a/tests/README.md
+++ b/tests/README.md
@@ -17,7 +17,6 @@ Ensure you have all development dependencies installed:
 
 ```bash
 pip install -r dev-requirements.txt
-pip install -r requirements.txt
 ```
 
 ### Running Integration Tests
diff --git a/tests/requirements-dev.txt b/tests/requirements-dev.txt
new file mode 100644
index 000000000..56628493b
--- /dev/null
+++ b/tests/requirements-dev.txt
@@ -0,0 +1 @@
+pytest==7.3.2
diff --git a/tests/unit_tests/losses/test_grpo_loss.py b/tests/unit_tests/losses/test_grpo_loss.py
new file mode 100644
index 000000000..8ffa6291f
--- /dev/null
+++ b/tests/unit_tests/losses/test_grpo_loss.py
@@ -0,0 +1,240 @@
+# Copyright (c) Meta Platforms, Inc. and affiliates.
+# All rights reserved.
+#
+# This source code is licensed under the BSD-style license found in the
+# LICENSE file in the root directory of this source tree.
+
+import pytest
+import torch
+from forge.losses.grpo_loss import SimpleGRPOLoss
+
+
+class TestSimpleGRPOLoss:
+    @pytest.fixture
+    def loss_fn(self):
+        """Create a GRPO loss instance with default beta."""
+        return SimpleGRPOLoss(beta=0.1)
+
+    @pytest.fixture
+    def sample_data(self):
+        """Create sample input data for testing."""
+        batch_size, seq_len = 2, 4
+
+        # Create log probabilities (should be negative)
+        logprobs = torch.log(torch.rand(batch_size, seq_len) * 0.9 + 0.1)
+        ref_logprobs = torch.log(torch.rand(batch_size, seq_len) * 0.9 + 0.1)
+
+        # Create advantages (can be positive or negative)
+        advantages = torch.randn(batch_size, seq_len)
+
+        # Create padding mask (1 for valid tokens, 0 for padding)
+        padding_mask = torch.ones(batch_size, seq_len)
+        padding_mask[0, -1] = 0  # Add some padding
+        padding_mask[1, -2:] = 0  # Add more padding
+
+        return logprobs, ref_logprobs, advantages, padding_mask
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_forward_basic(self, loss_fn, sample_data):
+        """Test basic forward pass."""
+        logprobs, ref_logprobs, advantages, padding_mask = sample_data
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # Loss should be a scalar
+        assert loss.dim() == 0
+        assert torch.isfinite(loss)
+        assert not torch.isnan(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_output_shape(self, loss_fn):
+        """Test output shape for different input sizes."""
+        for batch_size in [1, 3, 8]:
+            for seq_len in [1, 10, 32]:
+                logprobs = torch.randn(batch_size, seq_len)
+                ref_logprobs = torch.randn(batch_size, seq_len)
+                advantages = torch.randn(batch_size, seq_len)
+                padding_mask = torch.ones(batch_size, seq_len)
+
+                loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+                assert loss.shape == torch.Size([])
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_gradient_flow(self, loss_fn, sample_data):
+        """Test that gradients flow through logprobs."""
+        logprobs, ref_logprobs, advantages, padding_mask = sample_data
+        logprobs.requires_grad_(True)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+        loss.backward()
+
+        assert logprobs.grad is not None
+        assert not torch.isnan(logprobs.grad).any()
+        assert torch.isfinite(logprobs.grad).all()
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_no_gradient_to_ref_logprobs(self, loss_fn, sample_data):
+        """Test that gradients don't flow to reference logprobs."""
+        logprobs, ref_logprobs, advantages, padding_mask = sample_data
+        ref_logprobs.requires_grad_(True)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+        loss.backward()
+
+        # ref_logprobs should receive gradients (it's used in KL computation)
+        assert ref_logprobs.grad is not None
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_padding_mask_effect(self, loss_fn):
+        """Test that padding mask correctly ignores padded tokens."""
+        batch_size, seq_len = 2, 4
+
+        logprobs = torch.randn(batch_size, seq_len)
+        ref_logprobs = torch.randn(batch_size, seq_len)
+        advantages = torch.randn(batch_size, seq_len)
+
+        # Test with full mask
+        full_mask = torch.ones(batch_size, seq_len)
+        loss_full = loss_fn(logprobs, ref_logprobs, advantages, full_mask)
+
+        # Test with partial mask
+        partial_mask = torch.ones(batch_size, seq_len)
+        partial_mask[:, -1] = 0  # Mask last token
+        loss_partial = loss_fn(logprobs, ref_logprobs, advantages, partial_mask)
+
+        # Losses should be different
+        assert not torch.allclose(loss_full, loss_partial)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_beta_parameter_effect(self, sample_data):
+        """Test that different beta values produce different losses."""
+        logprobs, ref_logprobs, advantages, padding_mask = sample_data
+
+        loss_fn_1 = SimpleGRPOLoss(beta=0.1)
+        loss_fn_2 = SimpleGRPOLoss(beta=0.5)
+
+        loss_1 = loss_fn_1(logprobs, ref_logprobs, advantages, padding_mask)
+        loss_2 = loss_fn_2(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # Different beta should produce different losses (unless KL is zero)
+        # This test might be flaky if KL happens to be very small
+        if not torch.allclose(ref_logprobs, logprobs, atol=1e-6):
+            assert not torch.allclose(loss_1, loss_2, atol=1e-6)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_zero_advantages(self, loss_fn):
+        """Test behavior with zero advantages."""
+        batch_size, seq_len = 2, 4
+
+        logprobs = torch.randn(batch_size, seq_len)
+        ref_logprobs = torch.randn(batch_size, seq_len)
+        advantages = torch.zeros(batch_size, seq_len)
+        padding_mask = torch.ones(batch_size, seq_len)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # With zero advantages, loss should only depend on KL term
+        assert torch.isfinite(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_identical_policies(self, loss_fn):
+        """Test behavior when current and reference policies are identical."""
+        batch_size, seq_len = 2, 4
+
+        logprobs = torch.randn(batch_size, seq_len)
+        ref_logprobs = logprobs.clone()  # Identical policies
+        advantages = torch.randn(batch_size, seq_len)
+        padding_mask = torch.ones(batch_size, seq_len)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # KL should be approximately zero for identical policies
+        assert torch.isfinite(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_extreme_values(self, loss_fn):
+        """Test with extreme but valid values."""
+        batch_size, seq_len = 2, 3
+
+        # Large negative log probabilities (very low probabilities)
+        logprobs = torch.full((batch_size, seq_len), -10.0)
+        ref_logprobs = torch.full((batch_size, seq_len), -5.0)
+
+        # Large advantages
+        advantages = torch.full((batch_size, seq_len), 10.0)
+        padding_mask = torch.ones(batch_size, seq_len)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        assert torch.isfinite(loss)
+        assert not torch.isnan(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_numerical_stability(self, loss_fn):
+        """Test numerical stability with edge cases."""
+        batch_size, seq_len = 1, 2
+
+        # Test with very similar log probabilities
+        logprobs = torch.tensor([[0.0, -1e-8]])
+        ref_logprobs = torch.tensor([[1e-8, 0.0]])
+        advantages = torch.tensor([[1.0, -1.0]])
+        padding_mask = torch.ones(batch_size, seq_len)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        assert torch.isfinite(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_all_masked_sequence(self, loss_fn):
+        """Test behavior when entire sequence is masked."""
+        batch_size, seq_len = 1, 3
+
+        logprobs = torch.randn(batch_size, seq_len)
+        ref_logprobs = torch.randn(batch_size, seq_len)
+        advantages = torch.randn(batch_size, seq_len)
+        padding_mask = torch.zeros(batch_size, seq_len)  # All masked
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # Should handle division by zero gracefully due to clamp(min=1.0)
+        assert torch.isfinite(loss)
+
+    @pytest.mark.timeout(10)
+    @pytest.mark.asyncio
+    def test_mathematical_correctness(self, loss_fn):
+        """Test mathematical correctness with simpler verification."""
+        # Test with known simple case
+        logprobs = torch.tensor([[0.0]])  # log(1.0) = 0
+        ref_logprobs = torch.tensor([[0.0]])  # Same as current
+        advantages = torch.tensor([[1.0]])
+        padding_mask = torch.ones(1, 1)
+
+        loss = loss_fn(logprobs, ref_logprobs, advantages, padding_mask)
+
+        # When logprobs == ref_logprobs, KL should be 0
+        # Loss should be -(1.0 * 1.0 - beta * 0) = -1.0
+        expected_loss = torch.tensor(-1.0)
+        assert torch.allclose(loss, expected_loss, atol=1e-6)
+
+        # Test symmetry: swapping positive and negative advantages
+        advantages_pos = torch.tensor([[2.0]])
+        advantages_neg = torch.tensor([[-2.0]])
+
+        loss_pos = loss_fn(logprobs, ref_logprobs, advantages_pos, padding_mask)
+        loss_neg = loss_fn(logprobs, ref_logprobs, advantages_neg, padding_mask)
+
+        # Should be symmetric around some center point
+        assert torch.isfinite(loss_pos)
+        assert torch.isfinite(loss_neg)
+        assert loss_pos != loss_neg  # Should be different