diff --git a/merlin/models/torch/blocks/peft.py b/merlin/models/torch/blocks/peft.py
new file mode 100644
index 0000000000..1243b0ab6c
--- /dev/null
+++ b/merlin/models/torch/blocks/peft.py
@@ -0,0 +1,222 @@
+# flake8: noqa
+
+import math
+from typing import Final, TypeVar
+
+import torch
+from torch import nn
+
+from merlin.models.torch.block import Block
+
+BlockT = TypeVar("BlockT", bound=Block)
+
+
+class LoRA(nn.Module):
+    """Low Ranking Adaptation for parameter-efficient fine-tuning.
+
+    Low-Rank Adaptation, or LoRA, which freezes the pretrained model weights and injects
+    trainable rank decomposition matrices into each layer of the Transformer architecture,
+    greatly reducing the number of trainable parameters for downstream tasks.
+
+             ┌───────────────────┐
+             ┆         h         ┆
+             └───────────────────┘
+                       ▲
+                       |
+                       +
+                    /     \
+    ┌─────────────────┐    ╭───────────────╮     Matrix initialization:
+    ┆                 ┆     \      B      /      B = 0
+    ┆   pretrained    ┆      \    r*d    /       A = N(0, sigma^2)
+    ┆    weights      ┆       ╰─────────╯
+    ┆                 ┆       |    r    |        r - rank
+    ┆   W e R^(d*d)   ┆       | ◀─────▶ |
+    ┆                 ┆       ╭─────────╮
+    └─────────────────┘      /     A     \
+              ▲             /     d*r     \
+               \           ╰───────────────╯
+                \                ▲
+                 \              /
+                  \            /
+             ┌───────────────────┐
+             ┆         x         ┆
+             └───────────────────┘
+
+
+    Example usage::
+        block = Block(...).freeze()
+        block_with_lora = LoRA.walk(block, r=8, lora_alpha=0.5, lora_dropout=0.1)
+
+
+    Parameters
+    __________
+    module : nn.Module
+        The module to apply LoRA to.
+    r : int, optional
+        The rank of the LoRA approximation. Default is 0.
+    lora_alpha : float, optional
+        The scaling factor for the LoRA approximation. Default is 1.
+    lora_dropout : float, optional
+        The dropout rate for the LoRA approximation. Default is 0.
+    merge_weights : bool, optional
+        Whether to merge the LoRA weights into the module weights. Default is True.
+    """
+
+    wrapped_name: Final[str]
+
+    def __init__(
+        self,
+        module: nn.Module,
+        r: int = 0,
+        lora_alpha: float = 1.0,
+        lora_dropout: float = 0.0,
+        merge_weights: bool = True,
+    ):
+        super().__init__()
+        self.module = module
+        self.r = r
+        self.lora_alpha = lora_alpha
+        self.lora_dropout = nn.Dropout(p=lora_dropout) if lora_dropout > 0 else lambda x: x
+        self.merge_weights = merge_weights
+        self.merged = False
+        self.wrapped_name = self.module.__class__.__name__
+
+        if self.wrapped_name == "Linear":
+            self.in_features = self.module.in_features
+            self.out_features = self.module.out_features
+        elif self.wrapped_name == "Embedding":
+            self.in_features = self.module.num_embeddings
+            self.out_features = self.module.embedding_dim
+        else:
+            raise ValueError(f"LoRA is not supported for {type(self.module)} modules.")
+
+        if self.r > 0:
+            self.lora_A = nn.Parameter(torch.zeros(self.in_features, self.r))
+            self.lora_B = nn.Parameter(torch.zeros(self.r, self.out_features))
+            self.scaling = self.lora_alpha / self.r
+            self.module.weight.requires_grad = False
+
+    @staticmethod
+    @torch.jit.ignore
+    def walk(
+        block: BlockT,
+        r: int = 0,
+        lora_alpha: float = 1.0,
+        lora_dropout: float = 0.0,
+        merge_weights: bool = True,
+    ) -> BlockT:
+        """
+        Applies the LoRA approximation to the given block.
+
+        The LoRA instances are created by walking through the module tree of the given block
+        and replacing every `nn.Linear` or `nn.Embedding` module encountered with a corresponding
+        LoRA instance.
+
+        The parameters are set based on the input arguments and used to create a low-rank
+        approximation of the original weight matrix in the module. This approximation is intended
+        to reduce the complexity of the model without significant loss of performance.
+
+        Example usage::
+            block = Block(...).freeze()
+            block_with_lora = LoRA.apply(block, r=8, lora_alpha=0.5, lora_dropout=0.1)
+
+        Parameters
+        ----------
+        block : BlockT
+            The block to apply the LoRA to.
+        r : int, optional
+            The rank of the LoRA approximation. Default is 0.
+        lora_alpha : float, optional
+            The scaling factor for the LoRA approximation. Default is 1.
+        lora_dropout : float, optional
+            The dropout rate for the LoRA approximation. Default is 0.
+        merge_weights : bool, optional
+            Whether to merge the LoRA weights into the module weights.
+            Default is True.
+
+        Returns
+        -------
+        BlockT
+            The block with the applied LoRA.
+        """
+
+        def to_apply(module):
+            if isinstance(module, (nn.Linear, nn.Embedding)):
+                return LoRA(
+                    module,
+                    r=r,
+                    lora_alpha=lora_alpha,
+                    lora_dropout=lora_dropout,
+                    merge_weights=merge_weights,
+                )
+
+            return module
+
+        return block.walk(to_apply)
+
+    def reset_parameters(self):
+        """
+        Resets the parameters of the module and LoRA approximation.
+        """
+        self.module.reset_parameters()
+        if self.r > 0:
+            nn.init.kaiming_uniform_(self.lora_A, a=math.sqrt(5))
+            nn.init.zeros_(self.lora_B)
+
+    def train(self, mode: bool = True):
+        """
+        Sets the module in training mode.
+
+        This method overrides the base method in nn.Module to allow the addition and subtraction
+        of the low rank approximation (LoRA) to/from the weights of the module, depending on the
+        mode.
+
+        In training mode (mode=True), if merge_weights is set to True and the weights have been
+        merged,it subtracts the LoRA from the weights. This allows the original weights to be
+        exposed during training.
+
+        In evaluation mode (mode=False), if merge_weights is set to True and the weights haven't
+        been merged, it adds the LoRA to the weights. This allows the LoRA to augment the weights
+        during evaluation.
+
+        Parameters
+        ----------
+        mode : bool, optional
+            If True, sets the module in training mode, else sets it in evaluation mode.
+            Default is True.
+        """
+        super().train(mode)
+        if mode:
+            if self.merge_weights and self.merged:
+                if self.r > 0:
+                    if self.wrapped_name == "Linear":
+                        self.module.weight.data -= (self.lora_A @ self.lora_B) * self.scaling
+                    else:  # Embedding
+                        self.module.weight.data -= (self.lora_A @ self.lora_B) * self.scaling
+                self.merged = False
+        else:
+            if self.merge_weights and not self.merged:
+                if self.r > 0:
+                    if self.wrapped_name == "Linear":
+                        self.module.weight.data += (self.lora_A @ self.lora_B).t() * self.scaling
+                    else:  # Embedding
+                        self.module.weight.data += (self.lora_A @ self.lora_B) * self.scaling
+                self.merged = True
+
+    def forward(self, x: torch.Tensor) -> torch.Tensor:
+        output = self.module(x)
+        if self.r > 0 and not self.merged:
+            if self.wrapped_name == "Linear":
+                W_lora = self.lora_A @ self.lora_B * self.scaling
+                lora_output = x @ W_lora  # this computes the LoRA output
+                output += self.lora_dropout(lora_output)  # add the dropout on LoRA output
+            else:  # Embedding
+                # For an embedding layer, we cannot use the input `x` to multiply `W_lora` directly.
+                # Instead, we need to look up the LoRA output
+                # from `W_lora` using `x` as the indices, and then
+                # add the dropout on the LoRA output.
+                W_lora = self.lora_A @ self.lora_B * self.scaling
+                lora_output = W_lora[x, :]
+                output += self.lora_dropout(lora_output)
+
+        return output
diff --git a/tests/unit/torch/blocks/test_peft.py b/tests/unit/torch/blocks/test_peft.py
new file mode 100644
index 0000000000..4e1fc31589
--- /dev/null
+++ b/tests/unit/torch/blocks/test_peft.py
@@ -0,0 +1,95 @@
+import torch
+from torch import nn
+
+import merlin.models.torch as mm
+from merlin.models.torch.blocks.peft import LoRA
+from merlin.models.torch.utils import module_utils
+
+
+class TestLoRA:
+    def setup_method(self):
+        # create a simple linear layer to use in tests
+        self.linear_module = nn.Linear(10, 5)
+        self.lora_linear = LoRA(
+            self.linear_module, r=2, lora_alpha=1.0, lora_dropout=0.1, merge_weights=True
+        )
+        self.embedding_module = nn.Embedding(10, 5)
+        self.lora_embedding = LoRA(
+            self.embedding_module, r=2, lora_alpha=1.0, lora_dropout=0.1, merge_weights=True
+        )
+
+    def test_init_linear(self):
+        # test whether lora module was initialized correctly
+        assert self.lora_linear.module == self.linear_module
+        assert self.lora_linear.r == 2
+        assert self.lora_linear.lora_alpha == 1.0
+        assert isinstance(self.lora_linear.lora_dropout, nn.Dropout)
+        assert self.lora_linear.merge_weights
+        assert not self.lora_linear.merged
+        assert self.lora_linear.in_features == self.linear_module.in_features
+        assert self.lora_linear.out_features == self.linear_module.out_features
+        assert not self.lora_linear.module.weight.requires_grad
+
+    def test_init_embedding(self):
+        # test whether lora module was initialized correctly
+        assert self.lora_embedding.module == self.embedding_module
+        assert self.lora_embedding.r == 2
+        assert self.lora_embedding.lora_alpha == 1.0
+        assert isinstance(self.lora_embedding.lora_dropout, nn.Dropout)
+        assert self.lora_embedding.merge_weights
+        assert not self.lora_embedding.merged
+        assert self.lora_embedding.in_features == self.embedding_module.num_embeddings
+        assert self.lora_embedding.out_features == self.embedding_module.embedding_dim
+        assert not self.lora_embedding.module.weight.requires_grad
+
+    def test_walk(self):
+        block = mm.Block(nn.Linear(5, 5), nn.ReLU(), nn.Linear(5, 2))
+        lora_block = LoRA.walk(block, r=2, lora_alpha=1.0, lora_dropout=0.0, merge_weights=True)
+
+        # test whether the apply function correctly replaced Linear layers with LoRA modules
+        assert isinstance(lora_block[0], LoRA)
+        assert isinstance(lora_block[2], LoRA)
+        assert isinstance(lora_block[1], nn.ReLU)
+
+    def test_reset_parameters(self):
+        self.lora_linear.reset_parameters()
+
+        # check if reset correctly
+        assert torch.sum(self.lora_linear.lora_B).item() == 0
+        assert self.lora_linear.lora_A.data is not None  # filled with some initialization
+
+    def test_linear_train_and_eval_mode(self):
+        self.lora_linear.train()
+
+        # test if module is in training mode
+        assert self.lora_linear.training
+
+        self.lora_linear.eval()
+
+        # test if module is in eval mode
+        assert not self.lora_linear.training
+
+    def test_linear_forward(self):
+        x = torch.randn(1, 10)
+        out = module_utils.module_test(self.lora_linear, x)
+
+        # test output shape
+        assert out.shape == (1, 5)
+
+    def test_embedding_train_and_eval_mode(self):
+        self.lora_embedding.train()
+
+        # test if module is in training mode
+        assert self.lora_embedding.training
+
+        self.lora_embedding.eval()
+
+        # test if module is in eval mode
+        assert not self.lora_embedding.training
+
+    def test_embedding_forward(self):
+        x = torch.tensor([1, 2, 3])
+        out = module_utils.module_test(self.lora_embedding, x)
+
+        # test output shape
+        assert out.shape == (3, 5)