diff --git a/tests/test_utils.py b/tests/test_utils.py
index 8b67e92fca68..49fb02fd0403 100644
--- a/tests/test_utils.py
+++ b/tests/test_utils.py
@@ -14,7 +14,7 @@
 from vllm.utils import (FlexibleArgumentParser, MemorySnapshot,
                         PlaceholderModule, StoreBoolean, bind_kv_cache,
                         deprecate_kwargs, get_open_port, memory_profiling,
-                        merge_async_iterators, supports_kw)
+                        merge_async_iterators, supports_kw, swap_dict_values)
 
 from .utils import error_on_warning, fork_new_process_for_each_test
 
@@ -449,3 +449,26 @@ def build_ctx():
     with build_ctx():
         # Test conflict with internal __module attribute
         _ = placeholder_attr.module
+
+
+@pytest.mark.parametrize(
+    "obj,key1,key2",
+    [
+        # Tests for both keys exist
+        ({1: "a", 2: "b"}, 1, 2),
+        # Tests for one key does not exist
+        ({1: "a", 2: "b"}, 1, 3),
+        # Tests for both keys do not exist
+        ({1: "a", 2: "b"}, 3, 4),
+    ])
+def test_swap_dict_values(obj, key1, key2):
+    original_obj = obj.copy()
+    swap_dict_values(obj, key1, key2)
+    if key1 in original_obj:
+        assert obj[key2] == original_obj[key1]
+    else:
+        assert key2 not in obj
+    if key2 in original_obj:
+        assert obj[key1] == original_obj[key2]
+    else:
+        assert key1 not in obj
diff --git a/tests/v1/sample/test_rejection_sampler.py b/tests/v1/sample/test_rejection_sampler.py
index b1862455d0ec..190927745f1f 100644
--- a/tests/v1/sample/test_rejection_sampler.py
+++ b/tests/v1/sample/test_rejection_sampler.py
@@ -42,6 +42,7 @@ def create_sampling_metadata(spec_tokens: list[list[int]]) -> SamplingMetadata:
         min_tokens={},
         logit_bias=[None] * batch_size,
         allowed_token_ids_mask=None,
+        bad_words_token_ids={},
     )
 
 
diff --git a/tests/v1/sample/test_sampler.py b/tests/v1/sample/test_sampler.py
index b702d9ed7f83..5f041b448937 100644
--- a/tests/v1/sample/test_sampler.py
+++ b/tests/v1/sample/test_sampler.py
@@ -77,6 +77,49 @@ def _create_allowed_token_ids(
     return mask
 
 
+def _create_bad_words_token_ids(
+        batch_size: int, vocab_size: int,
+        bad_words_lengths: list[tuple[int]]) -> dict[int, list[list[int]]]:
+    bad_words_token_ids = {}
+    for batch_idx in range(batch_size):
+        token_ids_single_batch = []
+        for bad_words_length in bad_words_lengths:
+            token_ids = np.random.choice(vocab_size,
+                                         size=bad_words_length,
+                                         replace=True).tolist()
+            token_ids_single_batch.append(token_ids)
+        bad_words_token_ids[batch_idx] = token_ids_single_batch
+    if batch_size >= 2:
+        # Test no bad_words for some batch
+        no_bad_words_batch_idx = np.random.choice(batch_size)
+        bad_words_token_ids.pop(no_bad_words_batch_idx, None)
+    return bad_words_token_ids
+
+
+def _update_output_token_ids_for_bad_words(
+        metadata: SamplingMetadata, vocab_size: int) -> dict[int, list[int]]:
+    bad_words_last_tokens = {}
+    for batch_idx, bad_words_token_ids in metadata.bad_words_token_ids.items():
+        output_token_ids = metadata.output_token_ids[batch_idx]
+        bad_words_last_token: list[int] = []
+        for i, bad_word_token_ids in enumerate(bad_words_token_ids):
+            if len(bad_word_token_ids) == 1:
+                # Single token id always affects logits
+                bad_words_last_token.append(bad_word_token_ids[0])
+            else:
+                prefix_length = len(bad_word_token_ids) - 1
+                has_bad_words = np.random.choice([True, False])
+                if has_bad_words:
+                    output_token_ids[-prefix_length:] = bad_word_token_ids[:-1]
+                    bad_words_last_token.append(bad_word_token_ids[-1])
+                    break  # Maximum one update to output_token_ids
+                else:  # Make sure no accidental match to bad words
+                    output_token_ids[-1] = (bad_word_token_ids[-2] +
+                                            1) % vocab_size
+        bad_words_last_tokens[batch_idx] = bad_words_last_token
+    return bad_words_last_tokens
+
+
 def _create_default_sampling_metadata(
     num_output_tokens: int,
     batch_size: int,
@@ -112,6 +155,7 @@ def _create_default_sampling_metadata(
         min_tokens={},
         logit_bias=[None] * batch_size,
         allowed_token_ids_mask=None,
+        bad_words_token_ids={},
     )
     return fake_sampling_metadata
 
@@ -467,3 +511,35 @@ def test_sampler_allowed_token_ids(device: str, batch_size: int,
                     "inf"), f"{batch_idx}, {token_id}"
             else:
                 assert logits_for_req[token_id] != -float("inf")
+
+
+@pytest.mark.parametrize("device", CUDA_DEVICES)
+@pytest.mark.parametrize("batch_size", [1, 2, 32])
+@pytest.mark.parametrize("bad_words_lengths", [(1, ), (1, 3), (2, 2)])
+def test_sampler_bad_words(device: str, batch_size: int,
+                           bad_words_lengths: list[tuple[int]]):
+    """
+    Test to verify that when the bad words restriction is present, tokens
+    are penalized based on their match with the bad words.
+    """
+    torch.set_default_device(device)
+    # Create fake logits where each token is assigned the same
+    # logit value.
+    fake_logits = _create_fake_logits(batch_size, VOCAB_SIZE)
+    sampling_metadata = _create_default_sampling_metadata(
+        NUM_OUTPUT_TOKENS, batch_size, VOCAB_SIZE, torch.device(device))
+    sampling_metadata.bad_words_token_ids = _create_bad_words_token_ids(
+        batch_size, VOCAB_SIZE, bad_words_lengths)
+    bad_words_last_tokens = _update_output_token_ids_for_bad_words(
+        sampling_metadata, VOCAB_SIZE)
+    sampler = Sampler()
+    logits = sampler.apply_bad_words(fake_logits, sampling_metadata)
+    logits = logits.cpu()
+    for batch_idx in range(batch_size):
+        logits_for_req = logits[batch_idx]
+        for token_id in range(VOCAB_SIZE):
+            if (batch_idx in bad_words_last_tokens
+                    and token_id in bad_words_last_tokens[batch_idx]):
+                assert logits_for_req[token_id] == -float("inf")
+            else:
+                assert logits_for_req[token_id] != -float("inf")
diff --git a/tests/v1/sample/test_sampling_params_e2e.py b/tests/v1/sample/test_sampling_params_e2e.py
index dcb0fa20b1a0..0512a1e02660 100644
--- a/tests/v1/sample/test_sampling_params_e2e.py
+++ b/tests/v1/sample/test_sampling_params_e2e.py
@@ -120,8 +120,22 @@ def test_detokenize_false(model):
 def test_bad_words(model):
     """Check that we respect bad words."""
 
-    with pytest.raises(ValueError):
-        _ = model.generate(PROMPT, SamplingParams(bad_words=["Hello"]))
+    output = model.generate(PROMPT, SamplingParams(temperature=0))
+    split_text = output[0].outputs[0].text.split()
+
+    bad_words_1 = " ".join(split_text[:2])
+    params = SamplingParams(temperature=0, bad_words=[bad_words_1])
+    output = model.generate(PROMPT, params)
+    new_text = output[0].outputs[0].text
+    assert bad_words_1 not in new_text
+
+    bad_words_2 = new_text.split()[-1]
+    params = SamplingParams(temperature=0,
+                            bad_words=[bad_words_1, bad_words_2])
+    output = model.generate(PROMPT, params)
+    new_text = output[0].outputs[0].text
+    assert bad_words_1 not in new_text
+    assert bad_words_2 not in new_text
 
 
 def test_logits_processor(model):
diff --git a/tests/v1/worker/test_gpu_input_batch.py b/tests/v1/worker/test_gpu_input_batch.py
index 5f0cb1d3d3b3..192ddefe102d 100644
--- a/tests/v1/worker/test_gpu_input_batch.py
+++ b/tests/v1/worker/test_gpu_input_batch.py
@@ -100,6 +100,7 @@ def _construct_expected_sampling_metadata(
                                          VOCAB_SIZE,
                                          dtype=torch.bool,
                                          device=device)
+    bad_words_token_ids = {}
     for req in reqs:
         if req.req_id not in req_ids_retained:
             continue
@@ -123,6 +124,8 @@ def _construct_expected_sampling_metadata(
         if req.sampling_params.allowed_token_ids:
             allowed_token_ids_mask[index_in_input_batch][
                 req.sampling_params.allowed_token_ids] = True
+        bad_words_token_ids[
+            index_in_input_batch] = req.sampling_params.bad_words_token_ids
 
     return SamplingMetadata(
         temperature=torch.tensor(temperature, dtype=torch.float,
@@ -159,6 +162,7 @@ def _construct_expected_sampling_metadata(
                       and all(x == 1 for x in repetition_penalties)),
         logit_bias=logit_bias,
         allowed_token_ids_mask=allowed_token_ids_mask,
+        bad_words_token_ids=bad_words_token_ids,
     )
 
 
@@ -284,6 +288,8 @@ def same(t1: Optional[torch.Tensor], t2: Optional[torch.Tensor]) -> bool:
         assert torch.allclose(
             expected_sampling_metadata.allowed_token_ids_mask,
             sampling_metadata.allowed_token_ids_mask)
+    assert expected_sampling_metadata.bad_words_token_ids == \
+        sampling_metadata.bad_words_token_ids
 
 
 @pytest.mark.parametrize("device", CUDA_DEVICES)
diff --git a/vllm/sampling_params.py b/vllm/sampling_params.py
index ca577a6721fe..110efa229822 100644
--- a/vllm/sampling_params.py
+++ b/vllm/sampling_params.py
@@ -11,6 +11,8 @@
 
 from vllm.logger import init_logger
 from vllm.logits_process import LogitsProcessor
+from vllm.transformers_utils.tokenizer import AnyTokenizer
+from vllm.transformers_utils.tokenizers.mistral import MistralTokenizer
 
 logger = init_logger(__name__)
 
@@ -202,7 +204,6 @@ class SamplingParams(
     seed: Optional[int] = None
     stop: Optional[Union[str, list[str]]] = None
     stop_token_ids: Optional[list[int]] = None
-    bad_words: Optional[list[str]] = None
     ignore_eos: bool = False
     max_tokens: Optional[int] = 16
     min_tokens: int = 0
@@ -232,6 +233,10 @@ class SamplingParams(
     allowed_token_ids: Optional[list[int]] = None
     extra_args: Optional[dict[str, Any]] = None
 
+    # Fields used for bad words
+    bad_words: Optional[list[str]] = None
+    _bad_words_token_ids: list[list[int]] = msgspec.field(default_factory=list)
+
     @staticmethod
     def from_optional(
         n: Optional[int] = 1,
@@ -464,6 +469,46 @@ def update_from_generation_config(
                     eos_ids.update(self.stop_token_ids)
                     self.stop_token_ids = list(eos_ids)
 
+    def update_from_tokenizer(self, tokenizer: AnyTokenizer) -> None:
+        if self.bad_words is None:
+            return
+        for bad_word in self.bad_words:
+            # To prohibit words both at the beginning
+            # and in the middle of text
+            # (related to add_prefix_space tokenizer parameter)
+            for add_prefix_space in [False, True]:
+                prefix = " " if add_prefix_space else ""
+                prompt = prefix + bad_word.lstrip()
+
+                if isinstance(tokenizer, MistralTokenizer):
+                    # Mistral tokenizers should not add special tokens
+                    prompt_token_ids = tokenizer.encode(text=prompt)
+                else:
+                    prompt_token_ids = tokenizer.encode(
+                        text=prompt, add_special_tokens=False)
+
+                # If no space at the beginning
+                # or if prefix space produces a new word token
+                if (not add_prefix_space) or (
+                        add_prefix_space and prompt_token_ids[0]
+                        != self._bad_words_token_ids[-1][0]
+                        and len(prompt_token_ids) == len(
+                            self._bad_words_token_ids[-1])):
+                    self._bad_words_token_ids.append(prompt_token_ids)
+
+        invalid_token_ids = [
+            token_id for bad_words_token_ids in self._bad_words_token_ids
+            for token_id in bad_words_token_ids
+            if token_id < 0 or token_id > tokenizer.max_token_id
+        ]
+        if len(invalid_token_ids) > 0:
+            raise ValueError(
+                f"The model vocabulary size is {tokenizer.max_token_id+1},"
+                f" but the following tokens"
+                f" were specified as bad: {invalid_token_ids}."
+                f" All token id values should be integers satisfying:"
+                f" 0 <= token_id <= {tokenizer.max_token_id}.")
+
     @cached_property
     def sampling_type(self) -> SamplingType:
         if self.temperature < _SAMPLING_EPS:
@@ -476,6 +521,11 @@ def sampling_type(self) -> SamplingType:
     def all_stop_token_ids(self) -> set[int]:
         return self._all_stop_token_ids
 
+    @property
+    def bad_words_token_ids(self) -> list[list[int]]:
+        # For internal use only. Backward compatibility not guaranteed
+        return self._bad_words_token_ids
+
     def clone(self) -> "SamplingParams":
         """Deep copy, but maybe not the LogitsProcessor objects.
 
diff --git a/vllm/utils.py b/vllm/utils.py
index 883a9e504065..9cad2b8854a2 100644
--- a/vllm/utils.py
+++ b/vllm/utils.py
@@ -2361,3 +2361,19 @@ def __dir__(self) -> list[str]:
         if self._module is None:
             self._module = self._load()
         return dir(self._module)
+
+
+def swap_dict_values(obj: dict[_K, _V], key1: _K, key2: _K) -> None:
+    """
+    Helper function to swap values for two keys
+    """
+    v1 = obj.get(key1)
+    v2 = obj.get(key2)
+    if v1 is not None:
+        obj[key2] = v1
+    else:
+        obj.pop(key2, None)
+    if v2 is not None:
+        obj[key1] = v2
+    else:
+        obj.pop(key1, None)
diff --git a/vllm/v1/engine/processor.py b/vllm/v1/engine/processor.py
index 247fb046e81a..38638c1ee361 100644
--- a/vllm/v1/engine/processor.py
+++ b/vllm/v1/engine/processor.py
@@ -94,9 +94,6 @@ def _validate_supported_sampling_params(
         # Best of not yet supported.
         if params.best_of is not None and params.best_of > 1:
             raise ValueError("VLLM V1 does not yet support best_of.")
-        # Bad words not yet supported.
-        if params.bad_words:
-            raise ValueError("VLLM V1 does not yet support bad_words.")
         # Logits processors not supported.
         if params.logits_processors:
             raise ValueError("VLLM V1 does not support per request "
@@ -203,6 +200,8 @@ def process_inputs(
         sampling_params = params.clone()
         sampling_params.update_from_generation_config(
             self.generation_config_fields, eos_token_id)
+        sampling_params.update_from_tokenizer(
+            self.tokenizer.get_lora_tokenizer(lora_request))
 
         # Multimodal related.
         # Compute MM hashes (if enabled)
diff --git a/vllm/v1/sample/metadata.py b/vllm/v1/sample/metadata.py
index 55d9739b8007..e97e1235fb36 100644
--- a/vllm/v1/sample/metadata.py
+++ b/vllm/v1/sample/metadata.py
@@ -38,3 +38,6 @@ class SamplingMetadata:
     # `allowed_token_ids_mask` is a 2D bool tensor of shape (max batch size,
     # vocab size).
     allowed_token_ids_mask: Optional[torch.Tensor]
+
+    # req_index -> bad_words_token_ids
+    bad_words_token_ids: dict[int, list[list[int]]]
diff --git a/vllm/v1/sample/ops/bad_words.py b/vllm/v1/sample/ops/bad_words.py
new file mode 100644
index 000000000000..2984d4e4806f
--- /dev/null
+++ b/vllm/v1/sample/ops/bad_words.py
@@ -0,0 +1,38 @@
+# SPDX-License-Identifier: Apache-2.0
+
+import torch
+
+_SMALLEST_LOGIT = float("-inf")
+
+
+def _apply_bad_words_single_batch(
+    logits: torch.Tensor,
+    bad_words_token_ids: list[list[int]],
+    past_tokens_ids: list[int],
+) -> None:
+    for bad_word_ids in bad_words_token_ids:
+        if len(bad_word_ids) > len(past_tokens_ids) + 1:
+            continue
+
+        prefix_length = len(bad_word_ids) - 1
+        last_token_id = bad_word_ids[-1]
+        if prefix_length > 0:
+            actual_prefix = past_tokens_ids[-prefix_length:]
+        else:
+            actual_prefix = []
+        expected_prefix = bad_word_ids[:prefix_length]
+
+        assert len(actual_prefix) == len(expected_prefix)
+
+        if actual_prefix == expected_prefix:
+            logits[last_token_id] = _SMALLEST_LOGIT
+
+
+def apply_bad_words(
+    logits: torch.Tensor,
+    bad_words_token_ids: dict[int, list[list[int]]],
+    past_tokens_ids: list[list[int]],
+) -> None:
+    for i, bad_words_ids in bad_words_token_ids.items():
+        _apply_bad_words_single_batch(logits[i], bad_words_ids,
+                                      past_tokens_ids[i])
diff --git a/vllm/v1/sample/sampler.py b/vllm/v1/sample/sampler.py
index b0eb533ae2e5..96f6d807b10c 100644
--- a/vllm/v1/sample/sampler.py
+++ b/vllm/v1/sample/sampler.py
@@ -6,6 +6,7 @@
 
 from vllm.v1.outputs import LogprobsTensors, SamplerOutput
 from vllm.v1.sample.metadata import SamplingMetadata
+from vllm.v1.sample.ops.bad_words import apply_bad_words
 from vllm.v1.sample.ops.penalties import (apply_all_penalties,
                                           apply_min_token_penalties)
 from vllm.v1.sample.ops.topk_topp_sampler import TopKTopPSampler
@@ -38,6 +39,8 @@ def forward(
         logits = logits.to(torch.float32)
         # Apply allowed token ids.
         logits = self.apply_allowed_token_ids(logits, sampling_metadata)
+        # Apply bad words exclusion.
+        logits = self.apply_bad_words(logits, sampling_metadata)
         # Apply logits bias.
         logits = self.apply_logits_bias(logits, sampling_metadata)
         # Apply penalties (e.g., min_tokens, freq_penalties).
@@ -237,3 +240,16 @@ def apply_allowed_token_ids(
             logits.masked_fill_(sampling_metadata.allowed_token_ids_mask,
                                 float("-inf"))
         return logits
+
+    def apply_bad_words(
+        self,
+        logits: torch.Tensor,
+        sampling_metadata: SamplingMetadata,
+    ) -> torch.Tensor:
+        if sampling_metadata.bad_words_token_ids:
+            apply_bad_words(
+                logits,
+                sampling_metadata.bad_words_token_ids,
+                sampling_metadata.output_token_ids,
+            )
+        return logits
diff --git a/vllm/v1/worker/gpu_input_batch.py b/vllm/v1/worker/gpu_input_batch.py
index 6239a182e31e..9707cb5774cd 100644
--- a/vllm/v1/worker/gpu_input_batch.py
+++ b/vllm/v1/worker/gpu_input_batch.py
@@ -10,6 +10,7 @@
 from vllm.lora.request import LoRARequest
 from vllm.multimodal import MultiModalKwargs
 from vllm.sampling_params import SamplingParams, SamplingType
+from vllm.utils import swap_dict_values
 from vllm.v1.sample.metadata import SamplingMetadata
 from vllm.v1.utils import copy_slice
 from vllm.v1.worker.block_table import BlockTable
@@ -204,6 +205,9 @@ def __init__(
         self.allowed_token_ids_mask: Optional[torch.Tensor] = None
         self.allowed_token_ids_mask_cpu_tensor: Optional[torch.Tensor] = None
 
+        # req_index -> bad_words_token_ids
+        self.bad_words_token_ids: dict[int, list[list[int]]] = {}
+
         self.req_output_token_ids: list[Optional[list[int]]] = []
 
         # This is updated each time the batch constituents change.
@@ -320,6 +324,9 @@ def add_request(
             self.allowed_token_ids_mask_cpu_tensor[req_index][
                 sampling_params.allowed_token_ids] = False
 
+        self.bad_words_token_ids[
+            req_index] = sampling_params.bad_words_token_ids
+
         # Add request lora ID
         if request.lora_request:
             lora_id = request.lora_request.lora_int_id
@@ -369,6 +376,7 @@ def remove_request(self, req_id: str) -> Optional[int]:
         if self.allowed_token_ids_mask_cpu_tensor is not None:
             # False means we don't fill with -inf.
             self.allowed_token_ids_mask_cpu_tensor[req_index].fill_(False)
+        self.bad_words_token_ids.pop(req_index, None)
         return req_index
 
     def swap_states(self, i1: int, i2: int) -> None:
@@ -413,27 +421,9 @@ def swap_states(self, i1: int, i2: int) -> None:
         self.token_ids_cpu[i1, ...] = self.token_ids_cpu[i2, ...]
         self.token_ids_cpu[i2, ...] = tmp
 
-        g1 = self.generators.get(i1)
-        g2 = self.generators.get(i2)
-        if g1 is not None:
-            self.generators[i2] = g1
-        else:
-            self.generators.pop(i2, None)
-        if g2 is not None:
-            self.generators[i1] = g2
-        else:
-            self.generators.pop(i1, None)
-
-        t1 = self.min_tokens.get(i1)
-        t2 = self.min_tokens.get(i2)
-        if t1 is not None:
-            self.min_tokens[i2] = t1
-        else:
-            self.min_tokens.pop(i2, None)
-        if t2 is not None:
-            self.min_tokens[i1] = t2
-        else:
-            self.min_tokens.pop(i1, None)
+        swap_dict_values(self.generators, i1, i2)
+        swap_dict_values(self.min_tokens, i1, i2)
+        swap_dict_values(self.bad_words_token_ids, i1, i2)
 
         self.request_lora_mapping[i1], self.request_lora_mapping[i2] =\
             self.request_lora_mapping[i2], self.request_lora_mapping[i1]
@@ -518,6 +508,10 @@ def condense(self, empty_req_indices: list[int]) -> None:
                     empty_index] = self.allowed_token_ids_mask_cpu_tensor[
                         last_req_index]
 
+            bad_words_token_ids = self.bad_words_token_ids.pop(
+                last_req_index, None)
+            if bad_words_token_ids is not None:
+                self.bad_words_token_ids[empty_index] = bad_words_token_ids
             # Decrement last_req_index since it is now empty.
             last_req_index -= 1
 
@@ -585,6 +579,7 @@ def _make_sampling_metadata(self) -> SamplingMetadata:
             no_penalties=self.no_penalties,
             logit_bias=self.logit_bias[:num_reqs],
             allowed_token_ids_mask=allowed_token_ids_mask,
+            bad_words_token_ids=self.bad_words_token_ids,
         )
 
     def _make_prompt_token_ids_tensor(self) -> torch.Tensor:
diff --git a/vllm/v1/worker/gpu_model_runner.py b/vllm/v1/worker/gpu_model_runner.py
index 81dec429b425..e41427f6c452 100644
--- a/vllm/v1/worker/gpu_model_runner.py
+++ b/vllm/v1/worker/gpu_model_runner.py
@@ -1268,6 +1268,7 @@ def _dummy_sampler_run(
             min_tokens={},
             logit_bias=[None for _ in range(num_reqs)],
             allowed_token_ids_mask=None,
+            bad_words_token_ids={},
         )
         sampler_output = self.model.sample(logits=logits,
                                            sampling_metadata=dummy_metadata)