diff --git a/vllm/model_executor/guided_decoding/__init__.py b/vllm/model_executor/guided_decoding/__init__.py
index a81377341e095..e631aec928ec5 100644
--- a/vllm/model_executor/guided_decoding/__init__.py
+++ b/vllm/model_executor/guided_decoding/__init__.py
@@ -73,14 +73,6 @@ def maybe_backend_fallback(
                 "Falling back to use outlines instead.")
             guided_params.backend = "outlines"
 
-        # xgrammar only supports EBNF grammars and uses the GBNF format
-        # https://github.com/ggerganov/llama.cpp/blob/master/grammars/README.md
-        elif (guided_params.grammar is not None
-              and "::=" not in guided_params.grammar):
-            logger.warning("xgrammar only supports EBNF grammars. "
-                           "Falling back to use outlines instead.")
-            guided_params.backend = "outlines"
-
         # xgrammar doesn't support some JSON schema features
         elif (guided_params.json is not None
               and has_xgrammar_unsupported_json_features(guided_params.json)):
diff --git a/vllm/model_executor/guided_decoding/xgrammar_decoding.py b/vllm/model_executor/guided_decoding/xgrammar_decoding.py
index 8287cd6cf3aa0..b59a2269d2cd5 100644
--- a/vllm/model_executor/guided_decoding/xgrammar_decoding.py
+++ b/vllm/model_executor/guided_decoding/xgrammar_decoding.py
@@ -14,6 +14,9 @@
 except ImportError:
     pass
 
+from vllm.model_executor.guided_decoding.xgrammar_utils import (
+    convert_lark_to_gbnf, grammar_is_likely_lark)
+
 if TYPE_CHECKING:
     from transformers import PreTrainedTokenizer
 
@@ -152,7 +155,19 @@ def from_guided_params(cls,
                        tokenizer_hash=tokenizer_hash,
                        max_threads=max_threads)
         elif guided_params.grammar:
-            return cls(grammar_str=guided_params.grammar,
+            # XGrammar only supports GBNF grammars, so we must convert Lark
+            if grammar_is_likely_lark(guided_params.grammar):
+                try:
+                    grammar_str = convert_lark_to_gbnf(guided_params.grammar)
+                except ValueError as e:
+                    raise ValueError(
+                        "Failed to convert the grammar from Lark to GBNF. "
+                        "Please either use GBNF grammar directly or specify"
+                        " --guided-decoding-backend=outlines.\n"
+                        f"Conversion error: {str(e)}") from e
+            else:
+                grammar_str = guided_params.grammar
+            return cls(grammar_str=grammar_str,
                        vocab_size=model_config.hf_config.vocab_size,
                        encoded_vocab=encoded_vocab,
                        stop_token_ids=stop_token_ids,
diff --git a/vllm/model_executor/guided_decoding/xgrammar_utils.py b/vllm/model_executor/guided_decoding/xgrammar_utils.py
new file mode 100644
index 0000000000000..12b42245f4e3d
--- /dev/null
+++ b/vllm/model_executor/guided_decoding/xgrammar_utils.py
@@ -0,0 +1,162 @@
+import re
+
+
+def grammar_is_likely_lark(grammar_str: str) -> bool:
+    """
+    Check if grammar appears to use Lark syntax.
+    
+    Args:
+        grammar_str: Input grammar string
+        
+    Returns:
+        bool: True if grammar appears to be in Lark format, False otherwise
+        
+    Examples:
+        >>> grammar_is_likely_lark("rule: 'abc'")
+        True
+        >>> grammar_is_likely_lark("rule ::= 'abc'")
+        False
+    """
+    if not grammar_str or not isinstance(grammar_str, str):
+        return False
+
+    for line in grammar_str.split('\n'):
+        # Remove both comment styles
+        line = re.sub(r'(#|//).*$', '', line).strip()
+        if not line:
+            continue
+
+        # Look for Lark-style rule definitions
+        if ':' in line and '::=' not in line:
+            return True
+
+        # Look for Lark-specific features
+        if any(pattern in line for pattern in ['?start:', '|', '~']):
+            return True
+
+    return False
+
+
+def convert_lark_to_gbnf(grammar_str: str) -> str:
+    """
+    Convert a Lark grammar string to GBNF format.
+
+    GBNF reference:
+    https://github.com/ggerganov/llama.cpp/blob/master/grammars/README.md
+    Lark grammar reference:
+    https://lark-parser.readthedocs.io/en/latest/grammar.html
+    
+    Args:
+        grammar_str: Input grammar in Lark format
+        
+    Returns:
+        str: Converted grammar in GBNF format
+        
+    Examples:
+        >>> print(convert_lark_to_gbnf("rule: 'hello'"))
+        root ::= rule
+        rule ::= "hello"
+    """
+    if not isinstance(grammar_str, str):
+        raise ValueError(f"Grammar must be a string, got {type(grammar_str)}")
+    if not grammar_str.strip():
+        raise ValueError("Grammar string cannot be empty")
+
+    defined_rules = set()
+    referenced_rules = set()
+    output_lines = []
+
+    def clean_line(line: str) -> str:
+        """Remove comments and whitespace from line."""
+        return re.sub(r'(#|//).*$', '', line).strip()
+
+    def check_quotes(text: str, rule_name: str, line_num: int) -> None:
+        """Validate quote matching in text."""
+        if text.count("'") % 2 != 0 or text.count('"') % 2 != 0:
+            raise ValueError(
+                f"Mismatched quotes in {rule_name} on line {line_num}")
+
+    def extract_references(text: str) -> set:
+        """Extract rule references from text."""
+        # Remove quoted strings and special characters
+        text = re.sub(r'"[^"]*"', '', text)
+        text = re.sub(r'[+*?()|\[\]{}]', ' ', text)
+        return set(re.findall(r'\b[a-zA-Z_][a-zA-Z0-9_]*\b', text))
+
+    # First pass: Find root rule and validate rule definitions
+    lines = [clean_line(line) for line in grammar_str.split('\n')]
+    first_rule = None
+
+    for line_num, line in enumerate(lines, 1):
+        if not line or line.startswith('|'):
+            continue
+
+        if ':' in line:
+            try:
+                name = line.split(':', 1)[0].strip().strip('?')
+                defined_rules.add(name)
+                if first_rule is None:
+                    first_rule = name
+                if name == 'start':
+                    first_rule = 'start'
+            except IndexError as e:
+                raise ValueError(f"Invalid rule format on line {line_num}. "
+                                 "Expected 'rule_name: definition'") from e
+
+    if not defined_rules:
+        raise ValueError("No valid rules found in grammar")
+
+    # Add root rule
+    output_lines.append(f"root ::= {first_rule}")
+
+    # Second pass: Process rule definitions and alternatives
+    current_rule = None
+    current_definition = []
+
+    for line_num, line in enumerate(lines, 1):
+        if not line:
+            continue
+
+        try:
+            if ':' in line and not line.startswith('|'):
+                # Save previous rule if exists
+                if current_rule:
+                    output_lines.append(
+                        f"{current_rule} ::= {' | '.join(current_definition)}")
+
+                # Process new rule
+                name, definition = line.split(':', 1)
+                current_rule = name.strip().strip('?')
+
+                check_quotes(definition, f"rule '{current_rule}'", line_num)
+                definition = re.sub(r"'([^']*)'", r'"\1"', definition)
+                referenced_rules.update(extract_references(definition))
+                current_definition = [definition.strip()]
+
+            elif line.startswith('|'):
+                if not current_rule:
+                    raise ValueError(f"Alternative '|' on line {line_num} "
+                                     "without a preceding rule definition")
+
+                alt_def = line[1:].strip()
+                check_quotes(alt_def, f"alternative for rule '{current_rule}'",
+                             line_num)
+                alt_def = re.sub(r"'([^']*)'", r'"\1"', alt_def)
+                referenced_rules.update(extract_references(alt_def))
+                current_definition.append(alt_def)
+
+        except ValueError as e:
+            raise ValueError(f"Error on line {line_num}: {str(e)}") from e
+
+    # Add final rule if exists
+    if current_rule:
+        output_lines.append(
+            f"{current_rule} ::= {' | '.join(current_definition)}")
+
+    # Validate all rules are defined
+    undefined_rules = referenced_rules - defined_rules - {'root'}
+    if undefined_rules:
+        raise ValueError("Referenced rules are not defined: "
+                         f"{', '.join(sorted(undefined_rules))}")
+
+    return '\n'.join(output_lines)