diff --git a/api/nvidia/v1/clusterpolicy_types.go b/api/nvidia/v1/clusterpolicy_types.go
index ea4b21d86..4a1fb7290 100644
--- a/api/nvidia/v1/clusterpolicy_types.go
+++ b/api/nvidia/v1/clusterpolicy_types.go
@@ -94,6 +94,8 @@ type ClusterPolicySpec struct {
 	CCManager CCManagerSpec `json:"ccManager,omitempty"`
 	// HostPaths defines various paths on the host needed by GPU Operator components
 	HostPaths HostPathsSpec `json:"hostPaths,omitempty"`
+	// FabricManager component spec
+	FabricManager FabricManagerSpec `json:"fabricManager,omitempty"`
 }
 
 // Runtime defines container runtime type
@@ -1724,6 +1726,38 @@ type CDIConfigSpec struct {
 	Default *bool `json:"default,omitempty"`
 }
 
+// FabricMode defines the Fabric Manager mode
+type FabricMode string
+
+const (
+	// FabricModeFullPassthrough indicates Full-passthrough mode (FABRIC_MODE=0)
+	FabricModeFullPassthrough FabricMode = "full-passthrough"
+	// FabricModeSharedNVSwitch indicates Shared NVSwitch Virtualization mode (FABRIC_MODE=1)
+	FabricModeSharedNVSwitch FabricMode = "shared-nvswitch"
+)
+
+func (f FabricMode) String() string {
+	switch f {
+	case FabricModeFullPassthrough:
+		return "full-passthrough"
+	case FabricModeSharedNVSwitch:
+		return "shared-nvswitch"
+	default:
+		return ""
+	}
+}
+
+// FabricManagerSpec defines the properties for NVIDIA Fabric Manager configuration
+type FabricManagerSpec struct {
+	// Mode indicates the Fabric Manager mode
+	// +kubebuilder:validation:Enum=full-passthrough;shared-nvswitch
+	// +kubebuilder:default=full-passthrough
+	// +operator-sdk:gen-csv:customresourcedefinitions.specDescriptors=true
+	// +operator-sdk:gen-csv:customresourcedefinitions.specDescriptors.displayName="Fabric Manager Mode"
+	// +operator-sdk:gen-csv:customresourcedefinitions.specDescriptors.x-descriptors="urn:alm:descriptor:com.tectonic.ui:select:full-passthrough,urn:alm:descriptor:com.tectonic.ui:select:shared-nvswitch"
+	Mode FabricMode `json:"mode,omitempty"`
+}
+
 // MIGStrategy indicates MIG mode
 type MIGStrategy string
 
@@ -2218,3 +2252,18 @@ func (c *MIGPartedConfigSpec) GetName() string {
 func (c *VGPUDevicesConfigSpec) GetName() string {
 	return ptr.Deref(c, VGPUDevicesConfigSpec{}).Name
 }
+
+// IsSharedNVSwitchMode returns true if Fabric Manager is configured for Shared NVSwitch mode
+func (f *FabricManagerSpec) IsSharedNVSwitchMode() bool {
+	return f.Mode == FabricModeSharedNVSwitch
+}
+
+// ValidateFabricManagerConfig validates the Fabric Manager configuration
+func (c *ClusterPolicySpec) ValidateFabricManagerConfig() error {
+	if c.SandboxWorkloads.DefaultWorkload == "vm-passthrough" &&
+		c.FabricManager.IsSharedNVSwitchMode() &&
+		!c.Driver.IsEnabled() {
+		return fmt.Errorf("driver must be enabled when using vm-passthrough with Fabric Manager Shared NVSwitch mode")
+	}
+	return nil
+}
diff --git a/api/nvidia/v1/zz_generated.deepcopy.go b/api/nvidia/v1/zz_generated.deepcopy.go
index 9e68fdb37..5b86cd8e2 100644
--- a/api/nvidia/v1/zz_generated.deepcopy.go
+++ b/api/nvidia/v1/zz_generated.deepcopy.go
@@ -209,6 +209,7 @@ func (in *ClusterPolicySpec) DeepCopyInto(out *ClusterPolicySpec) {
 	in.KataManager.DeepCopyInto(&out.KataManager)
 	in.CCManager.DeepCopyInto(&out.CCManager)
 	out.HostPaths = in.HostPaths
+	out.FabricManager = in.FabricManager
 }
 
 // DeepCopy is an autogenerated deepcopy function, copying the receiver, creating a new ClusterPolicySpec.
@@ -788,6 +789,21 @@ func (in *EnvVar) DeepCopy() *EnvVar {
 	return out
 }
 
+// DeepCopyInto is an autogenerated deepcopy function, copying the receiver, writing into out. in must be non-nil.
+func (in *FabricManagerSpec) DeepCopyInto(out *FabricManagerSpec) {
+	*out = *in
+}
+
+// DeepCopy is an autogenerated deepcopy function, copying the receiver, creating a new FabricManagerSpec.
+func (in *FabricManagerSpec) DeepCopy() *FabricManagerSpec {
+	if in == nil {
+		return nil
+	}
+	out := new(FabricManagerSpec)
+	in.DeepCopyInto(out)
+	return out
+}
+
 // DeepCopyInto is an autogenerated deepcopy function, copying the receiver, writing into out. in must be non-nil.
 func (in *GDRCopySpec) DeepCopyInto(out *GDRCopySpec) {
 	*out = *in
diff --git a/assets/state-driver/0400_configmap.yaml b/assets/state-driver/0400_configmap.yaml
index 67aa1e2ca..3ab40437c 100644
--- a/assets/state-driver/0400_configmap.yaml
+++ b/assets/state-driver/0400_configmap.yaml
@@ -22,8 +22,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/assets/state-driver/0500_daemonset.yaml b/assets/state-driver/0500_daemonset.yaml
index 853cf6fc9..c6023e9b3 100644
--- a/assets/state-driver/0500_daemonset.yaml
+++ b/assets/state-driver/0500_daemonset.yaml
@@ -50,29 +50,29 @@ spec:
           command: ["driver-manager"]
           args: ["uninstall_driver"]
           env:
-          - name: NODE_NAME
-            valueFrom:
-              fieldRef:
-                fieldPath: spec.nodeName
-          # always use runc for driver containers
-          - name: NVIDIA_VISIBLE_DEVICES
-            value: void
-          - name: ENABLE_GPU_POD_EVICTION
-            value: "true"
-          - name: ENABLE_AUTO_DRAIN
-            value: "false"
-          - name: DRAIN_USE_FORCE
-            value: "false"
-          - name: DRAIN_POD_SELECTOR_LABEL
-            value: ""
-          - name: DRAIN_TIMEOUT_SECONDS
-            value: "0s"
-          - name: DRAIN_DELETE_EMPTYDIR_DATA
-            value: "false"
-          - name: OPERATOR_NAMESPACE
-            valueFrom:
-              fieldRef:
-                fieldPath: metadata.namespace
+            - name: NODE_NAME
+              valueFrom:
+                fieldRef:
+                  fieldPath: spec.nodeName
+            # always use runc for driver containers
+            - name: NVIDIA_VISIBLE_DEVICES
+              value: void
+            - name: ENABLE_GPU_POD_EVICTION
+              value: "true"
+            - name: ENABLE_AUTO_DRAIN
+              value: "false"
+            - name: DRAIN_USE_FORCE
+              value: "false"
+            - name: DRAIN_POD_SELECTOR_LABEL
+              value: ""
+            - name: DRAIN_TIMEOUT_SECONDS
+              value: "0s"
+            - name: DRAIN_DELETE_EMPTYDIR_DATA
+              value: "false"
+            - name: OPERATOR_NAMESPACE
+              valueFrom:
+                fieldRef:
+                  fieldPath: metadata.namespace
           securityContext:
             privileged: true
           volumeMounts:
@@ -89,193 +89,203 @@ spec:
               mountPath: /run/mellanox/drivers
               mountPropagation: HostToContainer
       containers:
-      - image: "FILLED BY THE OPERATOR"
-        imagePullPolicy: IfNotPresent
-        name: nvidia-driver-ctr
-        command: ["nvidia-driver"]
-        args: ["init"]
-        env:
-          - name: NODE_NAME
-            valueFrom:
-              fieldRef:
-                fieldPath: spec.nodeName
-          - name: NODE_IP
-            valueFrom:
-              fieldRef:
-                fieldPath: status.hostIP
-        securityContext:
-          privileged: true
-          seLinuxOptions:
-            level: "s0"
-        volumeMounts:
-          - name: run-nvidia
-            mountPath: /run/nvidia
-            mountPropagation: Bidirectional
-          - name: run-nvidia-fabricmanager
-            mountPath: /run/nvidia-fabricmanager
-          - name: run-nvidia-topologyd
-            mountPath: /run/nvidia-topologyd
-          - name: var-log
-            mountPath: /var/log
-          - name: dev-log
-            mountPath: /dev/log
-          - name: host-os-release
-            mountPath: "/host-etc/os-release"
-            readOnly: true
-          - name: mlnx-ofed-usr-src
-            mountPath: /run/mellanox/drivers/usr/src
-            mountPropagation: HostToContainer
-          - name: run-mellanox-drivers
-            mountPath: /run/mellanox/drivers
-            mountPropagation: HostToContainer
-          - name: sysfs-memory-online
-            mountPath: /sys/devices/system/memory/auto_online_blocks
-          - name: firmware-search-path
-            mountPath: /sys/module/firmware_class/parameters/path
-          - name: nv-firmware
-            mountPath: /lib/firmware
-          - name: driver-startup-probe-script
-            mountPath: /usr/local/bin/startup-probe.sh
-            subPath: startup-probe.sh
-        startupProbe:
-          exec:
-            command:
-            - sh
-            - /usr/local/bin/startup-probe.sh
-          initialDelaySeconds: 60
-          failureThreshold: 120
-          successThreshold: 1
-          periodSeconds: 10
-          timeoutSeconds: 60
-        lifecycle:
-          preStop:
+        - image: "FILLED BY THE OPERATOR"
+          imagePullPolicy: IfNotPresent
+          name: nvidia-driver-ctr
+          command: ["nvidia-driver"]
+          args: ["init"]
+          env:
+            - name: NODE_NAME
+              valueFrom:
+                fieldRef:
+                  fieldPath: spec.nodeName
+            - name: NODE_IP
+              valueFrom:
+                fieldRef:
+                  fieldPath: status.hostIP
+          securityContext:
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          volumeMounts:
+            - name: run-nvidia
+              mountPath: /run/nvidia
+              mountPropagation: Bidirectional
+            - name: run-nvidia-fabricmanager
+              mountPath: /run/nvidia-fabricmanager
+            - name: run-nvidia-topologyd
+              mountPath: /run/nvidia-topologyd
+            - name: var-log
+              mountPath: /var/log
+            - name: dev-log
+              mountPath: /dev/log
+            - name: host-os-release
+              mountPath: "/host-etc/os-release"
+              readOnly: true
+            - name: mlnx-ofed-usr-src
+              mountPath: /run/mellanox/drivers/usr/src
+              mountPropagation: HostToContainer
+            - name: run-mellanox-drivers
+              mountPath: /run/mellanox/drivers
+              mountPropagation: HostToContainer
+            - name: sysfs-memory-online
+              mountPath: /sys/devices/system/memory/auto_online_blocks
+            - name: firmware-search-path
+              mountPath: /sys/module/firmware_class/parameters/path
+            - name: nv-firmware
+              mountPath: /lib/firmware
+            - name: driver-startup-probe-script
+              mountPath: /usr/local/bin/startup-probe.sh
+              subPath: startup-probe.sh
+          startupProbe:
+            exec:
+              command:
+                - sh
+                - /usr/local/bin/startup-probe.sh
+            initialDelaySeconds: 60
+            failureThreshold: 120
+            successThreshold: 1
+            periodSeconds: 10
+            timeoutSeconds: 60
+          lifecycle:
+            preStop:
+              exec:
+                command:
+                  [
+                    "/bin/sh",
+                    "-c",
+                    "rm -f /run/nvidia/validations/.driver-ctr-ready",
+                  ]
+        - image: "FILLED BY THE OPERATOR"
+          imagePullPolicy: IfNotPresent
+          name: nvidia-peermem-ctr
+          command: ["nvidia-driver"]
+          # takes care of loading nvidia_peermem whenever it gets dynamically unloaded during MOFED driver re-install/update
+          args: ["reload_nvidia_peermem"]
+          securityContext:
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          volumeMounts:
+            - name: run-nvidia
+              mountPath: /run/nvidia
+              mountPropagation: Bidirectional
+            - name: var-log
+              mountPath: /var/log
+            - name: dev-log
+              mountPath: /dev/log
+              readOnly: true
+            - name: run-mellanox-drivers
+              mountPath: /run/mellanox/drivers
+              mountPropagation: HostToContainer
+          startupProbe:
+            exec:
+              command: [sh, -c, "nvidia-driver probe_nvidia_peermem"]
+            initialDelaySeconds: 10
+            failureThreshold: 120
+            successThreshold: 1
+            periodSeconds: 10
+            timeoutSeconds: 10
+          livenessProbe:
             exec:
-              command: ["/bin/sh", "-c", "rm -f /run/nvidia/validations/.driver-ctr-ready"]
-      - image: "FILLED BY THE OPERATOR"
-        imagePullPolicy: IfNotPresent
-        name: nvidia-peermem-ctr
-        command: ["nvidia-driver"]
-        # takes care of loading nvidia_peermem whenever it gets dynamically unloaded during MOFED driver re-install/update
-        args: ["reload_nvidia_peermem"]
-        securityContext:
-          privileged: true
-          seLinuxOptions:
-            level: "s0"
-        volumeMounts:
-          - name: run-nvidia
-            mountPath: /run/nvidia
-            mountPropagation: Bidirectional
-          - name: var-log
-            mountPath: /var/log
-          - name: dev-log
-            mountPath: /dev/log
-            readOnly: true
-          - name: run-mellanox-drivers
-            mountPath: /run/mellanox/drivers
-            mountPropagation: HostToContainer
-        startupProbe:
-          exec:
-            command:
-              [sh, -c, 'nvidia-driver probe_nvidia_peermem']
-          initialDelaySeconds: 10
-          failureThreshold: 120
-          successThreshold: 1
-          periodSeconds: 10
-          timeoutSeconds: 10
-        livenessProbe:
-          exec:
-            command:
-              [sh, -c, 'nvidia-driver probe_nvidia_peermem']
-          periodSeconds: 30
-          initialDelaySeconds: 30
-          failureThreshold: 1
-          successThreshold: 1
-          timeoutSeconds: 10
-      - image: "FILLED BY THE OPERATOR"
-        imagePullPolicy: IfNotPresent
-        name: nvidia-fs-ctr
-        command: [bash, -xc]
-        args: ["until [ -d /run/nvidia/driver/usr/src ] && lsmod | grep nvidia; do echo  Waiting for nvidia-driver to be installed...; sleep 10; done; exec nvidia-gds-driver install"]
-        securityContext:
-          privileged: true
-          seLinuxOptions:
-            level: "s0"
-        volumeMounts:
-          - name: run-nvidia
-            mountPath: /run/nvidia
-            mountPropagation: HostToContainer
-          - name: var-log
-            mountPath: /var/log
-          - name: dev-log
-            mountPath: /dev/log
-            readOnly: true
-        startupProbe:
-          exec:
-            command:
-              [sh, -c, 'lsmod | grep nvidia_fs']
-          initialDelaySeconds: 10
-          failureThreshold: 120
-          successThreshold: 1
-          periodSeconds: 10
-          timeoutSeconds: 10
-      - image: "FILLED BY THE OPERATOR"
-        imagePullPolicy: IfNotPresent
-        name: nvidia-gdrcopy-ctr
-        command: [bash, -xc]
-        args: ["until [ -d /run/nvidia/driver/usr/src ] && lsmod | grep nvidia; do echo  Waiting for nvidia-driver to be installed...; sleep 10; done; exec nvidia-gdrcopy-driver install"]
-        securityContext:
-          privileged: true
-          seLinuxOptions:
-            level: "s0"
-        volumeMounts:
-          - name: run-nvidia
-            mountPath: /run/nvidia
-            mountPropagation: HostToContainer
-          - name: var-log
-            mountPath: /var/log
-          - name: dev-log
-            mountPath: /dev/log
-            readOnly: true
-        startupProbe:
-          exec:
-            command:
-              [sh, -c, 'lsmod | grep gdrdrv']
-          initialDelaySeconds: 10
-          failureThreshold: 120
-          successThreshold: 1
-          periodSeconds: 10
-          timeoutSeconds: 10
-        # Only kept when OpenShift DriverToolkit side-car is enabled.
-      - image: "FILLED BY THE OPERATOR"
-        imagePullPolicy: IfNotPresent
-        name: openshift-driver-toolkit-ctr
-        command: [bash, -xc]
-        args: ["until [ -f /mnt/shared-nvidia-driver-toolkit/dir_prepared ]; do echo  Waiting for nvidia-driver-ctr container to prepare the shared directory ...; sleep 10; done; exec /mnt/shared-nvidia-driver-toolkit/ocp_dtk_entrypoint dtk-build-driver"]
-        securityContext:
-          # currently mandatory as 'nvidia-installer' loads (and
-          # unloads) the kernel module as part of the build process
-          privileged: true
-          seLinuxOptions:
-            level: "s0"
-        env:
-          - name: RHCOS_VERSION
-            value: "FILLED BY THE OPERATOR"
-          # always use runc for driver containers
-          - name: NVIDIA_VISIBLE_DEVICES
-            value: void
-        volumeMounts:
-          # corresponding volumes are dynamically injected by the
-          # operator when the OCP DriverToolkit side-car is enabled
-          - name: shared-nvidia-driver-toolkit
-            mountPath: /mnt/shared-nvidia-driver-toolkit
-          - name: var-log
-            mountPath: /var/log
-          - name: mlnx-ofed-usr-src
-            mountPath: /run/mellanox/drivers/usr/src
-            mountPropagation: HostToContainer
-          - name: host-os-release
-            mountPath: /host-etc/os-release
-            readOnly: true
+              command: [sh, -c, "nvidia-driver probe_nvidia_peermem"]
+            periodSeconds: 30
+            initialDelaySeconds: 30
+            failureThreshold: 1
+            successThreshold: 1
+            timeoutSeconds: 10
+        - image: "FILLED BY THE OPERATOR"
+          imagePullPolicy: IfNotPresent
+          name: nvidia-fs-ctr
+          command: [bash, -xc]
+          args:
+            [
+              "until [ -d /run/nvidia/driver/usr/src ] && lsmod | grep nvidia; do echo  Waiting for nvidia-driver to be installed...; sleep 10; done; exec nvidia-gds-driver install",
+            ]
+          securityContext:
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          volumeMounts:
+            - name: run-nvidia
+              mountPath: /run/nvidia
+              mountPropagation: HostToContainer
+            - name: var-log
+              mountPath: /var/log
+            - name: dev-log
+              mountPath: /dev/log
+              readOnly: true
+          startupProbe:
+            exec:
+              command: [sh, -c, "lsmod | grep nvidia_fs"]
+            initialDelaySeconds: 10
+            failureThreshold: 120
+            successThreshold: 1
+            periodSeconds: 10
+            timeoutSeconds: 10
+        - image: "FILLED BY THE OPERATOR"
+          imagePullPolicy: IfNotPresent
+          name: nvidia-gdrcopy-ctr
+          command: [bash, -xc]
+          args:
+            [
+              "until [ -d /run/nvidia/driver/usr/src ] && lsmod | grep nvidia; do echo  Waiting for nvidia-driver to be installed...; sleep 10; done; exec nvidia-gdrcopy-driver install",
+            ]
+          securityContext:
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          volumeMounts:
+            - name: run-nvidia
+              mountPath: /run/nvidia
+              mountPropagation: HostToContainer
+            - name: var-log
+              mountPath: /var/log
+            - name: dev-log
+              mountPath: /dev/log
+              readOnly: true
+          startupProbe:
+            exec:
+              command: [sh, -c, "lsmod | grep gdrdrv"]
+            initialDelaySeconds: 10
+            failureThreshold: 120
+            successThreshold: 1
+            periodSeconds: 10
+            timeoutSeconds: 10
+          # Only kept when OpenShift DriverToolkit side-car is enabled.
+        - image: "FILLED BY THE OPERATOR"
+          imagePullPolicy: IfNotPresent
+          name: openshift-driver-toolkit-ctr
+          command: [bash, -xc]
+          args:
+            [
+              "until [ -f /mnt/shared-nvidia-driver-toolkit/dir_prepared ]; do echo  Waiting for nvidia-driver-ctr container to prepare the shared directory ...; sleep 10; done; exec /mnt/shared-nvidia-driver-toolkit/ocp_dtk_entrypoint dtk-build-driver",
+            ]
+          securityContext:
+            # currently mandatory as 'nvidia-installer' loads (and
+            # unloads) the kernel module as part of the build process
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          env:
+            - name: RHCOS_VERSION
+              value: "FILLED BY THE OPERATOR"
+            # always use runc for driver containers
+            - name: NVIDIA_VISIBLE_DEVICES
+              value: void
+          volumeMounts:
+            # corresponding volumes are dynamically injected by the
+            # operator when the OCP DriverToolkit side-car is enabled
+            - name: shared-nvidia-driver-toolkit
+              mountPath: /mnt/shared-nvidia-driver-toolkit
+            - name: var-log
+              mountPath: /var/log
+            - name: mlnx-ofed-usr-src
+              mountPath: /run/mellanox/drivers/usr/src
+              mountPropagation: HostToContainer
+            - name: host-os-release
+              mountPath: /host-etc/os-release
+              readOnly: true
       volumes:
         - name: run-nvidia
           hostPath:
diff --git a/assets/state-sandbox-validation/0200_role.yaml b/assets/state-sandbox-validation/0200_role.yaml
index 79da66ff7..e1f616acb 100644
--- a/assets/state-sandbox-validation/0200_role.yaml
+++ b/assets/state-sandbox-validation/0200_role.yaml
@@ -12,3 +12,10 @@ rules:
   - use
   resourceNames:
   - privileged
+- apiGroups:
+  - apps
+  resources:
+  - daemonsets
+  verbs:
+  - get
+  - list
diff --git a/assets/state-sandbox-validation/0500_daemonset.yaml b/assets/state-sandbox-validation/0500_daemonset.yaml
index fcc2aa12a..982f64b53 100644
--- a/assets/state-sandbox-validation/0500_daemonset.yaml
+++ b/assets/state-sandbox-validation/0500_daemonset.yaml
@@ -26,6 +26,36 @@ spec:
       priorityClassName: system-node-critical
       serviceAccountName: nvidia-sandbox-validator
       initContainers:
+        - name: driver-validation
+          image: "FILLED BY THE OPERATOR"
+          command: ["sh", "-c"]
+          args: ["nvidia-validator"]
+          env:
+            - name: WITH_WAIT
+              value: "true"
+            - name: COMPONENT
+              value: driver
+            - name: OPERATOR_NAMESPACE
+              valueFrom:
+                fieldRef:
+                  fieldPath: metadata.namespace
+          securityContext:
+            privileged: true
+            seLinuxOptions:
+              level: "s0"
+          volumeMounts:
+            - name: host-root
+              mountPath: /host
+              readOnly: true
+              mountPropagation: HostToContainer
+            - name: driver-install-path
+              mountPath: /run/nvidia/driver
+              mountPropagation: HostToContainer
+            - name: run-nvidia-validations
+              mountPath: /run/nvidia/validations
+              mountPropagation: Bidirectional
+            - name: host-dev-char
+              mountPath: /host-dev-char
         - name: cc-manager-validation
           image: "FILLED BY THE OPERATOR"
           command: ['sh', '-c']
@@ -145,3 +175,6 @@ spec:
         - name: host-root
           hostPath:
             path: /
+        - name: host-dev-char
+          hostPath:
+            path: /dev/char
diff --git a/assets/state-vfio-manager/0500_daemonset.yaml b/assets/state-vfio-manager/0500_daemonset.yaml
index 1039cc874..ed867a70a 100644
--- a/assets/state-vfio-manager/0500_daemonset.yaml
+++ b/assets/state-vfio-manager/0500_daemonset.yaml
@@ -80,6 +80,9 @@ spec:
             readOnly: true
           - name: host-root
             mountPath: /host
+          - name: run-nvidia-validations
+            mountPath: /run/nvidia/validations
+            mountPropagation: Bidirectional
           securityContext:
             privileged: true
             seLinuxOptions:
@@ -102,6 +105,10 @@ spec:
           hostPath:
             path: /run/nvidia
             type: DirectoryOrCreate
+        - name: run-nvidia-validations
+          hostPath:
+            path: /run/nvidia/validations
+            type: DirectoryOrCreate
         - name: host-root
           hostPath:
             path: "/"
diff --git a/bundle/manifests/nvidia.com_clusterpolicies.yaml b/bundle/manifests/nvidia.com_clusterpolicies.yaml
index 379e98d87..b8a6ad74a 100644
--- a/bundle/manifests/nvidia.com_clusterpolicies.yaml
+++ b/bundle/manifests/nvidia.com_clusterpolicies.yaml
@@ -1057,6 +1057,17 @@ spec:
                         type: string
                     type: object
                 type: object
+              fabricManager:
+                description: FabricManager component spec
+                properties:
+                  mode:
+                    default: full-passthrough
+                    description: Mode indicates the Fabric Manager mode
+                    enum:
+                    - full-passthrough
+                    - shared-nvswitch
+                    type: string
+                type: object
               gdrcopy:
                 description: GDRCopy component spec
                 properties:
diff --git a/cmd/nvidia-validator/main.go b/cmd/nvidia-validator/main.go
index ea6cb5d5d..cb235ae72 100644
--- a/cmd/nvidia-validator/main.go
+++ b/cmd/nvidia-validator/main.go
@@ -1624,18 +1624,22 @@ func (v *VfioPCI) validate() error {
 		return err
 	}
 
-	err = v.runValidation()
-	if err != nil {
-		return err
-	}
-	log.Info("Validation completed successfully - all devices are bound to vfio-pci")
+	for {
+		log.Info("Attempting to validate that all device are bound to vfio-pci")
+		err := v.runValidation()
+		if err != nil {
+			if !withWaitFlag {
+				return fmt.Errorf("error validating vfio-pci: %w", err)
+			}
+			log.Warningf("failed to validate vfio-pci, retrying after %d seconds\n", sleepIntervalSecondsFlag)
+			time.Sleep(time.Duration(sleepIntervalSecondsFlag) * time.Second)
+			continue
+		}
 
-	// delete status file is already present
-	err = createStatusFile(outputDirFlag + "/" + vfioPCIStatusFile)
-	if err != nil {
-		return err
+		log.Info("Validation completed successfully - all devices are bound to vfio-pci")
+
+		return createStatusFile(outputDirFlag + "/" + vfioPCIStatusFile)
 	}
-	return nil
 }
 
 func (v *VfioPCI) runValidation() error {
diff --git a/config/crd/bases/nvidia.com_clusterpolicies.yaml b/config/crd/bases/nvidia.com_clusterpolicies.yaml
index 379e98d87..b8a6ad74a 100644
--- a/config/crd/bases/nvidia.com_clusterpolicies.yaml
+++ b/config/crd/bases/nvidia.com_clusterpolicies.yaml
@@ -1057,6 +1057,17 @@ spec:
                         type: string
                     type: object
                 type: object
+              fabricManager:
+                description: FabricManager component spec
+                properties:
+                  mode:
+                    default: full-passthrough
+                    description: Mode indicates the Fabric Manager mode
+                    enum:
+                    - full-passthrough
+                    - shared-nvswitch
+                    type: string
+                type: object
               gdrcopy:
                 description: GDRCopy component spec
                 properties:
diff --git a/controllers/object_controls.go b/controllers/object_controls.go
index a2a862bb0..782e46e9a 100644
--- a/controllers/object_controls.go
+++ b/controllers/object_controls.go
@@ -23,13 +23,12 @@ import (
 	"fmt"
 	"os"
 	"path"
+	"path/filepath"
 	"regexp"
 	"sort"
 	"strconv"
 	"strings"
 
-	"path/filepath"
-
 	apiconfigv1 "github.com/openshift/api/config/v1"
 	apiimagev1 "github.com/openshift/api/image/v1"
 	secv1 "github.com/openshift/api/security/v1"
@@ -2013,10 +2012,70 @@ func TransformKataManager(obj *appsv1.DaemonSet, config *gpuv1.ClusterPolicySpec
 
 // TransformVFIOManager transforms VFIO-PCI Manager daemonset with required config as per ClusterPolicy
 func TransformVFIOManager(obj *appsv1.DaemonSet, config *gpuv1.ClusterPolicySpec, n ClusterPolicyController) error {
-	// update k8s-driver-manager initContainer
-	err := transformDriverManagerInitContainer(obj, &config.VFIOManager.DriverManager, nil)
-	if err != nil {
-		return fmt.Errorf("failed to transform k8s-driver-manager initContainer for VFIO Manager: %v", err)
+	// Check if we're in shared-nvswitch mode
+	if config.FabricManager.IsSharedNVSwitchMode() {
+		// In shared-nvswitch mode, replace driver uninstall with device unbind
+		// Find the k8s-driver-manager init container and replace it with vfio-manage unbind
+		for i := range obj.Spec.Template.Spec.InitContainers {
+			if obj.Spec.Template.Spec.InitContainers[i].Name == "k8s-driver-manager" {
+				initContainer := &obj.Spec.Template.Spec.InitContainers[i]
+
+				// Get the main container image for consistency
+				mainImage, err := gpuv1.ImagePath(&config.VFIOManager)
+				if err != nil {
+					return err
+				}
+
+				// Replace with synchronized vfio-manage unbind init container
+				initContainer.Name = "vfio-device-unbind"
+				initContainer.Image = mainImage
+				initContainer.ImagePullPolicy = gpuv1.ImagePullPolicy(config.VFIOManager.ImagePullPolicy)
+				initContainer.Command = []string{"/bin/sh"}
+				initContainer.Args = []string{"-c", `
+# For shared-nvswitch mode, wait for driver to be ready before unbinding
+echo "Shared NVSwitch mode detected, waiting for driver readiness..."
+until [ -f /run/nvidia/validations/driver-ready ]
+do
+  echo "waiting for the driver validations to be ready..."
+  sleep 5
+done
+
+set -o allexport
+cat /run/nvidia/validations/driver-ready
+. /run/nvidia/validations/driver-ready
+
+echo "Driver is ready, proceeding with device unbind"
+exec vfio-manage unbind --all`}
+
+				// Add HOST_ROOT env var needed by vfio-manage
+				setContainerEnv(initContainer, "HOST_ROOT", "/host")
+
+				// Add nvidia-validations volume mount for driver-ready file
+				initContainer.VolumeMounts = append(initContainer.VolumeMounts, corev1.VolumeMount{
+					Name:      "nvidia-validations",
+					MountPath: "/run/nvidia/validations",
+					ReadOnly:  true,
+				})
+				break
+			}
+		}
+
+		// Add nvidia-validations volume
+		obj.Spec.Template.Spec.Volumes = append(obj.Spec.Template.Spec.Volumes, corev1.Volume{
+			Name: "nvidia-validations",
+			VolumeSource: corev1.VolumeSource{
+				HostPath: &corev1.HostPathVolumeSource{
+					Path: "/run/nvidia/validations",
+					Type: &[]corev1.HostPathType{corev1.HostPathDirectoryOrCreate}[0],
+				},
+			},
+		})
+	} else {
+		// Default behavior: update k8s-driver-manager initContainer
+		err := transformDriverManagerInitContainer(obj, &config.VFIOManager.DriverManager, nil)
+		if err != nil {
+			return fmt.Errorf("failed to transform k8s-driver-manager initContainer for VFIO Manager: %v", err)
+		}
 	}
 
 	// update image
@@ -2232,12 +2291,27 @@ func TransformSandboxValidator(obj *appsv1.DaemonSet, config *gpuv1.ClusterPolic
 		"vgpu-devices",
 	}
 
+	// Add driver validation when FabricManager.Mode is shared-nvswitch
+	if config.FabricManager.IsSharedNVSwitchMode() {
+		components = append(components, "driver")
+	}
+
 	for _, component := range components {
 		if err := TransformValidatorComponent(config, &obj.Spec.Template.Spec, component); err != nil {
 			validatorErr = errors.Join(validatorErr, err)
 		}
 	}
 
+	// Remove driver validation init container if NOT in shared-nvswitch mode
+	if !config.FabricManager.IsSharedNVSwitchMode() {
+		for i, initContainer := range obj.Spec.Template.Spec.InitContainers {
+			if initContainer.Name == "driver-validation" {
+				obj.Spec.Template.Spec.InitContainers = append(obj.Spec.Template.Spec.InitContainers[:i], obj.Spec.Template.Spec.InitContainers[i+1:]...)
+				break
+			}
+		}
+	}
+
 	if validatorErr != nil {
 		n.logger.Info("WARN: errors transforming the validator containers: %v", validatorErr)
 	}
@@ -3492,6 +3566,13 @@ func transformDriverContainer(obj *appsv1.DaemonSet, config *gpuv1.ClusterPolicy
 		}
 	}
 
+	// Set Fabric Manager environment variable if configured
+	if config.FabricManager.IsSharedNVSwitchMode() {
+		setContainerEnv(driverContainer, "FABRIC_MANAGER_FABRIC_MODE", "1")
+	} else if config.FabricManager.Mode == gpuv1.FabricModeFullPassthrough {
+		setContainerEnv(driverContainer, "FABRIC_MANAGER_FABRIC_MODE", "0")
+	}
+
 	// no further repo configuration required when using pre-compiled drivers, return here.
 	if config.Driver.UsePrecompiledDrivers() {
 		return nil
diff --git a/controllers/state_manager.go b/controllers/state_manager.go
index 4ea634ebe..badd54afc 100644
--- a/controllers/state_manager.go
+++ b/controllers/state_manager.go
@@ -42,6 +42,7 @@ const (
 	commonGPULabelValue                 = "true"
 	commonOperandsLabelKey              = "nvidia.com/gpu.deploy.operands"
 	commonOperandsLabelValue            = "true"
+	driverLabelKey                      = "nvidia.com/gpu.deploy.driver"
 	migManagerLabelKey                  = "nvidia.com/gpu.deploy.mig-manager"
 	migManagerLabelValue                = "true"
 	migCapableLabelKey                  = "nvidia.com/mig.capable"
@@ -116,9 +117,10 @@ var gpuNodeLabels = map[string]string{
 }
 
 type gpuWorkloadConfiguration struct {
-	config string
-	node   string
-	log    logr.Logger
+	config        string
+	node          string
+	log           logr.Logger
+	clusterPolicy *gpuv1.ClusterPolicy
 }
 
 // OpenShiftDriverToolkit contains the values required to deploy
@@ -322,6 +324,15 @@ func isValidWorkloadConfig(workloadConfig string) bool {
 	return ok
 }
 
+// shouldDeployDriverForVMPassthrough returns true if driver should be deployed for vm-passthrough workload
+// based on Fabric Manager configuration
+func (w *gpuWorkloadConfiguration) shouldDeployDriverForVMPassthrough() bool {
+	if w.config != gpuWorkloadConfigVMPassthrough || w.clusterPolicy == nil {
+		return false
+	}
+	return w.clusterPolicy.Spec.FabricManager.IsSharedNVSwitchMode()
+}
+
 // getWorkloadConfig returns the GPU workload configured for the node.
 // If an error occurs when searching for the workload config,
 // return defaultGPUWorkloadConfig.
@@ -382,6 +393,16 @@ func (w *gpuWorkloadConfiguration) addGPUStateLabels(labels map[string]string) b
 			modified = true
 		}
 	}
+
+	// Add conditional driver deployment for vm-passthrough workload
+	if w.shouldDeployDriverForVMPassthrough() {
+		if _, ok := labels[driverLabelKey]; !ok {
+			w.log.Info("Setting node label for driver deployment in vm-passthrough with Fabric Manager shared-nvswitch mode", "NodeName", w.node, "Label", driverLabelKey, "Value", "true")
+			labels[driverLabelKey] = "true"
+			modified = true
+		}
+	}
+
 	if w.config == gpuWorkloadConfigContainer && hasMIGCapableGPU(labels) && !hasMIGManagerLabel(labels) {
 		w.log.Info("Setting node label", "NodeName", w.node, "Label", migManagerLabelKey, "Value", migManagerLabelValue)
 		labels[migManagerLabelKey] = migManagerLabelValue
@@ -506,7 +527,7 @@ func (n *ClusterPolicyController) labelGPUNodes() (bool, int, error) {
 				"Error", err, "defaultGPUWorkloadConfig", defaultGPUWorkloadConfig)
 		}
 		n.logger.Info("GPU workload configuration", "NodeName", node.Name, "GpuWorkloadConfig", config)
-		gpuWorkloadConfig := &gpuWorkloadConfiguration{config, node.Name, n.logger}
+		gpuWorkloadConfig := &gpuWorkloadConfiguration{config, node.Name, n.logger, n.singleton}
 		if !hasCommonGPULabel(labels) && hasGPULabels(labels) {
 			n.logger.Info("Node has GPU(s)", "NodeName", node.Name)
 			// label the node with common Nvidia GPU label
diff --git a/controllers/state_manager_test.go b/controllers/state_manager_test.go
index bd1641e94..584e51902 100644
--- a/controllers/state_manager_test.go
+++ b/controllers/state_manager_test.go
@@ -19,6 +19,8 @@ package controllers
 import (
 	"testing"
 
+	"github.com/go-logr/logr"
+	"github.com/stretchr/testify/assert"
 	corev1 "k8s.io/api/core/v1"
 
 	gpuv1 "github.com/NVIDIA/gpu-operator/api/nvidia/v1"
@@ -186,3 +188,323 @@ func TestHasMIGCapableGPU(t *testing.T) {
 		}
 	}
 }
+
+func TestGpuWorkloadConfiguration_ShouldDeployDriverForVMPassthrough(t *testing.T) {
+	tests := []struct {
+		name          string
+		config        string
+		clusterPolicy *gpuv1.ClusterPolicy
+		expected      bool
+	}{
+		{
+			name:   "non-vm-passthrough workload",
+			config: gpuWorkloadConfigContainer,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeSharedNVSwitch,
+					},
+				},
+			},
+			expected: false,
+		},
+		{
+			name:          "vm-passthrough with nil cluster policy",
+			config:        gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: nil,
+			expected:      false,
+		},
+		{
+			name:   "vm-passthrough with shared-nvswitch mode",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeSharedNVSwitch,
+					},
+				},
+			},
+			expected: true,
+		},
+		{
+			name:   "vm-passthrough with full-passthrough mode",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeFullPassthrough,
+					},
+				},
+			},
+			expected: false,
+		},
+		{
+			name:   "vm-passthrough with default (empty) fabric manager mode",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: "", // empty defaults to full-passthrough
+					},
+				},
+			},
+			expected: false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			workloadConfig := &gpuWorkloadConfiguration{
+				config:        tt.config,
+				node:          "test-node",
+				log:           logr.Discard(),
+				clusterPolicy: tt.clusterPolicy,
+			}
+
+			result := workloadConfig.shouldDeployDriverForVMPassthrough()
+			assert.Equal(t, tt.expected, result)
+		})
+	}
+}
+
+func TestGpuWorkloadConfiguration_AddGPUStateLabels(t *testing.T) {
+	tests := []struct {
+		name           string
+		config         string
+		clusterPolicy  *gpuv1.ClusterPolicy
+		inputLabels    map[string]string
+		expectedLabels map[string]string
+		expectModified bool
+	}{
+		{
+			name:   "vm-passthrough with shared-nvswitch adds driver label",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeSharedNVSwitch,
+					},
+				},
+			},
+			inputLabels: map[string]string{},
+			expectedLabels: map[string]string{
+				"nvidia.com/gpu.deploy.sandbox-device-plugin": "true",
+				"nvidia.com/gpu.deploy.sandbox-validator":     "true",
+				"nvidia.com/gpu.deploy.vfio-manager":          "true",
+				"nvidia.com/gpu.deploy.kata-manager":          "true",
+				"nvidia.com/gpu.deploy.cc-manager":            "true",
+				"nvidia.com/gpu.deploy.driver":                "true",
+			},
+			expectModified: true,
+		},
+		{
+			name:   "vm-passthrough with full-passthrough does not add driver label",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeFullPassthrough,
+					},
+				},
+			},
+			inputLabels: map[string]string{},
+			expectedLabels: map[string]string{
+				"nvidia.com/gpu.deploy.sandbox-device-plugin": "true",
+				"nvidia.com/gpu.deploy.sandbox-validator":     "true",
+				"nvidia.com/gpu.deploy.vfio-manager":          "true",
+				"nvidia.com/gpu.deploy.kata-manager":          "true",
+				"nvidia.com/gpu.deploy.cc-manager":            "true",
+			},
+			expectModified: true,
+		},
+		{
+			name:   "container workload is not affected",
+			config: gpuWorkloadConfigContainer,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeSharedNVSwitch,
+					},
+				},
+			},
+			inputLabels: map[string]string{
+				"existing-label": "value",
+			},
+			expectedLabels: map[string]string{
+				"existing-label":                              "value",
+				"nvidia.com/gpu.deploy.driver":                "true",
+				"nvidia.com/gpu.deploy.gpu-feature-discovery": "true",
+				"nvidia.com/gpu.deploy.container-toolkit":     "true",
+				"nvidia.com/gpu.deploy.device-plugin":         "true",
+				"nvidia.com/gpu.deploy.dcgm":                  "true",
+				"nvidia.com/gpu.deploy.dcgm-exporter":         "true",
+				"nvidia.com/gpu.deploy.node-status-exporter":  "true",
+				"nvidia.com/gpu.deploy.operator-validator":    "true",
+			},
+			expectModified: true,
+		},
+		{
+			name:          "vm-passthrough with nil cluster policy does not add driver label",
+			config:        gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: nil,
+			inputLabels:   map[string]string{},
+			expectedLabels: map[string]string{
+				"nvidia.com/gpu.deploy.sandbox-device-plugin": "true",
+				"nvidia.com/gpu.deploy.sandbox-validator":     "true",
+				"nvidia.com/gpu.deploy.vfio-manager":          "true",
+				"nvidia.com/gpu.deploy.kata-manager":          "true",
+				"nvidia.com/gpu.deploy.cc-manager":            "true",
+			},
+			expectModified: true,
+		},
+		{
+			name:   "driver label already exists - no modification",
+			config: gpuWorkloadConfigVMPassthrough,
+			clusterPolicy: &gpuv1.ClusterPolicy{
+				Spec: gpuv1.ClusterPolicySpec{
+					FabricManager: gpuv1.FabricManagerSpec{
+						Mode: gpuv1.FabricModeSharedNVSwitch,
+					},
+				},
+			},
+			inputLabels: map[string]string{
+				"nvidia.com/gpu.deploy.sandbox-device-plugin": "true",
+				"nvidia.com/gpu.deploy.sandbox-validator":     "true",
+				"nvidia.com/gpu.deploy.vfio-manager":          "true",
+				"nvidia.com/gpu.deploy.kata-manager":          "true",
+				"nvidia.com/gpu.deploy.cc-manager":            "true",
+				"nvidia.com/gpu.deploy.driver":                "true",
+			},
+			expectedLabels: map[string]string{
+				"nvidia.com/gpu.deploy.sandbox-device-plugin": "true",
+				"nvidia.com/gpu.deploy.sandbox-validator":     "true",
+				"nvidia.com/gpu.deploy.vfio-manager":          "true",
+				"nvidia.com/gpu.deploy.kata-manager":          "true",
+				"nvidia.com/gpu.deploy.cc-manager":            "true",
+				"nvidia.com/gpu.deploy.driver":                "true",
+			},
+			expectModified: false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			workloadConfig := &gpuWorkloadConfiguration{
+				config:        tt.config,
+				node:          "test-node",
+				log:           logr.Discard(),
+				clusterPolicy: tt.clusterPolicy,
+			}
+
+			// Make a copy of input labels to avoid modifying the test data
+			labels := make(map[string]string)
+			for k, v := range tt.inputLabels {
+				labels[k] = v
+			}
+
+			modified := workloadConfig.addGPUStateLabels(labels)
+
+			assert.Equal(t, tt.expectModified, modified)
+			assert.Equal(t, tt.expectedLabels, labels)
+		})
+	}
+}
+
+func TestClusterPolicyValidateFabricManagerConfig(t *testing.T) {
+	tests := []struct {
+		name          string
+		clusterPolicy *gpuv1.ClusterPolicySpec
+		expectError   bool
+		errorMessage  string
+	}{
+		{
+			name: "valid configuration - vm-passthrough with shared-nvswitch and driver enabled",
+			clusterPolicy: &gpuv1.ClusterPolicySpec{
+				SandboxWorkloads: gpuv1.SandboxWorkloadsSpec{
+					DefaultWorkload: "vm-passthrough",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+				Driver: gpuv1.DriverSpec{
+					Enabled: newBoolPtr(true),
+				},
+			},
+			expectError: false,
+		},
+		{
+			name: "valid configuration - vm-passthrough with full-passthrough mode",
+			clusterPolicy: &gpuv1.ClusterPolicySpec{
+				SandboxWorkloads: gpuv1.SandboxWorkloadsSpec{
+					DefaultWorkload: "vm-passthrough",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeFullPassthrough,
+				},
+				Driver: gpuv1.DriverSpec{
+					Enabled: newBoolPtr(false),
+				},
+			},
+			expectError: false,
+		},
+		{
+			name: "valid configuration - container workload with any fabric manager mode",
+			clusterPolicy: &gpuv1.ClusterPolicySpec{
+				SandboxWorkloads: gpuv1.SandboxWorkloadsSpec{
+					DefaultWorkload: "container",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+				Driver: gpuv1.DriverSpec{
+					Enabled: newBoolPtr(false),
+				},
+			},
+			expectError: false,
+		},
+		{
+			name: "invalid configuration - vm-passthrough with shared-nvswitch but driver disabled",
+			clusterPolicy: &gpuv1.ClusterPolicySpec{
+				SandboxWorkloads: gpuv1.SandboxWorkloadsSpec{
+					DefaultWorkload: "vm-passthrough",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+				Driver: gpuv1.DriverSpec{
+					Enabled: newBoolPtr(false),
+				},
+			},
+			expectError:  true,
+			errorMessage: "driver must be enabled when using vm-passthrough with Fabric Manager Shared NVSwitch mode",
+		},
+		{
+			name: "valid configuration - vm-passthrough with shared-nvswitch and driver not specified (defaults to enabled)",
+			clusterPolicy: &gpuv1.ClusterPolicySpec{
+				SandboxWorkloads: gpuv1.SandboxWorkloadsSpec{
+					DefaultWorkload: "vm-passthrough",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+				Driver: gpuv1.DriverSpec{
+					// Enabled not specified, defaults to true
+				},
+			},
+			expectError: false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			err := tt.clusterPolicy.ValidateFabricManagerConfig()
+
+			if tt.expectError {
+				assert.Error(t, err)
+				assert.Contains(t, err.Error(), tt.errorMessage)
+			} else {
+				assert.NoError(t, err)
+			}
+		})
+	}
+}
diff --git a/controllers/transforms_test.go b/controllers/transforms_test.go
index cfab7da49..23ead1db0 100644
--- a/controllers/transforms_test.go
+++ b/controllers/transforms_test.go
@@ -1810,7 +1810,7 @@ func TestTransformVFIOManager(t *testing.T) {
 		expectedDaemonset Daemonset
 	}{
 		{
-			description: "transform vfio manager",
+			description: "transform vfio manager - normal mode",
 			daemonset: NewDaemonset().
 				WithContainer(corev1.Container{Name: "nvidia-vfio-manager"}).
 				WithContainer(corev1.Container{Name: "sidecar"}).
@@ -1833,6 +1833,9 @@ func TestTransformVFIOManager(t *testing.T) {
 						Env:             mockEnv,
 					},
 				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeFullPassthrough,
+				},
 			},
 			expectedDaemonset: NewDaemonset().
 				WithContainer(corev1.Container{
@@ -1855,6 +1858,80 @@ func TestTransformVFIOManager(t *testing.T) {
 				}).
 				WithPullSecret(secret),
 		},
+		{
+			description: "transform vfio manager - shared-nvswitch mode",
+			daemonset: NewDaemonset().
+				WithContainer(corev1.Container{Name: "nvidia-vfio-manager"}).
+				WithContainer(corev1.Container{Name: "sidecar"}).
+				WithInitContainer(corev1.Container{Name: "k8s-driver-manager"}),
+			clusterPolicySpec: &gpuv1.ClusterPolicySpec{
+				VFIOManager: gpuv1.VFIOManagerSpec{
+					Repository:       "nvcr.io/nvidia/cloud-native",
+					Image:            "vfio-pci-manager",
+					Version:          "v1.0.0",
+					ImagePullPolicy:  "IfNotPresent",
+					ImagePullSecrets: []string{secret},
+					Resources:        &gpuv1.ResourceRequirements{Limits: resources.Limits, Requests: resources.Requests},
+					Args:             []string{"--test-flag"},
+					Env:              mockEnv,
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+			},
+			expectedDaemonset: NewDaemonset().
+				WithContainer(corev1.Container{
+					Name:            "nvidia-vfio-manager",
+					Image:           "nvcr.io/nvidia/cloud-native/vfio-pci-manager:v1.0.0",
+					ImagePullPolicy: corev1.PullIfNotPresent,
+					Args:            []string{"--test-flag"},
+					Env:             mockEnvCore,
+					Resources:       resources,
+				}).
+				WithContainer(corev1.Container{
+					Name:      "sidecar",
+					Resources: resources,
+				}).
+				WithInitContainer(corev1.Container{
+					Name:            "vfio-device-unbind",
+					Image:           "nvcr.io/nvidia/cloud-native/vfio-pci-manager:v1.0.0",
+					ImagePullPolicy: corev1.PullIfNotPresent,
+					Command:         []string{"/bin/sh"},
+					Args: []string{"-c", `
+# For shared-nvswitch mode, wait for driver to be ready before unbinding
+echo "Shared NVSwitch mode detected, waiting for driver readiness..."
+until [ -f /run/nvidia/validations/driver-ready ]
+do
+  echo "waiting for the driver validations to be ready..."
+  sleep 5
+done
+
+set -o allexport
+cat /run/nvidia/validations/driver-ready
+. /run/nvidia/validations/driver-ready
+
+echo "Driver is ready, proceeding with device unbind"
+exec vfio-manage unbind --all`},
+					Env: []corev1.EnvVar{{Name: "HOST_ROOT", Value: "/host"}},
+					VolumeMounts: []corev1.VolumeMount{
+						{
+							Name:      "nvidia-validations",
+							MountPath: "/run/nvidia/validations",
+							ReadOnly:  true,
+						},
+					},
+				}).
+				WithVolume(corev1.Volume{
+					Name: "nvidia-validations",
+					VolumeSource: corev1.VolumeSource{
+						HostPath: &corev1.HostPathVolumeSource{
+							Path: "/run/nvidia/validations",
+							Type: &[]corev1.HostPathType{corev1.HostPathDirectoryOrCreate}[0],
+						},
+					},
+				}).
+				WithPullSecret(secret),
+		},
 	}
 
 	for _, tc := range testCases {
@@ -2612,6 +2689,104 @@ func TestTransformSandboxValidator(t *testing.T) {
 				WithPullSecret("pull-secret").
 				WithRuntimeClassName("nvidia"),
 		},
+		{
+			description: "fabric manager shared-nvswitch mode - driver validation should be preserved",
+			ds: NewDaemonset().
+				WithInitContainer(corev1.Container{Name: "driver-validation", Image: "old-image"}).
+				WithContainer(corev1.Container{
+					Name:  "dummy",
+					Image: "old-image",
+				}),
+			cpSpec: &gpuv1.ClusterPolicySpec{
+				Validator: gpuv1.ValidatorSpec{
+					Repository: "nvcr.io/nvidia/cloud-native",
+					Image:      "gpu-operator-validator",
+					Version:    "v1.0.0",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+			},
+			expectedDs: NewDaemonset().
+				WithInitContainer(corev1.Container{
+					Name:  "driver-validation",
+					Image: "nvcr.io/nvidia/cloud-native/gpu-operator-validator:v1.0.0",
+					SecurityContext: &corev1.SecurityContext{
+						RunAsUser: rootUID,
+					},
+				}).
+				WithContainer(corev1.Container{
+					Name:            "dummy",
+					Image:           "nvcr.io/nvidia/cloud-native/gpu-operator-validator:v1.0.0",
+					ImagePullPolicy: corev1.PullIfNotPresent,
+					SecurityContext: &corev1.SecurityContext{
+						RunAsUser: rootUID,
+					},
+				}),
+		},
+		{
+			description: "fabric manager full-passthrough mode - driver validation should be removed",
+			ds: NewDaemonset().
+				WithInitContainer(corev1.Container{Name: "driver-validation", Image: "old-image"}).
+				WithContainer(corev1.Container{
+					Name:  "dummy",
+					Image: "old-image",
+				}),
+			cpSpec: &gpuv1.ClusterPolicySpec{
+				Validator: gpuv1.ValidatorSpec{
+					Repository: "nvcr.io/nvidia/cloud-native",
+					Image:      "gpu-operator-validator",
+					Version:    "v1.0.0",
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeFullPassthrough,
+				},
+			},
+			expectedDs: func() Daemonset {
+				ds := NewDaemonset().
+					WithContainer(corev1.Container{
+						Name:            "dummy",
+						Image:           "nvcr.io/nvidia/cloud-native/gpu-operator-validator:v1.0.0",
+						ImagePullPolicy: corev1.PullIfNotPresent,
+						SecurityContext: &corev1.SecurityContext{
+							RunAsUser: rootUID,
+						},
+					})
+				// Set an empty InitContainers slice to match what happens after removal
+				ds.Spec.Template.Spec.InitContainers = []corev1.Container{}
+				return ds
+			}(),
+		},
+		{
+			description: "no fabric manager mode specified - driver validation should be removed",
+			ds: NewDaemonset().
+				WithInitContainer(corev1.Container{Name: "driver-validation", Image: "old-image"}).
+				WithContainer(corev1.Container{
+					Name:  "dummy",
+					Image: "old-image",
+				}),
+			cpSpec: &gpuv1.ClusterPolicySpec{
+				Validator: gpuv1.ValidatorSpec{
+					Repository: "nvcr.io/nvidia/cloud-native",
+					Image:      "gpu-operator-validator",
+					Version:    "v1.0.0",
+				},
+			},
+			expectedDs: func() Daemonset {
+				ds := NewDaemonset().
+					WithContainer(corev1.Container{
+						Name:            "dummy",
+						Image:           "nvcr.io/nvidia/cloud-native/gpu-operator-validator:v1.0.0",
+						ImagePullPolicy: corev1.PullIfNotPresent,
+						SecurityContext: &corev1.SecurityContext{
+							RunAsUser: rootUID,
+						},
+					})
+				// Set an empty InitContainers slice to match what happens after removal
+				ds.Spec.Template.Spec.InitContainers = []corev1.Container{}
+				return ds
+			}(),
+		},
 	}
 
 	for _, tc := range testCases {
@@ -2771,6 +2946,78 @@ func TestTransformDriver(t *testing.T) {
 			}),
 			errorExpected: false,
 		},
+		{
+			description: "driver with fabric manager shared-nvswitch mode",
+			ds: NewDaemonset().WithContainer(corev1.Container{Name: "nvidia-driver-ctr"}).
+				WithInitContainer(corev1.Container{Name: "k8s-driver-manager"}),
+			cpSpec: &gpuv1.ClusterPolicySpec{
+				Driver: gpuv1.DriverSpec{
+					Repository: "nvcr.io/nvidia",
+					Image:      "driver",
+					Version:    "570.172.08",
+					Manager: gpuv1.DriverManagerSpec{
+						Repository: "nvcr.io/nvidia/cloud-native",
+						Image:      "k8s-driver-manager",
+						Version:    "v0.8.0",
+					},
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeSharedNVSwitch,
+				},
+			},
+			client: mockClientMap["secret-env-client"],
+			expectedDs: NewDaemonset().WithContainer(corev1.Container{
+				Name:            "nvidia-driver-ctr",
+				Image:           "nvcr.io/nvidia/driver:570.172.08-",
+				ImagePullPolicy: corev1.PullIfNotPresent,
+				Env: []corev1.EnvVar{
+					{
+						Name:  "FABRIC_MANAGER_FABRIC_MODE",
+						Value: "1",
+					},
+				},
+			}).WithInitContainer(corev1.Container{
+				Name:  "k8s-driver-manager",
+				Image: "nvcr.io/nvidia/cloud-native/k8s-driver-manager:v0.8.0",
+			}),
+			errorExpected: false,
+		},
+		{
+			description: "driver with fabric manager full-passthrough mode",
+			ds: NewDaemonset().WithContainer(corev1.Container{Name: "nvidia-driver-ctr"}).
+				WithInitContainer(corev1.Container{Name: "k8s-driver-manager"}),
+			cpSpec: &gpuv1.ClusterPolicySpec{
+				Driver: gpuv1.DriverSpec{
+					Repository: "nvcr.io/nvidia",
+					Image:      "driver",
+					Version:    "570.172.08",
+					Manager: gpuv1.DriverManagerSpec{
+						Repository: "nvcr.io/nvidia/cloud-native",
+						Image:      "k8s-driver-manager",
+						Version:    "v0.8.0",
+					},
+				},
+				FabricManager: gpuv1.FabricManagerSpec{
+					Mode: gpuv1.FabricModeFullPassthrough,
+				},
+			},
+			client: mockClientMap["secret-env-client"],
+			expectedDs: NewDaemonset().WithContainer(corev1.Container{
+				Name:            "nvidia-driver-ctr",
+				Image:           "nvcr.io/nvidia/driver:570.172.08-",
+				ImagePullPolicy: corev1.PullIfNotPresent,
+				Env: []corev1.EnvVar{
+					{
+						Name:  "FABRIC_MANAGER_FABRIC_MODE",
+						Value: "0",
+					},
+				},
+			}).WithInitContainer(corev1.Container{
+				Name:  "k8s-driver-manager",
+				Image: "nvcr.io/nvidia/cloud-native/k8s-driver-manager:v0.8.0",
+			}),
+			errorExpected: false,
+		},
 	}
 
 	for _, tc := range testCases {
diff --git a/deployments/gpu-operator/crds/nvidia.com_clusterpolicies.yaml b/deployments/gpu-operator/crds/nvidia.com_clusterpolicies.yaml
index 379e98d87..b8a6ad74a 100644
--- a/deployments/gpu-operator/crds/nvidia.com_clusterpolicies.yaml
+++ b/deployments/gpu-operator/crds/nvidia.com_clusterpolicies.yaml
@@ -1057,6 +1057,17 @@ spec:
                         type: string
                     type: object
                 type: object
+              fabricManager:
+                description: FabricManager component spec
+                properties:
+                  mode:
+                    default: full-passthrough
+                    description: Mode indicates the Fabric Manager mode
+                    enum:
+                    - full-passthrough
+                    - shared-nvswitch
+                    type: string
+                type: object
               gdrcopy:
                 description: GDRCopy component spec
                 properties:
diff --git a/internal/state/testdata/golden/driver-additional-configs.yaml b/internal/state/testdata/golden/driver-additional-configs.yaml
index 88d0e7a09..f150861d2 100644
--- a/internal/state/testdata/golden/driver-additional-configs.yaml
+++ b/internal/state/testdata/golden/driver-additional-configs.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-full-spec.yaml b/internal/state/testdata/golden/driver-full-spec.yaml
index 2397f42fb..0e9a01b81 100644
--- a/internal/state/testdata/golden/driver-full-spec.yaml
+++ b/internal/state/testdata/golden/driver-full-spec.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-gdrcopy-openshift.yaml b/internal/state/testdata/golden/driver-gdrcopy-openshift.yaml
index 4b1a6f85b..fda787c54 100644
--- a/internal/state/testdata/golden/driver-gdrcopy-openshift.yaml
+++ b/internal/state/testdata/golden/driver-gdrcopy-openshift.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-gdrcopy.yaml b/internal/state/testdata/golden/driver-gdrcopy.yaml
index cd56e8a93..0e1232f16 100644
--- a/internal/state/testdata/golden/driver-gdrcopy.yaml
+++ b/internal/state/testdata/golden/driver-gdrcopy.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-gds.yaml b/internal/state/testdata/golden/driver-gds.yaml
index b14b03af3..6d7b523b6 100644
--- a/internal/state/testdata/golden/driver-gds.yaml
+++ b/internal/state/testdata/golden/driver-gds.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-minimal.yaml b/internal/state/testdata/golden/driver-minimal.yaml
index 890a40cee..265ce4d4b 100644
--- a/internal/state/testdata/golden/driver-minimal.yaml
+++ b/internal/state/testdata/golden/driver-minimal.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-openshift-drivertoolkit.yaml b/internal/state/testdata/golden/driver-openshift-drivertoolkit.yaml
index f979ac36e..1009c10d9 100644
--- a/internal/state/testdata/golden/driver-openshift-drivertoolkit.yaml
+++ b/internal/state/testdata/golden/driver-openshift-drivertoolkit.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-precompiled.yaml b/internal/state/testdata/golden/driver-precompiled.yaml
index e6a37c48d..85c126f7e 100644
--- a/internal/state/testdata/golden/driver-precompiled.yaml
+++ b/internal/state/testdata/golden/driver-precompiled.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-rdma-hostmofed.yaml b/internal/state/testdata/golden/driver-rdma-hostmofed.yaml
index e29367438..292808d84 100644
--- a/internal/state/testdata/golden/driver-rdma-hostmofed.yaml
+++ b/internal/state/testdata/golden/driver-rdma-hostmofed.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-rdma.yaml b/internal/state/testdata/golden/driver-rdma.yaml
index 2efe95107..36ebfb36c 100644
--- a/internal/state/testdata/golden/driver-rdma.yaml
+++ b/internal/state/testdata/golden/driver-rdma.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-secret-env.yaml b/internal/state/testdata/golden/driver-secret-env.yaml
index 8b2c277a5..ab767d741 100644
--- a/internal/state/testdata/golden/driver-secret-env.yaml
+++ b/internal/state/testdata/golden/driver-secret-env.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-vgpu-host-manager-openshift.yaml b/internal/state/testdata/golden/driver-vgpu-host-manager-openshift.yaml
index 7e61f189f..1bc4ccd25 100644
--- a/internal/state/testdata/golden/driver-vgpu-host-manager-openshift.yaml
+++ b/internal/state/testdata/golden/driver-vgpu-host-manager-openshift.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-vgpu-host-manager.yaml b/internal/state/testdata/golden/driver-vgpu-host-manager.yaml
index 6df18ad31..072052627 100644
--- a/internal/state/testdata/golden/driver-vgpu-host-manager.yaml
+++ b/internal/state/testdata/golden/driver-vgpu-host-manager.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-vgpu-licensing-secret.yaml b/internal/state/testdata/golden/driver-vgpu-licensing-secret.yaml
index 66e04a502..ec0e41a5b 100644
--- a/internal/state/testdata/golden/driver-vgpu-licensing-secret.yaml
+++ b/internal/state/testdata/golden/driver-vgpu-licensing-secret.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/internal/state/testdata/golden/driver-vgpu-licensing.yaml b/internal/state/testdata/golden/driver-vgpu-licensing.yaml
index 6d95d1c09..dbb26b457 100644
--- a/internal/state/testdata/golden/driver-vgpu-licensing.yaml
+++ b/internal/state/testdata/golden/driver-vgpu-licensing.yaml
@@ -106,8 +106,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"
diff --git a/manifests/state-driver/0400_configmap.yaml b/manifests/state-driver/0400_configmap.yaml
index 55ba3df55..34802a6d5 100644
--- a/manifests/state-driver/0400_configmap.yaml
+++ b/manifests/state-driver/0400_configmap.yaml
@@ -26,8 +26,14 @@ data:
     fi
 
     if ! nvidia-smi; then
-      echo "nvidia-smi failed"
-      exit 1
+      # For vm-passthrough with shared-nvswitch mode, nvidia-smi may fail due to unbound devices
+      # Fall back to checking if nvidia module is loaded when FABRIC_MANAGER_FABRIC_MODE=1
+      if [ "${FABRIC_MANAGER_FABRIC_MODE:-}" = "1" ] && lsmod | grep -q "^nvidia "; then
+        echo "nvidia-smi failed but nvidia module is loaded (vm-passthrough with shared-nvswitch mode)"
+      else
+        echo "nvidia-smi failed"
+        exit 1
+      fi
     fi
 
     GPU_DIRECT_RDMA_ENABLED="${GPU_DIRECT_RDMA_ENABLED:-false}"