diff --git a/.env.example b/.env.example
index 2e156267..c92d5111 100644
--- a/.env.example
+++ b/.env.example
@@ -19,6 +19,8 @@ COHERE_API_KEY=<COHERE_API_KEY>
 # settings for local models
 LOCAL_MODEL=llama3.1:8b
 LOCAL_MODEL_EMBEDDINGS=nomic-embed-text
+LOCAL_EMBEDDING_MODEL_DIM = 768
+LOCAL_EMBEDDING_MODEL_MAX_TOKENS = 8192
 
 # settings for GraphRAG
 GRAPHRAG_API_KEY=<YOUR_OPENAI_KEY>
diff --git a/README.md b/README.md
index c34eff67..063ea7ad 100644
--- a/README.md
+++ b/README.md
@@ -170,7 +170,22 @@ documents and developers who want to build their own RAG pipeline.
 ### Setup GraphRAG
 
 > [!NOTE]
-> Currently GraphRAG feature only works with OpenAI or Ollama API.
+> Official MS GraphRAG indexing only works with OpenAI or Ollama API.
+> We recommend most users to use NanoGraphRAG implementation for straightforward integration with Kotaemon.
+
+<details>
+
+<summary>Setup Nano GRAPHRAG</summary>
+
+- Install nano-GraphRAG: `pip install nano-graphrag`
+- Launch Kotaemon with `USE_NANO_GRAPHRAG=true` environment variable.
+- Set your default LLM & Embedding models in Resources setting and it will be recognized automatically from NanoGraphRAG.
+
+</details>
+
+<details>
+
+<summary>Setup MS GRAPHRAG</summary>
 
 - **Non-Docker Installation**: If you are not using Docker, install GraphRAG with the following command:
 
@@ -181,6 +196,8 @@ documents and developers who want to build their own RAG pipeline.
 - **Setting Up API KEY**: To use the GraphRAG retriever feature, ensure you set the `GRAPHRAG_API_KEY` environment variable. You can do this directly in your environment or by adding it to a `.env` file.
 - **Using Local Models and Custom Settings**: If you want to use GraphRAG with local models (like `Ollama`) or customize the default LLM and other configurations, set the `USE_CUSTOMIZED_GRAPHRAG_SETTING` environment variable to true. Then, adjust your settings in the `settings.yaml.example` file.
 
+</details>
+
 ### Setup Local Models (for local/private RAG)
 
 See [Local model setup](docs/local_model.md).
diff --git a/flowsettings.py b/flowsettings.py
index ecc75803..1fac0339 100644
--- a/flowsettings.py
+++ b/flowsettings.py
@@ -284,14 +284,20 @@
     },
 }
 
-
+USE_NANO_GRAPHRAG = config("USE_NANO_GRAPHRAG", default=False, cast=bool)
+GRAPHRAG_INDEX_TYPE = (
+    "ktem.index.file.graph.GraphRAGIndex"
+    if not USE_NANO_GRAPHRAG
+    else "ktem.index.file.graph.NanoGraphRAGIndex"
+)
 KH_INDEX_TYPES = [
     "ktem.index.file.FileIndex",
-    "ktem.index.file.graph.GraphRAGIndex",
+    GRAPHRAG_INDEX_TYPE,
 ]
-KH_INDICES = [
+
+GRAPHRAG_INDEX = (
     {
-        "name": "File",
+        "name": "GraphRAG",
         "config": {
             "supported_file_types": (
                 ".png, .jpeg, .jpg, .tiff, .tif, .pdf, .xls, .xlsx, .doc, .docx, "
@@ -299,10 +305,25 @@
             ),
             "private": False,
         },
-        "index_type": "ktem.index.file.FileIndex",
-    },
+        "index_type": "ktem.index.file.graph.GraphRAGIndex",
+    }
+    if not USE_NANO_GRAPHRAG
+    else {
+        "name": "NanoGraphRAG",
+        "config": {
+            "supported_file_types": (
+                ".png, .jpeg, .jpg, .tiff, .tif, .pdf, .xls, .xlsx, .doc, .docx, "
+                ".pptx, .csv, .html, .mhtml, .txt, .md, .zip"
+            ),
+            "private": False,
+        },
+        "index_type": "ktem.index.file.graph.NanoGraphRAGIndex",
+    }
+)
+
+KH_INDICES = [
     {
-        "name": "GraphRAG",
+        "name": "File",
         "config": {
             "supported_file_types": (
                 ".png, .jpeg, .jpg, .tiff, .tif, .pdf, .xls, .xlsx, .doc, .docx, "
@@ -310,6 +331,7 @@
             ),
             "private": False,
         },
-        "index_type": "ktem.index.file.graph.GraphRAGIndex",
+        "index_type": "ktem.index.file.FileIndex",
     },
+    GRAPHRAG_INDEX,
 ]
diff --git a/libs/ktem/ktem/index/file/graph/__init__.py b/libs/ktem/ktem/index/file/graph/__init__.py
index 194be6f6..e2836f70 100644
--- a/libs/ktem/ktem/index/file/graph/__init__.py
+++ b/libs/ktem/ktem/index/file/graph/__init__.py
@@ -1,3 +1,4 @@
 from .graph_index import GraphRAGIndex
+from .nano_graph_index import NanoGraphRAGIndex
 
-__all__ = ["GraphRAGIndex"]
+__all__ = ["GraphRAGIndex", "NanoGraphRAGIndex"]
diff --git a/libs/ktem/ktem/index/file/graph/nano_graph_index.py b/libs/ktem/ktem/index/file/graph/nano_graph_index.py
new file mode 100644
index 00000000..d6ec1317
--- /dev/null
+++ b/libs/ktem/ktem/index/file/graph/nano_graph_index.py
@@ -0,0 +1,26 @@
+from typing import Any
+
+from ..base import BaseFileIndexRetriever
+from .graph_index import GraphRAGIndex
+from .nano_pipelines import NanoGraphRAGIndexingPipeline, NanoGraphRAGRetrieverPipeline
+
+
+class NanoGraphRAGIndex(GraphRAGIndex):
+    def _setup_indexing_cls(self):
+        self._indexing_pipeline_cls = NanoGraphRAGIndexingPipeline
+
+    def _setup_retriever_cls(self):
+        self._retriever_pipeline_cls = [NanoGraphRAGRetrieverPipeline]
+
+    def get_retriever_pipelines(
+        self, settings: dict, user_id: int, selected: Any = None
+    ) -> list["BaseFileIndexRetriever"]:
+        _, file_ids, _ = selected
+        retrievers = [
+            NanoGraphRAGRetrieverPipeline(
+                file_ids=file_ids,
+                Index=self._resources["Index"],
+            )
+        ]
+
+        return retrievers
diff --git a/libs/ktem/ktem/index/file/graph/nano_pipelines.py b/libs/ktem/ktem/index/file/graph/nano_pipelines.py
new file mode 100644
index 00000000..de3bce42
--- /dev/null
+++ b/libs/ktem/ktem/index/file/graph/nano_pipelines.py
@@ -0,0 +1,380 @@
+import asyncio
+import glob
+import logging
+import os
+import re
+from pathlib import Path
+from typing import Generator
+
+import numpy as np
+import pandas as pd
+from ktem.db.models import engine
+from ktem.embeddings.manager import embedding_models_manager as embeddings
+from ktem.llms.manager import llms
+from sqlalchemy.orm import Session
+from theflow.settings import settings
+
+from kotaemon.base import Document, Param, RetrievedDocument
+from kotaemon.base.schema import AIMessage, HumanMessage, SystemMessage
+
+from ..pipelines import BaseFileIndexRetriever
+from .pipelines import GraphRAGIndexingPipeline
+from .visualize import create_knowledge_graph, visualize_graph
+
+try:
+    from nano_graphrag import GraphRAG, QueryParam
+    from nano_graphrag._op import (
+        _find_most_related_community_from_entities,
+        _find_most_related_edges_from_entities,
+        _find_most_related_text_unit_from_entities,
+    )
+    from nano_graphrag._utils import EmbeddingFunc
+    from nano_graphrag.base import (
+        BaseGraphStorage,
+        BaseKVStorage,
+        BaseVectorStorage,
+        CommunitySchema,
+        TextChunkSchema,
+    )
+
+except ImportError:
+    print(
+        (
+            "Nano-GraphRAG dependencies not installed. "
+            "Try `pip install nano-graphrag` to install. "
+            "Nano-GraphRAG retriever pipeline will not work properly."
+        )
+    )
+
+
+logging.getLogger("nano-graphrag").setLevel(logging.INFO)
+
+
+filestorage_path = Path(settings.KH_FILESTORAGE_PATH) / "nano_graphrag"
+filestorage_path.mkdir(parents=True, exist_ok=True)
+
+
+def get_llm_func(model):
+    async def llm_func(
+        prompt, system_prompt=None, history_messages=[], **kwargs
+    ) -> str:
+        input_messages = [SystemMessage(text=system_prompt)] if system_prompt else []
+
+        if history_messages:
+            for msg in history_messages:
+                if msg.get("role") == "user":
+                    input_messages.append(HumanMessage(text=msg["content"]))
+                else:
+                    input_messages.append(AIMessage(text=msg["content"]))
+
+        input_messages.append(HumanMessage(text=prompt))
+        output = model(input_messages).text
+
+        print("-" * 50)
+        print(output, "\n", "-" * 50)
+
+        return output
+
+    return llm_func
+
+
+def get_embedding_func(model):
+    async def embedding_func(texts: list[str]) -> np.ndarray:
+        outputs = model(texts)
+        embedding_outputs = np.array([doc.embedding for doc in outputs])
+
+        return embedding_outputs
+
+    return embedding_func
+
+
+def get_default_models_wrapper():
+    # setup model functions
+    default_embedding = embeddings.get_default()
+    default_embedding_dim = len(default_embedding(["Hi"])[0].embedding)
+    embedding_func = EmbeddingFunc(
+        embedding_dim=default_embedding_dim,
+        max_token_size=8192,
+        func=get_embedding_func(default_embedding),
+    )
+    print("GraphRAG embedding dim", default_embedding_dim)
+
+    default_llm = llms.get_default()
+    llm_func = get_llm_func(default_llm)
+
+    return llm_func, embedding_func, default_llm, default_embedding
+
+
+def prepare_graph_index_path(graph_id: str):
+    root_path = Path(filestorage_path) / graph_id
+    input_path = root_path / "input"
+
+    return root_path, input_path
+
+
+def list_of_list_to_df(data: list[list]) -> pd.DataFrame:
+    df = pd.DataFrame(data[1:], columns=data[0])
+    return df
+
+
+def clean_quote(input: str) -> str:
+    return re.sub(r"[\"']", "", input)
+
+
+async def nano_graph_rag_build_local_query_context(
+    graph_func,
+    query,
+    query_param: QueryParam,
+):
+    knowledge_graph_inst: BaseGraphStorage = graph_func.chunk_entity_relation_graph
+    entities_vdb: BaseVectorStorage = graph_func.entities_vdb
+    community_reports: BaseKVStorage[CommunitySchema] = graph_func.community_reports
+    text_chunks_db: BaseKVStorage[TextChunkSchema] = graph_func.text_chunks
+
+    results = await entities_vdb.query(query, top_k=query_param.top_k)
+    if not len(results):
+        raise ValueError("No results found")
+
+    node_datas = await asyncio.gather(
+        *[knowledge_graph_inst.get_node(r["entity_name"]) for r in results]
+    )
+    node_degrees = await asyncio.gather(
+        *[knowledge_graph_inst.node_degree(r["entity_name"]) for r in results]
+    )
+    node_datas = [
+        {**n, "entity_name": k["entity_name"], "rank": d}
+        for k, n, d in zip(results, node_datas, node_degrees)
+        if n is not None
+    ]
+    use_communities = await _find_most_related_community_from_entities(
+        node_datas, query_param, community_reports
+    )
+    use_text_units = await _find_most_related_text_unit_from_entities(
+        node_datas, query_param, text_chunks_db, knowledge_graph_inst
+    )
+    use_relations = await _find_most_related_edges_from_entities(
+        node_datas, query_param, knowledge_graph_inst
+    )
+    entites_section_list = [["id", "entity", "type", "description", "rank"]]
+    for i, n in enumerate(node_datas):
+        entites_section_list.append(
+            [
+                str(i),
+                clean_quote(n["entity_name"]),
+                n.get("entity_type", "UNKNOWN"),
+                clean_quote(n.get("description", "UNKNOWN")),
+                n["rank"],
+            ]
+        )
+    entities_df = list_of_list_to_df(entites_section_list)
+
+    relations_section_list = [
+        ["id", "source", "target", "description", "weight", "rank"]
+    ]
+    for i, e in enumerate(use_relations):
+        relations_section_list.append(
+            [
+                str(i),
+                clean_quote(e["src_tgt"][0]),
+                clean_quote(e["src_tgt"][1]),
+                clean_quote(e["description"]),
+                e["weight"],
+                e["rank"],
+            ]
+        )
+    relations_df = list_of_list_to_df(relations_section_list)
+
+    communities_section_list = [["id", "content"]]
+    for i, c in enumerate(use_communities):
+        communities_section_list.append([str(i), c["report_string"]])
+    communities_df = list_of_list_to_df(communities_section_list)
+
+    text_units_section_list = [["id", "content"]]
+    for i, t in enumerate(use_text_units):
+        text_units_section_list.append([str(i), t["content"]])
+    sources_df = list_of_list_to_df(text_units_section_list)
+
+    return entities_df, relations_df, communities_df, sources_df
+
+
+def build_graphrag(working_dir, llm_func, embedding_func):
+    graphrag_func = GraphRAG(
+        working_dir=working_dir,
+        best_model_func=llm_func,
+        cheap_model_func=llm_func,
+        embedding_func=embedding_func,
+        embedding_func_max_async=4,
+    )
+    return graphrag_func
+
+
+class NanoGraphRAGIndexingPipeline(GraphRAGIndexingPipeline):
+    """GraphRAG specific indexing pipeline"""
+
+    def call_graphrag_index(self, graph_id: str, docs: list[Document]):
+        _, input_path = prepare_graph_index_path(graph_id)
+        input_path.mkdir(parents=True, exist_ok=True)
+
+        (
+            llm_func,
+            embedding_func,
+            default_llm,
+            default_embedding,
+        ) = get_default_models_wrapper()
+        print(
+            f"Indexing GraphRAG with LLM {default_llm} "
+            f"and Embedding {default_embedding}..."
+        )
+
+        all_docs = [
+            doc.text for doc in docs if doc.metadata.get("type", "text") == "text"
+        ]
+
+        yield Document(
+            channel="debug",
+            text="[GraphRAG] Creating index... This can take a long time.",
+        )
+
+        # remove all .json files in the input_path directory (previous cache)
+        json_files = glob.glob(f"{input_path}/*.json")
+        for json_file in json_files:
+            os.remove(json_file)
+
+        # indexing
+        graphrag_func = build_graphrag(
+            input_path,
+            llm_func=llm_func,
+            embedding_func=embedding_func,
+        )
+        # output must be contain: Loaded graph from
+        # ..input/graph_chunk_entity_relation.graphml with xxx nodes, xxx edges
+        graphrag_func.insert(all_docs)
+
+        yield Document(
+            channel="debug",
+            text="[GraphRAG] Indexing finished.",
+        )
+
+    def stream(
+        self, file_paths: str | Path | list[str | Path], reindex: bool = False, **kwargs
+    ) -> Generator[
+        Document, None, tuple[list[str | None], list[str | None], list[Document]]
+    ]:
+        file_ids, errors, all_docs = yield from super().stream(
+            file_paths, reindex=reindex, **kwargs
+        )
+
+        return file_ids, errors, all_docs
+
+
+class NanoGraphRAGRetrieverPipeline(BaseFileIndexRetriever):
+    """GraphRAG specific retriever pipeline"""
+
+    Index = Param(help="The SQLAlchemy Index table")
+    file_ids: list[str] = []
+
+    def _build_graph_search(self):
+        file_id = self.file_ids[0]
+
+        # retrieve the graph_id from the index
+        with Session(engine) as session:
+            graph_id = (
+                session.query(self.Index.target_id)
+                .filter(self.Index.source_id == file_id)
+                .filter(self.Index.relation_type == "graph")
+                .first()
+            )
+            graph_id = graph_id[0] if graph_id else None
+            assert graph_id, f"GraphRAG index not found for file_id: {file_id}"
+
+        _, input_path = prepare_graph_index_path(graph_id)
+        input_path.mkdir(parents=True, exist_ok=True)
+
+        llm_func, embedding_func, _, _ = get_default_models_wrapper()
+        graphrag_func = build_graphrag(
+            input_path,
+            llm_func=llm_func,
+            embedding_func=embedding_func,
+        )
+        query_params = QueryParam(mode="local", only_need_context=True)
+
+        return graphrag_func, query_params
+
+    def _to_document(self, header: str, context_text: str) -> RetrievedDocument:
+        return RetrievedDocument(
+            text=context_text,
+            metadata={
+                "file_name": header,
+                "type": "table",
+                "llm_trulens_score": 1.0,
+            },
+            score=1.0,
+        )
+
+    def format_context_records(
+        self, entities, relationships, reports, sources
+    ) -> list[RetrievedDocument]:
+        docs = []
+        context: str = ""
+
+        # entities current parsing error
+        header = "<b>Entities</b>\n"
+        context = entities[["entity", "description"]].to_markdown(index=False)
+        docs.append(self._to_document(header, context))
+
+        header = "\n<b>Relationships</b>\n"
+        context = relationships[["source", "target", "description"]].to_markdown(
+            index=False
+        )
+        docs.append(self._to_document(header, context))
+
+        header = "\n<b>Reports</b>\n"
+        context = ""
+        for _, row in reports.iterrows():
+            title, content = row["id"], row["content"]  # not contain title
+            context += f"\n\n<h5>Report <b>{title}</b></h5>\n"
+            context += content
+        docs.append(self._to_document(header, context))
+
+        header = "\n<b>Sources</b>\n"
+        context = ""
+        for _, row in sources.iterrows():
+            title, content = row["id"], row["content"]
+            context += f"\n\n<h5>Source <b>#{title}</b></h5>\n"
+            context += content
+        docs.append(self._to_document(header, context))
+
+        return docs
+
+    def plot_graph(self, relationships):
+        G = create_knowledge_graph(relationships)
+        plot = visualize_graph(G)
+        return plot
+
+    def run(
+        self,
+        text: str,
+    ) -> list[RetrievedDocument]:
+        if not self.file_ids:
+            return []
+
+        graphrag_func, query_params = self._build_graph_search()
+        entities, relationships, reports, sources = asyncio.run(
+            nano_graph_rag_build_local_query_context(graphrag_func, text, query_params)
+        )
+
+        documents = self.format_context_records(
+            entities, relationships, reports, sources
+        )
+        plot = self.plot_graph(relationships)
+
+        return documents + [
+            RetrievedDocument(
+                text="",
+                metadata={
+                    "file_name": "GraphRAG",
+                    "type": "plot",
+                    "data": plot,
+                },
+            ),
+        ]
diff --git a/libs/ktem/ktem/index/file/graph/pipelines.py b/libs/ktem/ktem/index/file/graph/pipelines.py
index 4d356a64..42cfe6dd 100644
--- a/libs/ktem/ktem/index/file/graph/pipelines.py
+++ b/libs/ktem/ktem/index/file/graph/pipelines.py
@@ -38,6 +38,7 @@
     print(
         (
             "GraphRAG dependencies not installed. "
+            "Try `pip install graphrag future` to install. "
             "GraphRAG retriever pipeline will not work properly."
         )
     )
@@ -97,7 +98,11 @@ def write_docs_to_files(self, graph_id: str, docs: list[Document]):
 
         return root_path
 
-    def call_graphrag_index(self, input_path: str):
+    def call_graphrag_index(self, graph_id: str, all_docs: list[Document]):
+        # call GraphRAG index with docs and graph_id
+        input_path = self.write_docs_to_files(graph_id, all_docs)
+        input_path = str(input_path.absolute())
+
         # Construct the command
         command = [
             "python",
@@ -147,8 +152,7 @@ def stream(
         # assign graph_id to file_ids
         graph_id = self.store_file_id_with_graph_id(file_ids)
         # call GraphRAG index with docs and graph_id
-        graph_index_path = self.write_docs_to_files(graph_id, all_docs)
-        yield from self.call_graphrag_index(str(graph_index_path.absolute()))
+        yield from self.call_graphrag_index(graph_id, all_docs)
 
         return file_ids, errors, all_docs