diff --git a/notebooks/writing_a_trace_transform_cpu_offloading.ipynb b/notebooks/writing_a_trace_transform_cpu_offloading.ipynb
index f692a9f40e..86d8263769 100644
--- a/notebooks/writing_a_trace_transform_cpu_offloading.ipynb
+++ b/notebooks/writing_a_trace_transform_cpu_offloading.ipynb
@@ -525,7 +525,7 @@
     "\n",
     "# Verify that saved tensors are on CPU.\n",
     "saved_tensor_devices = set()\n",
-    "for t in actual.grad_fn.next_functions[0][0].saved_tensors:\n",
+    "for t in actual.grad_fn.saved_tensors:\n",
     "    saved_tensor_devices.add(str(t.device))\n",
     "\n",
     "assert \"cpu\" in saved_tensor_devices  # Verify that we actually have saved tensors on CPU\n",
diff --git a/thunder/executors/torch_autograd.py b/thunder/executors/torch_autograd.py
index 0f3faeaf4a..8a9827ca30 100644
--- a/thunder/executors/torch_autograd.py
+++ b/thunder/executors/torch_autograd.py
@@ -105,16 +105,18 @@ def detach_if_tensor(t):
 
         saved_tensors = tuple(map(detach_if_tensor, saved_tensors))
 
-        # We must save tensors using ctx.save_for_backward
-        ctx.save_for_backward(*saved_tensors)
-
         ctx.side_channel = side_channel
         if side_channel is not None:
             assert not side_channel
             ctx.side_channel["fw"] = flat_output
-
+            # We must save tensors using ctx.save_for_backward but
+            # we want to save the tensors in the function returning the outputs to avoid memory leaks
+            # (basically ref-cycles via output.grad_fn.next_functions[0, 0].saved_tensors[0] == output
+            # PyTorch autograd handles this gracefully for output.grad_fn.saved_tensors)
+            ctx.side_channel["tensors_to_save"] = saved_tensors
             return torch.randn(1, device="meta", requires_grad=True)
         else:
+            ctx.save_for_backward(*saved_tensors)
             return flat_output
 
     # NOTE: If `torch.autograd.function.once_differentiable` is to be removed,
@@ -125,25 +127,26 @@ def detach_if_tensor(t):
     def backward(ctx, *raw_args):
         if ctx.side_channel is not None:
             args = ctx.side_channel.pop("bw")
+            saved_tensors_list = ctx.side_channel.pop("saved_tensors")
             assert not ctx.side_channel
         else:
             args = list(raw_args)
-        # ctx.saved_tensors is a tuple of tensors saved in forward. Our compiled
-        # backward is a really long function that takes all the tensors saved in
-        # forward and gradually uses them to compute the gradients of the
-        # inputs. Unfortunately, Python holds a reference to all arguments of a
-        # function until the function returns, even if we delete the variable
-        # "saved_tensors" inside the function, the tensors will still be held in
-        # memory until the function returns. Fortunately, Python passes mutable
-        # objects by reference, so we can just replace the saved_tensors with an
-        # empty list and the memory will be freed immediately. We must also
-        # delete the reference to the saved_tensors in the context, otherwise
-        # the memory will be freed only when the context is deleted.
-        saved_tensors_list = list(ctx.saved_tensors)  # Make a copy as we will mutate it
-
-        # This is an undocumented API, but it's the only way to clear the
-        # reference to the saved tensors in the context
-        ctx.maybe_clear_saved_tensors()  # Delete the reference to all saved tensors in the context
+            # ctx.saved_tensors is a tuple of tensors saved in forward. Our compiled
+            # backward is a really long function that takes all the tensors saved in
+            # forward and gradually uses them to compute the gradients of the
+            # inputs. Unfortunately, Python holds a reference to all arguments of a
+            # function until the function returns, even if we delete the variable
+            # "saved_tensors" inside the function, the tensors will still be held in
+            # memory until the function returns. Fortunately, Python passes mutable
+            # objects by reference, so we can just replace the saved_tensors with an
+            # empty list and the memory will be freed immediately. We must also
+            # delete the reference to the saved_tensors in the context, otherwise
+            # the memory will be freed only when the context is deleted.
+            saved_tensors_list = list(ctx.saved_tensors)  # Make a copy as we will mutate it
+
+            # This is an undocumented API, but it's the only way to clear the
+            # reference to the saved tensors in the context
+            ctx.maybe_clear_saved_tensors()  # Delete the reference to all saved tensors in the context
         grads = ctx.compiled_backward([saved_tensors_list, ctx.saved_other], args)
 
         assert not args
@@ -165,6 +168,7 @@ def forward(ctx, dummy, side_channel, *args):
         ctx.side_channel = side_channel
         ctx.num_args = len(args)
         res = ctx.side_channel.pop("fw")
+        ctx.save_for_backward(*ctx.side_channel.pop("tensors_to_save"))
         assert not ctx.side_channel
         return res
 
@@ -172,6 +176,8 @@ def forward(ctx, dummy, side_channel, *args):
     def backward(ctx, *args):
         assert not ctx.side_channel
         ctx.side_channel["bw"] = list(args)
+        ctx.side_channel["saved_tensors"] = list(ctx.saved_tensors)  # see above
+        ctx.maybe_clear_saved_tensors()  # Delete the reference to all saved tensors in the context
         return torch.randn(1, device="meta"), None, *([None] * ctx.num_args)
 
 
diff --git a/thunder/tests/test_core.py b/thunder/tests/test_core.py
index 68e8a8e56b..900b026d6f 100644
--- a/thunder/tests/test_core.py
+++ b/thunder/tests/test_core.py
@@ -3187,3 +3187,26 @@ def fn(x):
         ):  # prims is unpack_sequence and any output is TensorProxy
             # Verify that we print information about the unpacked TensorProxy.
             assert "cpu f32[3]" in str(bsym)
+
+
+def test_apply_autograd_memory():
+    from thunder.executors.torch_autograd import connect_to_autograd
+
+    def foo():
+        def backward(*args):
+            return None
+
+        x = torch.randn(2, 2, requires_grad=True)
+        o = x.sum()
+
+        connect_to_autograd(
+            backward_fn=backward,
+            flat_args=(x,),
+            flat_output=(o,),
+            saved_tensors=(o,),
+            saved_other=(),
+            return_none_instead_of_grads=True,
+        )
+        return [weakref.ref(x), weakref.ref(o)]
+
+    assert not any(wr() for wr in foo())
diff --git a/thunder/tests/test_grad.py b/thunder/tests/test_grad.py
index af1c3232cb..718465538c 100644
--- a/thunder/tests/test_grad.py
+++ b/thunder/tests/test_grad.py
@@ -1752,10 +1752,10 @@ def f(x, y):
 
         # With activation checkpointing, we are saving only the original input.
         # The intermediate values are recomputed during backward pass.
-        assert len(out.grad_fn.next_functions[0][0].saved_tensors) == 2
+        assert len(out.grad_fn.saved_tensors) == 2
         # We detach the saved tensors (which returns a new Python tensor backed by same storage)
         # the order seems to be non-deterministic sometimes
-        assert {t.data_ptr() for t in out.grad_fn.next_functions[0][0].saved_tensors} == {x.data_ptr(), y.data_ptr()}
+        assert {t.data_ptr() for t in out.grad_fn.saved_tensors} == {x.data_ptr(), y.data_ptr()}
 
         g = torch.ones_like(out)
         out.backward(g)
@@ -1948,8 +1948,8 @@ def fn(a):
     a = torch.randn(2, 2, device=device, requires_grad=True)
     res = jfn(a)
     res2 = jfn2(a)
-    assert len(res.grad_fn.next_functions[0][0].saved_tensors) == 3  # should be decomposed
-    assert len(res2.grad_fn.next_functions[0][0].saved_tensors) == 1
+    assert len(res.grad_fn.saved_tensors) == 3  # should be decomposed
+    assert len(res2.grad_fn.saved_tensors) == 1
 
     if NVFUSER_AVAILABLE and device == "cuda":
         # check everything is fused