diff --git a/tests/engine/test_arg_utils.py b/tests/engine/test_arg_utils.py
index 360ac1bfbad93..f7dc167fea6e4 100644
--- a/tests/engine/test_arg_utils.py
+++ b/tests/engine/test_arg_utils.py
@@ -42,22 +42,42 @@ def test_bad_nullable_kvs(arg):
         nullable_kvs(arg)
 
 
-@pytest.mark.parametrize(("arg", "expected"), [
-    (None, None),
-    ("{}", {}),
-    ('{"num_crops": 4}', {
-        "num_crops": 4
-    }),
-    ('{"foo": {"bar": "baz"}}', {
-        "foo": {
-            "bar": "baz"
-        }
-    }),
+# yapf: disable
+@pytest.mark.parametrize(("arg", "expected", "option"), [
+    (None, None, "mm-processor-kwargs"),
+    ("{}", {}, "mm-processor-kwargs"),
+    (
+        '{"num_crops": 4}',
+        {
+            "num_crops": 4
+        },
+        "mm-processor-kwargs"
+    ),
+    (
+        '{"foo": {"bar": "baz"}}',
+        {
+            "foo":
+            {
+                "bar": "baz"
+            }
+        },
+        "mm-processor-kwargs"
+    ),
+    (
+        '{"cast_logits_dtype":"bfloat16","sequence_parallel_norm":true,"sequence_parallel_norm_threshold":2048}',
+        {
+            "cast_logits_dtype": "bfloat16",
+            "sequence_parallel_norm": True,
+            "sequence_parallel_norm_threshold": 2048,
+        },
+        "override-neuron-config"
+    ),
 ])
-def test_mm_processor_kwargs_prompt_parser(arg, expected):
+# yapf: enable
+def test_composite_arg_parser(arg, expected, option):
     parser = EngineArgs.add_cli_args(FlexibleArgumentParser())
     if arg is None:
         args = parser.parse_args([])
     else:
-        args = parser.parse_args(["--mm-processor-kwargs", arg])
-    assert args.mm_processor_kwargs == expected
+        args = parser.parse_args([f"--{option}", arg])
+    assert getattr(args, option.replace("-", "_")) == expected
diff --git a/vllm/engine/arg_utils.py b/vllm/engine/arg_utils.py
index 0d4559e377427..152470430e606 100644
--- a/vllm/engine/arg_utils.py
+++ b/vllm/engine/arg_utils.py
@@ -789,13 +789,10 @@ def add_cli_args(parser: FlexibleArgumentParser) -> FlexibleArgumentParser:
             "lower performance.")
         parser.add_argument(
             '--override-neuron-config',
-            type=lambda configs: {
-                str(key): value
-                for key, value in
-                (config.split(':') for config in configs.split(','))
-            },
+            type=json.loads,
             default=None,
-            help="override or set neuron device configuration.")
+            help="Override or set neuron device configuration. "
+            "e.g. {\"cast_logits_dtype\": \"bloat16\"}.'")
 
         return parser