diff --git a/changelog/4270.changed.md b/changelog/4270.changed.md
new file mode 100644
index 000000000..eb9f54972
--- /dev/null
+++ b/changelog/4270.changed.md
@@ -0,0 +1 @@
+- Updated `NvidiaLLMService` to emit model reasoning as `LLMThought*Frame`s (from both `reasoning_content` and `<think>...</think>` output), avoid mixing reasoning text into normal assistant content, and allow keyless local NIM endpoints while warning when the cloud endpoint is used without an API key.
diff --git a/src/pipecat/services/nvidia/llm.py b/src/pipecat/services/nvidia/llm.py
index 28b635a62..7ddbe42e4 100644
--- a/src/pipecat/services/nvidia/llm.py
+++ b/src/pipecat/services/nvidia/llm.py
@@ -2,21 +2,44 @@
 # Copyright (c) 2024-2026, Daily
 #
 # SPDX-License-Identifier: BSD 2-Clause License
+# Copyright (c) 2026 NVIDIA CORPORATION & AFFILIATES.
 #
 
 """NVIDIA NIM API service implementation.
 
 This module provides a service for interacting with NVIDIA's NIM (NVIDIA Inference
 Microservice) API while maintaining compatibility with the OpenAI-style interface.
+
+Refer to the NVIDIA NIM LLM API documentation for available models and usage:
+https://docs.api.nvidia.com/nim/reference/llm-apis
 """
 
+from collections.abc import AsyncIterator
 from dataclasses import dataclass
+from enum import StrEnum
 
+from loguru import logger
+from openai.types.chat import ChatCompletionChunk
+
+from pipecat.frames.frames import (
+    LLMThoughtEndFrame,
+    LLMThoughtStartFrame,
+    LLMThoughtTextFrame,
+)
 from pipecat.metrics.metrics import LLMTokenUsage
 from pipecat.processors.aggregators.llm_context import LLMContext
 from pipecat.services.openai.base_llm import BaseOpenAILLMService
 from pipecat.services.openai.llm import OpenAILLMService
 
+_THINK_OPEN = "<think>"
+_THINK_CLOSE = "</think>"
+
+
+class _ThinkTagState(StrEnum):
+    DETECTING = "detecting"
+    IN_THOUGHT = "in_thought"
+    CONTENT = "content"
+
 
 @dataclass
 class NvidiaLLMSettings(BaseOpenAILLMService.Settings):
@@ -28,9 +51,19 @@ class NvidiaLLMSettings(BaseOpenAILLMService.Settings):
 class NvidiaLLMService(OpenAILLMService):
     """A service for interacting with NVIDIA's NIM (NVIDIA Inference Microservice) API.
 
-    This service extends OpenAILLMService to work with NVIDIA's NIM API while maintaining
-    compatibility with the OpenAI-style interface. It specifically handles the difference
-    in token usage reporting between NIM (incremental) and OpenAI (final summary).
+    This service extends OpenAILLMService to work with NVIDIA's NIM API while
+    maintaining compatibility with the OpenAI-style interface. It handles:
+
+    - Incremental token usage reporting (NIM sends per-chunk counts instead
+      of a final summary)
+    - Detection and filtering of leading ``<think>``/``</think>`` content for
+      models that emit reasoning inline before visible output (e.g.
+      DeepSeek-R1, some nemotron models)
+    - Extraction of ``reasoning_content`` from the streaming delta for models
+      with API-level reasoning separation (e.g. Nemotron Nano models)
+
+    Reasoning content is emitted as ``LLMThought*Frame`` objects, keeping it
+    accessible to observers and logging without sending it to TTS.
     """
 
     Settings = NvidiaLLMSettings
@@ -39,7 +72,7 @@ class NvidiaLLMService(OpenAILLMService):
     def __init__(
         self,
         *,
-        api_key: str,
+        api_key: str | None = None,
         base_url: str = "https://integrate.api.nvidia.com/v1",
         model: str | None = None,
         settings: Settings | None = None,
@@ -48,10 +81,12 @@ class NvidiaLLMService(OpenAILLMService):
         """Initialize the NvidiaLLMService.
 
         Args:
-            api_key: The API key for accessing NVIDIA's NIM API.
-            base_url: The base URL for NIM API. Defaults to "https://integrate.api.nvidia.com/v1".
+            api_key: NVIDIA API key for authentication. Required when using the
+                cloud endpoint. Not needed for local NIM deployments.
+            base_url: The base URL for NIM API. Defaults to NVIDIA's cloud endpoint.
+                For local deployments, pass the local address (e.g. ``http://localhost:8000/v1``).
             model: The model identifier to use. Defaults to
-                "nvidia/llama-3.1-nemotron-70b-instruct".
+                "nvidia/nemotron-3-nano-30b-a3b".
 
                 .. deprecated:: 0.0.105
                     Use ``settings=NvidiaLLMService.Settings(model=...)`` instead.
@@ -61,7 +96,7 @@ class NvidiaLLMService(OpenAILLMService):
             **kwargs: Additional keyword arguments passed to OpenAILLMService.
         """
         # 1. Initialize default_settings with hardcoded defaults
-        default_settings = self.Settings(model="nvidia/llama-3.1-nemotron-70b-instruct")
+        default_settings = self.Settings(model="nvidia/nemotron-3-nano-30b-a3b")
 
         # 2. Apply direct init arg overrides (deprecated)
         if model is not None:
@@ -75,6 +110,14 @@ class NvidiaLLMService(OpenAILLMService):
             default_settings.apply_update(settings)
 
         super().__init__(api_key=api_key, base_url=base_url, settings=default_settings, **kwargs)
+
+        if "api.nvidia.com" in base_url and not api_key:
+            logger.warning(
+                "NvidiaLLMService: Using the cloud endpoint but no API key was provided. "
+                "An API key is required for the cloud endpoint. "
+                "Set base_url to your local NIM endpoint for local deployments."
+            )
+
         # Counters for accumulating token usage metrics
         self._prompt_tokens = 0
         self._completion_tokens = 0
@@ -82,24 +125,202 @@ class NvidiaLLMService(OpenAILLMService):
         self._has_reported_prompt_tokens = False
         self._is_processing = False
 
-    async def _process_context(self, context: LLMContext):
-        """Process a context through the LLM and accumulate token usage metrics.
+    def _reset_response_state(self):
+        """Reset per-response state at the start of each LLM call.
 
-        This method overrides the parent class implementation to handle NVIDIA's
-        incremental token reporting style, accumulating the counts and reporting
-        them once at the end of processing.
-
-        Args:
-            context: The context to process, containing messages and other information
-                needed for the LLM interaction.
+        Resets token accumulation counters, leading-think-tag detection state,
+        and reasoning-content field tracking.
         """
-        # Reset all counters and flags at the start of processing
         self._prompt_tokens = 0
         self._completion_tokens = 0
         self._total_tokens = 0
         self._has_reported_prompt_tokens = False
         self._is_processing = True
 
+        self._think_tag_state = _ThinkTagState.DETECTING
+        self._think_tag_buffer = ""
+
+        # reasoning_content field tracking
+        self._has_reasoning_field = False
+
+    async def _filter_thinking_content(self, text: str) -> str | None:
+        """Filter leading ``<think>`` tags from content and emit thought frames.
+
+        Uses a three-state machine optimized for the common provider pattern
+        where a response either begins with a ``<think>`` block or contains no
+        think tags at all. It returns only visible content to the base OpenAI
+        processing loop while emitting hidden reasoning as ``LLMThought*Frame``
+        side effects.
+
+        - ``detecting``: Buffers the start of the stream to check for
+          ``<think>``.
+        - ``in_thought``: Inside a leading think block; emits
+          ``LLMThoughtTextFrame`` until ``</think>`` is found.
+        - ``content``: Normal content; passthrough.
+
+        Non-reasoning models transition from ``detecting`` to ``content``
+        on the first chunk with zero buffering overhead after that.
+
+        Args:
+            text: The text content from the LLM to filter.
+
+        Returns:
+            The non-reasoning content that should continue through the base
+            OpenAI content path, or ``None`` if this chunk should not emit
+            normal content.
+
+        """
+        if self._think_tag_state == _ThinkTagState.CONTENT:
+            return text
+
+        self._think_tag_buffer += text
+
+        if self._think_tag_state == _ThinkTagState.DETECTING:
+            if len(self._think_tag_buffer) < len(_THINK_OPEN):
+                if _THINK_OPEN.startswith(self._think_tag_buffer):
+                    return None
+                self._think_tag_state = _ThinkTagState.CONTENT
+                passthrough = self._think_tag_buffer
+                self._think_tag_buffer = ""
+                return passthrough
+
+            if self._think_tag_buffer.startswith(_THINK_OPEN):
+                self._think_tag_state = _ThinkTagState.IN_THOUGHT
+                await self.push_frame(LLMThoughtStartFrame())
+                self._think_tag_buffer = self._think_tag_buffer[len(_THINK_OPEN) :]
+            else:
+                self._think_tag_state = _ThinkTagState.CONTENT
+                passthrough = self._think_tag_buffer
+                self._think_tag_buffer = ""
+                return passthrough
+
+        if self._think_tag_state == _ThinkTagState.IN_THOUGHT:
+            idx = self._think_tag_buffer.find(_THINK_CLOSE)
+            if idx != -1:
+                thought = self._think_tag_buffer[:idx]
+                if thought:
+                    await self.push_frame(LLMThoughtTextFrame(text=thought))
+                await self.push_frame(LLMThoughtEndFrame())
+                remainder = self._think_tag_buffer[idx + len(_THINK_CLOSE) :]
+                self._think_tag_buffer = ""
+                self._think_tag_state = _ThinkTagState.CONTENT
+                return remainder or None
+            else:
+                safe_end = len(self._think_tag_buffer) - len(_THINK_CLOSE) + 1
+                if safe_end > 0:
+                    await self.push_frame(
+                        LLMThoughtTextFrame(text=self._think_tag_buffer[:safe_end])
+                    )
+                    self._think_tag_buffer = self._think_tag_buffer[safe_end:]
+        return None
+
+    async def _flush_reasoning_state(self):
+        """Flush buffered reasoning state at normal stream completion.
+
+        Emits any buffered trailing thought text, closes open thought frames,
+        and forwards any buffered pre-content text that was held while deciding
+        whether the stream began with ``<think>``.
+        """
+        if self._think_tag_state == _ThinkTagState.IN_THOUGHT:
+            if self._think_tag_buffer:
+                await self.push_frame(LLMThoughtTextFrame(text=self._think_tag_buffer))
+            await self.push_frame(LLMThoughtEndFrame())
+        elif self._think_tag_state == _ThinkTagState.DETECTING and self._think_tag_buffer:
+            await super()._push_llm_text(self._think_tag_buffer)
+
+        self._think_tag_buffer = ""
+        self._think_tag_state = _ThinkTagState.CONTENT
+
+        if self._has_reasoning_field:
+            await self.push_frame(LLMThoughtEndFrame())
+            self._has_reasoning_field = False
+
+    async def get_chat_completions(self, context: LLMContext) -> AsyncIterator[ChatCompletionChunk]:
+        """Wrap the chat completion stream to handle ``reasoning_content``.
+
+        Models with API-level reasoning separation (e.g. Nemotron Nano)
+        include a ``reasoning_content`` field on the streaming delta. This
+        wrapper extracts those chunks and emits them as ``LLMThought*Frame``
+        objects. It also rewrites streamed ``delta.content`` so leading
+        ``<think>`` sections are removed before the base OpenAI loop processes
+        visible content.
+
+        Args:
+            context: The LLM context for the completion request.
+
+        Returns:
+            An async iterator of chat completion chunks where
+            ``reasoning_content`` has been emitted as ``LLMThought*Frame``
+            side effects.
+        """
+        stream = await super().get_chat_completions(context)
+        return self._handle_reasoning_content(stream)
+
+    async def _handle_reasoning_content(
+        self, stream: AsyncIterator[ChatCompletionChunk]
+    ) -> AsyncIterator[ChatCompletionChunk]:
+        """Handle ``reasoning_content`` and leading ``<think>`` tags in a chunk stream.
+
+        Inspects each chunk for a ``reasoning_content`` field on the delta and
+        emits ``LLMThoughtStartFrame`` / ``LLMThoughtTextFrame`` /
+        ``LLMThoughtEndFrame`` as side effects. It also strips ``<think>``
+        blocks from ``delta.content`` before yielding the chunk so the base
+        OpenAI loop only sees user-facing content. Every chunk is still yielded
+        so the base streaming loop can process metadata such as token usage,
+        model name, tool calls, and audio transcripts.
+
+        Notes:
+            Stream cleanup is owned by the base OpenAI processing loop
+            (``BaseOpenAILLMService._process_context``), which wraps the stream
+            in its own closing context manager.
+
+        Args:
+            stream: The original chat completion stream.
+
+        Yields:
+            Chat completion chunks with any leading ``<think>`` content removed
+            from ``delta.content`` before they reach the base OpenAI loop.
+        """
+        async for chunk in stream:
+            if chunk.choices and len(chunk.choices) > 0 and chunk.choices[0].delta:
+                delta = chunk.choices[0].delta
+                rc = getattr(delta, "reasoning_content", None)
+                if rc:
+                    if not self._has_reasoning_field:
+                        self._has_reasoning_field = True
+                        await self.push_frame(LLMThoughtStartFrame())
+                    await self.push_frame(LLMThoughtTextFrame(text=rc))
+                elif self._has_reasoning_field and delta.content:
+                    await self.push_frame(LLMThoughtEndFrame())
+                    self._has_reasoning_field = False
+
+                if delta.content:
+                    delta.content = await self._filter_thinking_content(delta.content)
+            yield chunk
+
+        await self._flush_reasoning_state()
+
+    async def _process_context(self, context: LLMContext):
+        """Process a context through the LLM and accumulate token usage metrics.
+
+        Delegates to the base OpenAI streaming loop while adding
+        NVIDIA-specific behavior:
+
+        - ``reasoning_content`` and leading ``<think>`` content are
+          intercepted via the ``get_chat_completions`` stream wrapper and
+          emitted as
+          ``LLMThought*Frame`` objects.
+        - Incremental token counts are accumulated and reported as final
+          totals.
+
+        Args:
+            context: The context to process, containing messages and other
+                information needed for the LLM interaction.
+        """
+        self._reset_response_state()
+
+        # Wrap in try/finally to guarantee accumulated token metrics are
+        # reported and _is_processing is cleared even on cancellation.
         try:
             await super()._process_context(context)
         finally: