diff --git a/tests/engine/test_arg_utils.py b/tests/engine/test_arg_utils.py
index 5b0e76fe53685..de78d41ad12eb 100644
--- a/tests/engine/test_arg_utils.py
+++ b/tests/engine/test_arg_utils.py
@@ -59,6 +59,25 @@ def test_compilation_config():
     assert args.compilation_config.level == 3
 
 
+def test_prefix_cache_default():
+    parser = EngineArgs.add_cli_args(FlexibleArgumentParser())
+    args = parser.parse_args([])
+
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert (not engine_args.enable_prefix_caching
+            ), "prefix caching defaults to off."
+
+    # with flag to turn it on.
+    args = parser.parse_args(["--enable-prefix-caching"])
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert engine_args.enable_prefix_caching
+
+    # with disable flag to turn it off.
+    args = parser.parse_args(["--no-enable-prefix-caching"])
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert not engine_args.enable_prefix_caching
+
+
 def test_valid_pooling_config():
     parser = EngineArgs.add_cli_args(FlexibleArgumentParser())
     args = parser.parse_args([
diff --git a/tests/v1/engine/test_engine_args.py b/tests/v1/engine/test_engine_args.py
index 69cfdf5a395c1..ac5e7dde525a7 100644
--- a/tests/v1/engine/test_engine_args.py
+++ b/tests/v1/engine/test_engine_args.py
@@ -4,6 +4,7 @@
 from vllm.config import VllmConfig
 from vllm.engine.arg_utils import EngineArgs
 from vllm.usage.usage_lib import UsageContext
+from vllm.utils import FlexibleArgumentParser
 
 if not envs.VLLM_USE_V1:
     pytest.skip(
@@ -12,6 +13,24 @@
     )
 
 
+def test_prefix_caching_from_cli():
+    parser = EngineArgs.add_cli_args(FlexibleArgumentParser())
+    args = parser.parse_args([])
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert (engine_args.enable_prefix_caching
+            ), "V1 turns on prefix caching by default."
+
+    # Turn it off possible with flag.
+    args = parser.parse_args(["--no-enable-prefix-caching"])
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert not engine_args.enable_prefix_caching
+
+    # Turn it on with flag.
+    args = parser.parse_args(["--enable-prefix-caching"])
+    engine_args = EngineArgs.from_cli_args(args=args)
+    assert engine_args.enable_prefix_caching
+
+
 def test_defaults():
     engine_args = EngineArgs(model="facebook/opt-125m")
 
diff --git a/vllm/engine/arg_utils.py b/vllm/engine/arg_utils.py
index 90b4798f17a13..f0020562c3c3a 100644
--- a/vllm/engine/arg_utils.py
+++ b/vllm/engine/arg_utils.py
@@ -416,9 +416,13 @@ def add_cli_args(parser: FlexibleArgumentParser) -> FlexibleArgumentParser:
                             'tokens. This is ignored on neuron devices and '
                             'set to max-model-len')
 
-        parser.add_argument('--enable-prefix-caching',
-                            action='store_true',
-                            help='Enables automatic prefix caching.')
+        parser.add_argument(
+            "--enable-prefix-caching",
+            action=argparse.BooleanOptionalAction,
+            default=EngineArgs.enable_prefix_caching,
+            help="Enables automatic prefix caching. "
+            "Use --no-enable-prefix-caching to disable explicitly.",
+        )
         parser.add_argument('--disable-sliding-window',
                             action='store_true',
                             help='Disables sliding window, '