Azure setup - GraphRAG

GraphRAG seamlessly integrates with Azure OpenAI to provide enterprise-grade LLM capabilities. This guide walks you through setting up Azure OpenAI for use with GraphRAG.

Prerequisites

Before starting, ensure you have:

An active Azure subscription
Access to Azure OpenAI Service
Deployed models for chat completion and embeddings
GraphRAG installed (pip install graphrag)

Azure OpenAI setup

Deploy Azure OpenAI models

In the Azure Portal, deploy the required models:

Navigate to your Azure OpenAI resource
Go to “Model deployments”
Deploy a chat model (e.g., gpt-4o, gpt-4-turbo)
Deploy an embedding model (e.g., text-embedding-3-small)

Note your deployment names - you’ll need these for configuration.

Gather connection information

Collect the following from your Azure OpenAI resource:

Endpoint URL: https://YOUR-RESOURCE-NAME.openai.azure.com/
API Key: Found under “Keys and Endpoint”
API Version: Use 2024-02-15-preview or later
Deployment names: The names you gave your models

Initialize GraphRAG project

graphrag init --root ./my-project

Configuration

Environment variables

The recommended approach is to store sensitive information in environment variables.

Edit .env file

Open the .env file created by graphrag init:

.env

GRAPHRAG_API_KEY=your-azure-api-key-here
GRAPHRAG_API_BASE=https://your-resource-name.openai.azure.com/
GRAPHRAG_API_VERSION=2024-02-15-preview

Never commit your .env file to version control. Keep your API keys secure.

Configure settings.yaml

Edit settings.yaml to use Azure OpenAI:

settings.yaml

name: "my-azure-project"

llm:
  type: chat
  model_provider: azure
  model: gpt-4o  # Your chat deployment name
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}
  deployment_name: gpt-4o  # Must match your Azure deployment

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-3-small  # Your embedding deployment name
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}
  deployment_name: text-embedding-3-small  # Must match your Azure deployment

Rate limiting

Azure OpenAI has token-per-minute (TPM) and requests-per-minute (RPM) limits. Configure these in your settings:

settings.yaml

llm:
  type: chat
  model_provider: azure
  model: gpt-4o
  deployment_name: gpt-4o
  # Rate limits (adjust based on your Azure quota)
  requests_per_minute: 60
  tokens_per_minute: 80000
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-3-small
  deployment_name: text-embedding-3-small
  # Rate limits for embeddings
  requests_per_minute: 60
  tokens_per_minute: 150000
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}

Check your Azure OpenAI quota in the Azure Portal under your resource’s “Quotas” section.

Model configurations

Chat models

Different Azure OpenAI chat models have different capabilities and costs:

GPT-4o
GPT-4 Turbo
GPT-3.5 Turbo

Latest and most capable model:

llm:
  type: chat
  model_provider: azure
  model: gpt-4o
  deployment_name: gpt-4o
  max_tokens: 4000
  temperature: 0.0
  top_p: 1.0

Best for: Complex reasoning, high-quality extractions

Good balance of performance and cost:

llm:
  type: chat
  model_provider: azure
  model: gpt-4-turbo
  deployment_name: gpt-4-turbo
  max_tokens: 4000
  temperature: 0.0
  top_p: 1.0

Best for: Production workloads

Most cost-effective option:

llm:
  type: chat
  model_provider: azure
  model: gpt-35-turbo
  deployment_name: gpt-35-turbo-16k
  max_tokens: 4000
  temperature: 0.0
  top_p: 1.0

Best for: Testing, development, simple extractions

Embedding models

text-embedding-3-small
text-embedding-3-large
text-embedding-ada-002

Balanced performance and cost:

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-3-small
  deployment_name: text-embedding-3-small

Dimensions: 1536

Highest quality embeddings:

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-3-large
  deployment_name: text-embedding-3-large

Dimensions: 3072

Legacy model (still supported):

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-ada-002
  deployment_name: text-embedding-ada-002

Dimensions: 1536

Multiple model configurations

You can use different models for different workflows:

settings.yaml

# Default chat model for most workflows
llm:
  type: chat
  model_provider: azure
  model: gpt-4o
  deployment_name: gpt-4o
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}

# Override for specific workflows
entity_extraction:
  llm:
    type: chat
    model_provider: azure
    model: gpt-4-turbo
    deployment_name: gpt-4-turbo
    # Use same API settings
    api_base: ${GRAPHRAG_API_BASE}
    api_key: ${GRAPHRAG_API_KEY}
    api_version: ${GRAPHRAG_API_VERSION}

summarize_descriptions:
  llm:
    type: chat
    model_provider: azure
    model: gpt-35-turbo
    deployment_name: gpt-35-turbo-16k
    # Cost optimization for summaries
    api_base: ${GRAPHRAG_API_BASE}
    api_key: ${GRAPHRAG_API_KEY}
    api_version: ${GRAPHRAG_API_VERSION}

Azure AI Search integration

For production deployments, use Azure AI Search as your vector store:

settings.yaml

vector_store:
  type: azure_ai_search
  api_key: ${AZURE_SEARCH_API_KEY}
  url: https://your-search-service.search.windows.net
  audience: https://search.azure.com
  
  # Optional: custom index schema
  index_schema:
    entity_description:
      index_name: graphrag-entities
    community_full_content:
      index_name: graphrag-communities
    text_unit_text:
      index_name: graphrag-text-units

Create Azure AI Search resource

In the Azure Portal, create a new Azure AI Search service.

Get connection details

URL: https://YOUR-SERVICE-NAME.search.windows.net
API Key: Found in “Keys” section

Add to .env

.env

AZURE_SEARCH_API_KEY=your-search-api-key

Testing your configuration

Verify your Azure setup before running a full index:

Run dry run

graphrag index --root ./my-project --dry-run --verbose

This validates your configuration without making API calls.

Test with small dataset

Create a small test file:

echo "This is a test document for GraphRAG." > ./my-project/input/test.txt

Run indexing:

graphrag index --root ./my-project --verbose

Monitor Azure metrics

Check the Azure Portal to verify:

API calls are succeeding
Token usage is within limits
No throttling errors

Cost optimization

Optimize costs when using Azure OpenAI:

1. Use appropriate models

Development

Use GPT-3.5 Turbo for testing and development

Production

Use GPT-4o or GPT-4 Turbo for final production runs

2. Enable caching

settings.yaml

cache:
  type: file
  base_dir: ./cache

Caching stores LLM responses to avoid redundant API calls.

3. Optimize chunking

settings.yaml

chunking:
  size: 300  # Larger chunks = fewer LLM calls
  overlap: 100
  encoding_model: cl100k_base

4. Batch processing

settings.yaml

entity_extraction:
  max_gleanings: 0  # Reduce to 0-1 for cost savings

Reducing max_gleanings will decrease extraction quality. Test with your data to find the right balance.

Authentication methods

API key authentication

The standard method shown above:

.env

GRAPHRAG_API_KEY=your-azure-api-key

Azure AD / Entra ID authentication

For enhanced security, use Azure AD:

settings.yaml

llm:
  type: chat
  model_provider: azure
  model: gpt-4o
  deployment_name: gpt-4o
  api_base: ${GRAPHRAG_API_BASE}
  api_version: ${GRAPHRAG_API_VERSION}
  # Use Azure AD token
  authentication_type: azure_ad

Azure AD authentication requires the azure-identity Python package: pip install azure-identity

Troubleshooting

Common issues

401 Unauthorized error

Cause: Invalid API key or authentication failureSolution:

Verify your API key in the Azure Portal
Ensure the key is correctly set in .env
Check that api_base matches your resource endpoint

404 Not Found error

Cause: Incorrect deployment name or endpointSolution:

Verify deployment_name matches your Azure deployment exactly
Check that api_base ends with / or doesn’t, based on API version
Ensure the model is deployed in the same region as your endpoint

429 Rate limit exceeded

Cause: Exceeding Azure OpenAI quotaSolution:

Reduce requests_per_minute and tokens_per_minute in config
Request quota increase in Azure Portal
Implement retry logic with exponential backoff

Model not found error

Cause: Model not deployed or incorrect API versionSolution:

Deploy the model in Azure Portal
Use API version 2024-02-15-preview or later
Match model parameter to your deployment name

Validation checklist

Azure OpenAI resource is created and active
Chat model (e.g., gpt-4o) is deployed
Embedding model (e.g., text-embedding-3-small) is deployed
API key is copied to .env file
api_base URL is correct
deployment_name matches Azure deployment exactly
model_provider is set to azure
Rate limits match your Azure quota
Dry run completes without errors

Example complete configuration

Here’s a complete working configuration for Azure:

name: "azure-graphrag-project"

logging:
  directory: "output/logs"
  filename: "app.log"

llm:
  type: chat
  model_provider: azure
  model: gpt-4o
  deployment_name: gpt-4o
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}
  requests_per_minute: 60
  tokens_per_minute: 80000
  max_tokens: 4000
  temperature: 0.0
  top_p: 1.0

embedding:
  type: embedding
  model_provider: azure
  model: text-embedding-3-small
  deployment_name: text-embedding-3-small
  api_base: ${GRAPHRAG_API_BASE}
  api_key: ${GRAPHRAG_API_KEY}
  api_version: ${GRAPHRAG_API_VERSION}
  requests_per_minute: 60
  tokens_per_minute: 150000

chunking:
  size: 300
  overlap: 100
  encoding_model: cl100k_base

cache:
  type: file
  base_dir: ./cache

snapshots:
  graphml: true

storage:
  type: file
  base_dir: ./output

vector_store:
  type: azure_ai_search
  api_key: ${AZURE_SEARCH_API_KEY}
  url: ${AZURE_SEARCH_URL}

# Azure OpenAI Configuration
GRAPHRAG_API_KEY=sk-your-azure-openai-key-here
GRAPHRAG_API_BASE=https://your-resource.openai.azure.com/
GRAPHRAG_API_VERSION=2024-02-15-preview

# Azure AI Search Configuration (optional)
AZURE_SEARCH_API_KEY=your-search-key-here
AZURE_SEARCH_URL=https://your-search-service.search.windows.net

Next steps

Configuration reference

Explore all configuration options

CLI usage

Learn GraphRAG commands

Best practices

Optimize your implementation

Migration guide

Upgrade between versions

​Prerequisites

​Azure OpenAI setup

​Configuration

​Environment variables

​Rate limiting

​Model configurations

​Chat models

​Embedding models

​Multiple model configurations

​Azure AI Search integration

​Testing your configuration

​Cost optimization

​1. Use appropriate models

Development

Production

​2. Enable caching

​3. Optimize chunking

​4. Batch processing

​Authentication methods

​API key authentication

​Azure AD / Entra ID authentication

​Troubleshooting

​Common issues

​Validation checklist

​Example complete configuration

​Next steps

Configuration reference

CLI usage

Best practices

Migration guide

Prerequisites

Azure OpenAI setup

Configuration

Environment variables

Rate limiting

Model configurations

Chat models

Embedding models

Multiple model configurations

Azure AI Search integration

Testing your configuration

Cost optimization

1. Use appropriate models

2. Enable caching

3. Optimize chunking

4. Batch processing

Authentication methods

API key authentication

Azure AD / Entra ID authentication

Troubleshooting

Common issues

Validation checklist

Example complete configuration

Next steps