diff --git a/litellm/main.py b/litellm/main.py
index 5b8c569a390..319a59771f4 100644
--- a/litellm/main.py
+++ b/litellm/main.py
@@ -7300,8 +7300,11 @@ def _get_encoding():
 def __getattr__(name: str) -> Any:
     """Lazy import handler for main module"""
     if name == "encoding":
-        # Lazy load encoding to avoid heavy tiktoken import at module load time
-        _encoding = tiktoken.get_encoding("cl100k_base")
+        # Use _get_default_encoding which properly sets TIKTOKEN_CACHE_DIR
+        # before loading tiktoken, ensuring the local cache is used
+        # instead of downloading from the internet
+        from litellm._lazy_imports import _get_default_encoding
+        _encoding = _get_default_encoding()
         # Cache it in the module's __dict__ for subsequent accesses
         import sys
 
diff --git a/tests/test_litellm/test_eager_tiktoken_load.py b/tests/test_litellm/test_eager_tiktoken_load.py
index 1264c68b99e..33dd57fad8d 100644
--- a/tests/test_litellm/test_eager_tiktoken_load.py
+++ b/tests/test_litellm/test_eager_tiktoken_load.py
@@ -78,6 +78,35 @@ def test_lazy_loading_default():
     assert len(tokens) > 0, "Encoding should work"
 
 
+def test_tiktoken_cache_dir_set_on_lazy_load():
+    """Test that TIKTOKEN_CACHE_DIR is set when encoding is lazy loaded.
+
+    This ensures the local tiktoken cache is used instead of downloading
+    from the internet. Regression test for issue #19768.
+    """
+    # Remove environment variables to ensure clean state
+    if "LITELLM_DISABLE_LAZY_LOADING" in os.environ:
+        del os.environ["LITELLM_DISABLE_LAZY_LOADING"]
+    if "TIKTOKEN_CACHE_DIR" in os.environ:
+        del os.environ["TIKTOKEN_CACHE_DIR"]
+
+    # Clear any cached modules
+    modules_to_clear = [k for k in sys.modules.keys() if k.startswith("litellm")]
+    for module in modules_to_clear:
+        del sys.modules[module]
+
+    # Import litellm fresh
+    import litellm
+
+    # Access encoding (triggers lazy load)
+    _ = litellm.encoding
+
+    # Verify TIKTOKEN_CACHE_DIR is now set and points to local tokenizers
+    assert "TIKTOKEN_CACHE_DIR" in os.environ, "TIKTOKEN_CACHE_DIR should be set after lazy loading encoding"
+    cache_dir = os.environ["TIKTOKEN_CACHE_DIR"]
+    assert "tokenizers" in cache_dir, f"TIKTOKEN_CACHE_DIR should point to tokenizers directory, got: {cache_dir}"
+
+
 @pytest.fixture(autouse=True)
 def cleanup_env():
     """Clean up environment variable after each test"""