diff --git a/demo/guide-python/categorical.py b/demo/guide-python/categorical.py
new file mode 100644
index 000000000000..02ef7a8fc8c3
--- /dev/null
+++ b/demo/guide-python/categorical.py
@@ -0,0 +1,75 @@
+"""Experimental support for categorical data.  After 1.5 XGBoost `gpu_hist` tree method
+has experimental support for one-hot encoding based tree split.
+
+In before, users need to run an encoder themselves before passing the data into XGBoost,
+which creates a sparse matrix and potentially increase memory usage.  This demo showcases
+the experimental categorical data support, more advanced features are planned.
+
+    .. versionadded:: 1.5.0
+
+"""
+import pandas as pd
+import numpy as np
+import xgboost as xgb
+from typing import Tuple
+
+
+def make_categorical(
+    n_samples: int, n_features: int, n_categories: int, onehot: bool
+) -> Tuple[pd.DataFrame, pd.Series]:
+    """Make some random data for demo."""
+    rng = np.random.RandomState(1994)
+
+    pd_dict = {}
+    for i in range(n_features + 1):
+        c = rng.randint(low=0, high=n_categories, size=n_samples)
+        pd_dict[str(i)] = pd.Series(c, dtype=np.int64)
+
+    df = pd.DataFrame(pd_dict)
+    label = df.iloc[:, 0]
+    df = df.iloc[:, 1:]
+    for i in range(0, n_features):
+        label += df.iloc[:, i]
+    label += 1
+
+    df = df.astype("category")
+    categories = np.arange(0, n_categories)
+    for col in df.columns:
+        df[col] = df[col].cat.set_categories(categories)
+
+    if onehot:
+        return pd.get_dummies(df), label
+    return df, label
+
+
+def main() -> None:
+    # Use builtin categorical data support
+    # Must be pandas DataFrame or cudf DataFrame with categorical data
+    X, y = make_categorical(100, 10, 4, False)
+    # Specify `enable_categorical` to True.
+    reg = xgb.XGBRegressor(tree_method="gpu_hist", enable_categorical=True)
+    reg.fit(X, y, eval_set=[(X, y)])
+
+    # Pass in already encoded data
+    X_enc, y_enc = make_categorical(100, 10, 4, True)
+    reg_enc = xgb.XGBRegressor(tree_method="gpu_hist")
+    reg_enc.fit(X_enc, y_enc, eval_set=[(X_enc, y_enc)])
+
+    reg_results = np.array(reg.evals_result()["validation_0"]["rmse"])
+    reg_enc_results = np.array(reg_enc.evals_result()["validation_0"]["rmse"])
+
+    # Check that they have same results
+    np.testing.assert_allclose(reg_results, reg_enc_results)
+
+    # Convert to DMatrix for SHAP value
+    booster: xgb.Booster = reg.get_booster()
+    m = xgb.DMatrix(X, enable_categorical=True)  # specify categorical data support.
+    SHAP = booster.predict(m, pred_contribs=True)
+    margin = booster.predict(m, output_margin=True)
+    np.testing.assert_allclose(
+        np.sum(SHAP, axis=len(SHAP.shape) - 1), margin, rtol=1e-3
+    )
+
+
+if __name__ == "__main__":
+    main()
diff --git a/tests/python-gpu/test_gpu_demos.py b/tests/python-gpu/test_gpu_demos.py
index df2021c71ec9..2b3bc7424004 100644
--- a/tests/python-gpu/test_gpu_demos.py
+++ b/tests/python-gpu/test_gpu_demos.py
@@ -20,6 +20,12 @@ def test_update_process_demo():
     subprocess.check_call(cmd)
 
 
+def test_categorical_demo():
+    script = os.path.join(td.PYTHON_DEMO_DIR, 'categorical.py')
+    cmd = ['python', script]
+    subprocess.check_call(cmd)
+
+
 @pytest.mark.skipif(**tm.no_dask())
 @pytest.mark.skipif(**tm.no_dask_cuda())
 @pytest.mark.skipif(**tm.no_cupy())