arXiv:2507.08445v1 Announce Type: cross Abstract: Despite the remarkable progress of Large Language Models (LLMs), their performance in question answering (QA) remains limited by the lack of domain-specific and up-to-date knowledge. Retrieval-Augmented Generation (RAG) addresses this limitation by incorporating external information, often from graph-structured data. However, existing graph-based RAG methods suffer from poor graph quality due to incomplete extraction and insufficient utilization of query information during retrieval. To overcome these limitations, we propose CUE-RAG, a novel approach that introduces (1) a multi-partite graph index incorporates text Chunks, knowledge Units, and Entities to capture semantic content at multiple levels of granularity, (2) a hybrid extraction strategy that reduces LLM token usage while still producing accurate and disambiguated knowledge units, and (3) Q-Iter, a query-driven iterative retrieval strategy that enhances relevance through semantic search and constrained graph traversal. Experiments on three QA benchmarks show that CUE-RAG significantly outperforms state-of-the-art baselines, achieving up to 99.33% higher Accuracy and 113.51% higher F1 score while reducing indexing costs by 72.58%. Remarkably, CUE-RAG matches or outperforms baselines even without using an LLM for indexing. These results demonstrate the effectiveness and cost-efficiency of CUE-RAG in advancing graph-based RAG systems.