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Effective context engineering for AI agents
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Given that LLMs are constrained by a finite attention budget, good context engineering means finding the smallest possible set of high-signal tokens that maximize the likelihood of some desired outcome. Implementing this practice is much easier said than done, but in the following section, we outline what this guiding principle means in practice across the different components of context. “The optimal altitude strikes a balance: specific enough to guide behavior effectively, yet flexible enough to provide the model with strong heuristics to guide behavior.” We recommend organizing prompts into distinct sections (like <background_information>, <instructions>, ## Tool guidance, ## Output description, etc) and using techniques like XML tagging or Markdown headers to delineate these sections, although the exact formatting of prompts is likely becoming less important as models become more capable.
We recommend organizing prompts into distinct sections (like <background_information>, <instructions>, ## Tool guidance, ## Output description, etc) and using techniques like XML tagging or Markdown headers to delineate these sections, although the exact formatting of prompts is likely becoming less important as models become more capable. “It’s best to start by testing a minimal prompt with the best model available to see how it performs on your task, and then add clear instructions and examples to improve performance based on failure modes found during initial testing.” Tools allow agents to operate with their environment and pull in new, additional context as they work. Because tools define the contract between agents and their information/action space, it’s extremely important that tools promote efficiency, both by returning information that is token efficient and by encouraging efficient agent behaviors.
One of the most common failure modes we see is bloated tool sets that cover too much functionality or lead to ambiguous decision points about which tool to use. If a human engineer can’t definitively say which tool should be used in a given situation, an AI agent can’t be expected to do better. As we’ll discuss later, curating a minimal viable set of tools for the agent can also lead to more reliable maintenance and pruning of context over long interactions. “Providing examples, otherwise known as few-shot prompting, is a well known best practice that we continue to strongly advise.” Our overall guidance across the different components of context (system prompts, tools, examples, message history, etc) is to be thoughtful and keep your context informative, yet tight. Now let's dive into dynamically retrieving context at runtime.
Given that LLMs are constrained by a finite attention budget, good context engineering means finding the smallest possible set of high-signal tokens that maximize the likelihood of some desired outcome. Implementing this practice is much easier said than done, but in the following section, we outline what this guiding principle means in practice across the different components of context. “engineers sometimes provide vague, high-level guidance that fails to give the LLM concrete signals for desired outputs or falsely assumes shared context.” We recommend organizing prompts into distinct sections (like <background_information>, <instructions>, ## Tool guidance, ## Output description, etc) and using techniques like XML tagging or Markdown headers to delineate these sections, although the exact formatting of prompts is likely becoming less important as models become more capable.
Of course, there's a trade-off: runtime exploration is slower than retrieving pre-computed data. Not only that, but opinionated and thoughtful engineering is required to ensure that an LLM has the right tools and heuristics for effectively navigating its information landscape. Without proper guidance, an agent can waste context by misusing tools, chasing dead-ends, or failing to identify key information. “The decision boundary for the ‘right’ level of autonomy depends on the task.” The hybrid strategy might be better suited for contexts with less dynamic content, such as legal or finance work. As model capabilities improve, agentic design will trend towards letting intelligent models act intelligently, with progressively less human curation. Given the rapid pace of progress in the field, "do the simplest thing that works" will likely remain our best advice for teams building agents on top of Claude.
After a few years of prompt engineering being the focus of attention in applied AI, a new term has come to prominence: context engineering. Building with language models is becoming less about finding the right words and phrases for your prompts, and more about answering the broader question of “what configuration of context is most likely to generate our model’s desired behavior?" “Context refers to the set of tokens included when sampling from a large-language model (LLM).” In this post, we’ll explore the emerging art of context engineering and offer a refined mental model for building steerable, effective agents.
In this post, we’ll explore the emerging art of context engineering and offer a refined mental model for building steerable, effective agents. “Prompt engineering refers to methods for writing and organizing LLM instructions for optimal outcomes” In the early days of engineering with LLMs, prompting was the biggest component of AI engineering work, as the majority of use cases outside of everyday chat interactions required prompts optimized for one-shot classification or text generation tasks. As the term implies, the primary focus of prompt engineering is how to write effective prompts, particularly system prompts. However, as we move towards engineering more capable agents that operate over multiple turns of inference and longer time horizons, we need strategies for managing the entire context state (system instructions, tools, Model Context Protocol (MCP), external data, message history, etc).
In this post, we’ll explore the emerging art of context engineering and offer a refined mental model for building steerable, effective agents. “Context engineering refers to the set of strategies for curating and maintaining the optimal set of tokens (information) during LLM inference, including all the other information that may land there outside of the prompts.” In the early days of engineering with LLMs, prompting was the biggest component of AI engineering work, as the majority of use cases outside of everyday chat interactions required prompts optimized for one-shot classification or text generation tasks. As the term implies, the primary focus of prompt engineering is how to write effective prompts, particularly system prompts. However, as we move towards engineering more capable agents that operate over multiple turns of inference and longer time horizons, we need strategies for managing the entire context state (system instructions, tools, Model Context Protocol (MCP), external data, message history, etc).
Letting agents navigate and retrieve data autonomously also enables progressive disclosure—in other words, allows agents to incrementally discover relevant context through exploration. Each interaction yields context that informs the next decision: file sizes suggest complexity; naming conventions hint at purpose; timestamps can be a proxy for relevance. Agents can assemble understanding layer by layer, maintaining only what's necessary in working memory and leveraging note-taking strategies for additional persistence. This self-managed context window keeps the agent focused on relevant subsets rather than drowning in exhaustive but potentially irrelevant information. “Without proper guidance, an agent can waste context by misusing tools, chasing dead-ends, or failing to identify key information.” In certain settings, the most effective agents might employ a hybrid strategy, retrieving some data up front for speed, and pursuing further autonomous exploration at its discretion. The decision boundary for the ‘right’ level of autonomy depends on the task. Claude Code is an agent that employs this hybrid model: CLAUDE.md files are naively dropped into context up front, while primitives like glob and grep allow it to navigate its environment and retrieve files just-in-time, effectively bypassing the issues of stale indexing and complex syntax trees.
Context retrieval and agentic search “we’ve gravitated towards a simple definition for agents: LLMs autonomously using tools in a loop.” Working alongside our customers, we’ve seen the field converging on this simple paradigm. As the underlying models become more capable, the level of autonomy of agents can scale: smarter models allow agents to independently navigate nuanced problem spaces and recover from errors.
Sub-agent architectures “specialized sub-agents can handle focused tasks with clean context windows.” This approach achieves a clear separation of concerns—the detailed search context remains isolated within sub-agents, while the lead agent focuses on synthesizing and analyzing the results. This pattern, discussed in How we built our multi-agent research system, showed a substantial improvement over single-agent systems on complex research tasks.
Of course, there's a trade-off: runtime exploration is slower than retrieving pre-computed data. Not only that, but opinionated and thoughtful engineering is required to ensure that an LLM has the right tools and heuristics for effectively navigating its information landscape. Without proper guidance, an agent can waste context by misusing tools, chasing dead-ends, or failing to identify key information. “the most effective agents might employ a hybrid strategy, retrieving some data up front for speed, and pursuing further autonomous exploration at its discretion.” The hybrid strategy might be better suited for contexts with less dynamic content, such as legal or finance work. As model capabilities improve, agentic design will trend towards letting intelligent models act intelligently, with progressively less human curation. Given the rapid pace of progress in the field, "do the simplest thing that works" will likely remain our best advice for teams building agents on top of Claude.
In Writing tools for AI agents – with AI agents, we discussed building tools that are well understood by LLMs and have minimal overlap in functionality. Similar to the functions of a well-designed codebase, tools should be self-contained, robust to error, and extremely clear with respect to their intended use. Input parameters should similarly be descriptive, unambiguous, and play to the inherent strengths of the model. “If a human engineer can’t definitively say which tool should be used in a given situation, an AI agent can’t be expected to do better.” Providing examples, otherwise known as few-shot prompting, is a well known best practice that we continue to strongly advise. However, teams will often stuff a laundry list of edge cases into a prompt in an attempt to articulate every possible rule the LLM should follow for a particular task. We do not recommend this. Instead, we recommend working to curate a set of diverse, canonical examples that effectively portray the expected behavior of the agent. For an LLM, examples are the “pictures” worth a thousand words.
In Writing tools for AI agents – with AI agents, we discussed building tools that are well understood by LLMs and have minimal overlap in functionality. Similar to the functions of a well-designed codebase, tools should be self-contained, robust to error, and extremely clear with respect to their intended use. Input parameters should similarly be descriptive, unambiguous, and play to the inherent strengths of the model. “One of the most common failure modes we see is bloated tool sets that cover too much functionality or lead to ambiguous decision points about which tool to use.” Providing examples, otherwise known as few-shot prompting, is a well known best practice that we continue to strongly advise. However, teams will often stuff a laundry list of edge cases into a prompt in an attempt to articulate every possible rule the LLM should follow for a particular task. We do not recommend this. Instead, we recommend working to curate a set of diverse, canonical examples that effectively portray the expected behavior of the agent. For an LLM, examples are the “pictures” worth a thousand words.