# How Chain-of-Thought Works? Tracing Information Flow from Decoding, Projection, and Activation

arXiv: https://arxiv.org/abs/2507.20758 · HTML: https://mlsanity.com/paper/2507.20758/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Placed in Prompting and chain-of-thought reasoning, one of 17 directions in LLM reasoning.
- Builds on 14 of its 47 references that are in the map.
- First posted on arXiv 28 Jul 2025.

## Placed in

- LLM reasoning / [Prompting and chain-of-thought reasoning](https://mlsanity.com/lr/prompting-and-chain-of-thought-reasoning/)

## Builds on (most cited first, 14 of 14)

- [The Llama 3 Herd of Models](https://mlsanity.com/paper/2407.21783/) (2024)
- [Training Verifiers to Solve Math Word Problems](https://mlsanity.com/paper/2110.14168/) (2021)
- [Gemma 2: Improving Open Language Models at a Practical Size](https://mlsanity.com/paper/2408.00118/) (2024)
- [LLMs Can Easily Learn to Reason from Demonstrations Structure, not content, is what matters!](https://mlsanity.com/paper/2502.07374/) (2025)
- [Text and Patterns: For Effective Chain of Thought, It Takes Two to Tango](https://mlsanity.com/paper/2209.07686/) (2022)
- [Concise Thoughts: Impact of Output Length on LLM Reasoning and Cost](https://mlsanity.com/paper/2407.19825/) (2024)
- [How to think step-by-step: A mechanistic understanding of chain-of-thought reasoning](https://mlsanity.com/paper/2402.18312/) (2024)
- [Contrastive Chain-of-Thought Prompting](https://mlsanity.com/paper/2311.09277/) (2023)
- [On the Hardness of Faithful Chain-of-Thought Reasoning in Large Language Models](https://mlsanity.com/paper/2406.10625/) (2024)
- [Analyzing Chain-of-Thought Prompting in Large Language Models via Gradient-based Feature Attributions](https://mlsanity.com/paper/2307.13339/) (2023)
- [How Do Multilingual Language Models Remember Facts?](https://mlsanity.com/paper/2410.14387/) (2024)
- [Towards Faithful Natural Language Explanations: A Study Using Activation Patching in Large Language Models](https://mlsanity.com/paper/2410.14155/) (2024)
- [ROME: Memorization Insights from Text, Logits and Representation](https://mlsanity.com/paper/2403.00510/) (2024)
- [Towards Temporal Knowledge Graph Alignment in the Wild](https://mlsanity.com/paper/2507.14475/) (2025)

## Built on by (most cited first, 1 of 1)

- [Good Arguments Against the People Pleasers: How Reasoning Mitigates (Yet Masks) LLM Sycophancy](https://mlsanity.com/paper/2603.16643/) (2026)

## Abstract (arXiv)

Chain-of-Thought (CoT) prompting significantly enhances model reasoning, yet its internal mechanisms remain poorly understood. We analyze CoT's operational principles by reversely tracing information flow across decoding, projection, and activation phases. Our quantitative analysis suggests that CoT may serve as a decoding space pruner, leveraging answer templates to guide output generation, with higher template adherence strongly correlating with improved performance. Furthermore, we surprisingly find that CoT modulates neuron engagement in a task-dependent manner: reducing neuron activation in open-domain tasks, yet increasing it in closed-domain scenarios. These findings offer a novel mechanistic interpretability framework and critical insights for enabling targeted CoT interventions to design more efficient and robust prompts. We released our code and data at https://anonymous.4open.science/r/cot-D247.