# Layer Specialization Underlying Compositional Reasoning in Transformers

arXiv: https://arxiv.org/abs/2510.17469 · HTML: https://mlsanity.com/paper/2510.17469/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 14 of its 20 references that are in the map.
- First posted on arXiv 20 Oct 2025.

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

- [Language Models are Few-Shot Learners](https://mlsanity.com/paper/2005.14165/) (2020)
- [Transformer Feed-Forward Layers Are Key-Value Memories](https://mlsanity.com/paper/2012.14913/) (2020)
- [Toy Models of Superposition](https://mlsanity.com/paper/2209.10652/) (2022)
- [An Explanation of In-context Learning as Implicit Bayesian Inference](https://mlsanity.com/paper/2111.02080/) (2021)
- [Transformers learn in-context by gradient descent](https://mlsanity.com/paper/2212.07677/) (2022)
- [What Can Transformers Learn In-Context? A Case Study of Simple Function Classes](https://mlsanity.com/paper/2208.01066/) (2022)
- [What learning algorithm is in-context learning? Investigations with linear models](https://mlsanity.com/paper/2211.15661/) (2022)
- [Transformer Feed-Forward Layers Build Predictions by Promoting Concepts in the Vocabulary Space](https://mlsanity.com/paper/2203.14680/) (2022)
- [Measuring Compositional Generalization: A Comprehensive Method on Realistic Data](https://mlsanity.com/paper/1912.09713/) (2019)
- [Physics of Language Models: Part 3.1, Knowledge Storage and Extraction](https://mlsanity.com/paper/2309.14316/) (2023)
- [Omnigrok: Grokking Beyond Algorithmic Data](https://mlsanity.com/paper/2210.01117/) (2022)
- [Grokking modular arithmetic](https://mlsanity.com/paper/2301.02679/) (2023)
- [A Tale of Two Circuits: Grokking as Competition of Sparse and Dense Subnetworks](https://mlsanity.com/paper/2303.11873/) (2023)
- [Towards Understanding the Relationship between In-context Learning and Compositional Generalization](https://mlsanity.com/paper/2403.11834/) (2024)

## Abstract (arXiv)

Transformers exhibit compositional reasoning on sequences not observed during training, a capability often attributed to in-context learning (ICL) and skill composition. We investigate this phenomenon using the Random Hierarchy Model (RHM), a probabilistic context-free grammar that generates sequences through recursive rule application. Models are trained on subsets of sequences and evaluated across four generalization conditions: memorization, in-distribution generalization, out-of-distribution generalization with the same rules, and cross-layer transfer. Behaviorally, performance improves systematically with task complexity and the number of in-context examples, with out-of-distribution tasks requiring substantially more examples than in-distribution scenarios. Mechanistically, we identify a progressive emergence of layer specialization during training that correlates with generalization performance. Principal component analysis and attention pattern clustering reveal that transformers develop structured, hierarchically organized representations in specialized layers. These results demonstrate that transformers develop modular, interpretable mechanisms supporting compositional reasoning, linking internal algorithmic structure to observed behavioral capabilities.