# Less Context, Better Agents: Efficient Context Engineering for Long-Horizon Tool-Using LLM Agents

arXiv: https://arxiv.org/abs/2606.10209 · HTML: https://mlsanity.com/paper/2606.10209/

## Key facts

- Cited by 2 papers in the map (data through 14 Oct 2026).
- Placed in Financial trading and forecasting agents, one of 16 directions in LLM agents and tool use.
- Builds on 8 of its 11 references that are in the map.
- First posted on arXiv 8 Jun 2026.

## Placed in

- LLM agents and tool use / [Financial trading and forecasting agents](https://mlsanity.com/agents/financial-trading-and-forecasting-agents/)

## Builds on (most cited first, 8 of 8)

- [Language Models are Few-Shot Learners](https://mlsanity.com/paper/2005.14165/) (2020)
- [ReAct: Synergizing Reasoning and Acting in Language Models](https://mlsanity.com/paper/2210.03629/) (2022)
- [Evaluating Very Long-Term Conversational Memory of LLM Agents](https://mlsanity.com/paper/2402.17753/) (2024)
- [LongMemEval: Benchmarking Chat Assistants on Long-Term Interactive Memory](https://mlsanity.com/paper/2410.10813/) (2024)
- [LLMLingua: Compressing Prompts for Accelerated Inference of Large Language Models](https://mlsanity.com/paper/2310.05736/) (2023)
- [ACON: Optimizing Context Compression for Long-horizon LLM Agents](https://mlsanity.com/paper/2510.00615/) (2025)
- [MCP-Bench: Benchmarking Tool-Using LLM Agents with Complex Real-World Tasks via MCP Servers](https://mlsanity.com/paper/2508.20453/) (2025)
- [Context as a Tool: Context Management for Long-Horizon SWE-Agents](https://mlsanity.com/paper/2512.22087/) (2025)

## Built on by (most cited first, 2 of 2)

- [What Does Context Compression Cost an Agent? Interaction Costs Unrevealed by Task-Completion Metrics](https://mlsanity.com/paper/2608.16370/) (2026)
- [PDEU-Bench: Benchmarking the Personalized Planning Lifecycle of Tool-Calling LLM Agents](https://mlsanity.com/paper/2609.34930/) (2026)

## Abstract (arXiv)

Large language models deployed as autonomous agents for enterprise workflows face a key challenge: verbose tool responses from enterprise systems can cause context overflow, stale-state errors, and high inference cost. We study this problem in automated expense itemization in Microsoft Dynamics 365 Finance and Operations using Model Context Protocol tools. We evaluate four GPT-5 configurations on a 50-task hotel expense benchmark: no user model, full conversation history, context pruned to the last 5 tool call/response pairs, and pruning with automated summarization. Results are averaged across 5 independent runs, with the user model held constant for the context-engineering comparison. The no-user-model baseline achieves only 8.0% complete itemization. Full-context retention improves completion to 71.0%, but consumes 1,480,996 tokens and 14.56 hours per benchmark. Pruning to the last 5 tool calls improves completion to 79.0% while reducing token use to 535,274 and runtime to 5.39 hours. Adding summarization achieves the best result: 91.6% complete itemization and 99.64% average amount itemized, with 553,374 tokens and 5.79 hours. We further report confidence intervals, effect-size analysis, sensitivity over pruning and summary windows, failure analysis, results across five expense types grouped into three categories, and cross-model evidence with Claude Sonnet 4.5. These results show that, for this class of enterprise tool-use workflow, selective retention of recent tool interactions plus compact summarization can improve both reliability and efficiency compared with full-history retention.