# CoACT: Action-Preserving Observation Compression for Coding Agents

arXiv: https://arxiv.org/abs/2607.02911 · HTML: https://mlsanity.com/paper/2607.02911/

## Key facts

- Cited by 4 papers in the map (data through 14 Oct 2026).
- Placed in Software engineering coding agents, one of 16 directions in LLM agents and tool use.
- Builds on 35 of its 43 references that are in the map.
- First posted on arXiv 3 Jul 2026.

## Placed in

- LLM agents and tool use / [Software engineering coding agents](https://mlsanity.com/agents/software-engineering-coding-agents/)

## Builds on (most cited first, 30 of 35)

- [LoRA: Low-Rank Adaptation of Large Language Models](https://mlsanity.com/paper/2106.09685/) (2021)
- [ReAct: Synergizing Reasoning and Acting in Language Models](https://mlsanity.com/paper/2210.03629/) (2022)
- [SWE-bench: Can Language Models Resolve Real-World GitHub Issues?](https://mlsanity.com/paper/2310.06770/) (2023)
- [SWE-agent: Agent-Computer Interfaces Enable Automated Software Engineering](https://mlsanity.com/paper/2405.15793/) (2024)
- [DeepSeek-V4: Towards Highly Efficient Million-Token Context Intelligence](https://mlsanity.com/paper/2606.19348/) (2026)
- [OpenHands: An Open Platform for AI Software Developers as Generalist Agents](https://mlsanity.com/paper/2407.16741/) (2024)
- [Terminal-Bench: Benchmarking Agents on Hard, Realistic Tasks in Command Line Interfaces](https://mlsanity.com/paper/2601.11868/) (2026)
- [LongLLMLingua: Accelerating and Enhancing LLMs in Long Context Scenarios via Prompt Compression](https://mlsanity.com/paper/2310.06839/) (2023)
- [Agentless: Demystifying LLM-based Software Engineering Agents](https://mlsanity.com/paper/2407.01489/) (2024)
- [LLMLingua-2: Data Distillation for Efficient and Faithful Task-Agnostic Prompt Compression](https://mlsanity.com/paper/2403.12968/) (2024)
- [SWE-smith: Scaling Data for Software Engineering Agents](https://mlsanity.com/paper/2504.21798/) (2025)
- [Scaling Long-Horizon LLM Agent via Context-Folding](https://mlsanity.com/paper/2510.11967/) (2025)
- [ACON: Optimizing Context Compression for Long-horizon LLM Agents](https://mlsanity.com/paper/2510.00615/) (2025)
- [AgentFold: Long-Horizon Web Agents with Proactive Context Management](https://mlsanity.com/paper/2510.24699/) (2025)
- [Trae Agent: An LLM-based Agent for Software Engineering with Test-time Scaling](https://mlsanity.com/paper/2507.23370/) (2025)
- [Prompt Compression with Context-Aware Sentence Encoding for Fast and Improved LLM Inference](https://mlsanity.com/paper/2409.01227/) (2024)
- [Scaling LLM Multi-turn RL with End-to-end Summarization-based Context Management](https://mlsanity.com/paper/2510.06727/) (2025)
- [The Complexity Trap: Simple Observation Masking Is as Efficient as LLM Summarization for Agent Context Management](https://mlsanity.com/paper/2508.21433/) (2025)
- [Reducing Cost of LLM Agents with Trajectory Reduction](https://mlsanity.com/paper/2509.23586/) (2025)
- [SWE-Pruner: Self-Adaptive Context Pruning for Coding Agents](https://mlsanity.com/paper/2601.16746/) (2026)
- [Context as a Tool: Context Management for Long-Horizon SWE-Agents](https://mlsanity.com/paper/2512.22087/) (2025)
- [LongCodeZip: Compress Long Context for Code Language Models](https://mlsanity.com/paper/2510.00446/) (2025)
- [How Do AI Agents Spend Your Money? Analyzing and Predicting Token Consumption in Agentic Coding Tasks](https://mlsanity.com/paper/2604.22750/) (2026)
- [Provence: efficient and robust context pruning for retrieval-augmented generation](https://mlsanity.com/paper/2501.16214/) (2025)
- [COMPASS: Enhancing Agent Long-Horizon Reasoning with Evolving Context](https://mlsanity.com/paper/2510.08790/) (2025)
- [SWE-Effi: Re-Evaluating Software AI Agent System Effectiveness Under Resource Constraints](https://mlsanity.com/paper/2509.09853/) (2025)
- [Active Context Compression: Autonomous Memory Management in LLM Agents](https://mlsanity.com/paper/2601.07190/) (2026)
- [A Self-Evolving Framework for Efficient Terminal Agents via Observational Context Compression](https://mlsanity.com/paper/2604.19572/) (2026)
- [Compressing Code Context for LLM-based Issue Resolution](https://mlsanity.com/paper/2603.28119/) (2026)
- [AgentSwing: Adaptive Parallel Context Management Routing for Long-Horizon Web Agents](https://mlsanity.com/paper/2603.27490/) (2026)

## Built on by (most cited first, 4 of 4)

- [Read Less, Solve More: Token-Efficient Sparse Reading for AI Agents](https://mlsanity.com/paper/2608.22237/) (2026)
- [Compress What You See, Not What You Say: Anchored Context Distillation for Latent-Observation Software Engineering Agents](https://mlsanity.com/paper/2609.31430/) (2026)
- [Beyond Token Savings: A Systematic Study of Context Compression in LLM Agents](https://mlsanity.com/paper/2609.32961/) (2026)
- [Safe Actions Alone Do Not Ensure Safe Agents: Identifying Unfulfilled Obligations with Guard Models](https://mlsanity.com/paper/2610.11773/) (2026)

## Abstract (arXiv)

LLM-based coding agents solve software-engineering tasks through iterative interactions with development environments, where returned observations accumulate in the context and become a major source of inference cost. Observation compression reduces this cost by shortening observations before they are appended to the context. However, existing methods still exhibit an unsatisfactory efficiency-effectiveness trade-off, as they do not explicitly model how compression affects the agent's subsequent behavior. This paper proposes CoACT, an action-preserving observation compression method for coding agents. CoACT is built on next-action preservation (NAP), which requires a compressed observation to induce the same next action as the raw observation. By checking the agent's immediate next action, NAP provides a practical signal for whether a compression preserves the information needed for continued task solving. During training, a teacher model first generates multiple compressed candidates of each observation. CoACT then uses an action-preservation reward based on NAP to filter out candidates that would change the agent's next action, and uses a length-reduction reward to choose compact candidates as supervision for a lightweight compressor. Experiments on SWE-bench Verified with three agentic models show that CoACT reduces average total token consumption by 33.0% while maintaining task-solving effectiveness close to the uncompressed agent.