mlsanityData to 7 Oct 2026

Hybrid Semantic Tool Discovery for Enterprise MCP Gateway: Architecture and Implementation

arXiv 2608.23992 ↗First posted 25 Aug 2026cs.IR cs.AIcited by 0

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Abstract (arXiv)

Large language model (LLM) agents invoke external tools to retrieve and reason over information beyond pretrained knowledge. The Model Context Protocol (MCP) standardizes how such tools are surfaced, and a proxy MCP server aggregates many backend servers behind a single endpoint providing a secure, governable chokepoint for authentication, policy enforcement, and observability. This architecture creates two compounding challenges: a context-engineering bottleneck where full tool schemas saturate the model context window before any user query, and a tool discoverability barrier where users and agents cannot identify the best tool among 2,000+ indexed tools across 200+ MCP servers. Prompt caching reduces reprocessing cost but neither frees context capacity nor improves accuracy. We present SCOUT (Selective Context Optimization for Universal Tooling), which reframes tool exposure as a context-selection problem, injecting only tools relevant to the current step. SCOUT surfaces two MCP meta-tools -- tool_search and execute_tool -- where tool_search performs hybrid retrieval, fusing BM25 sparse matching with dense vector search via Reciprocal Rank Fusion to return the top-k relevant tools. Backed by zero-downtime catalog update pipelines, SCOUT resolves both context saturation and tool discovery challenges. In production at PayPal, SCOUT reduces MCP tool-token consumption from 140.2k tokens (70.1% of context) to 1.3k tokens (0.8%), a 99% reduction, cutting per-query inference cost at enterprise scale. Because SCOUT is surfaced as standard MCP tools, it is model-agnostic and requires no client-side modifications.

Key facts. No citing papers in the map yet (data through 7 Oct 2026). Builds on 5 of its 9 references that are in the map. First posted on arXiv 25 Aug 2026.

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5 of 9 references.

References · 5

  1. 2020Retrieval-Augmented Generation for Knowledge-Intensive NLP Taskscited by 9,160
  2. 2022ReAct: Synergizing Reasoning and Acting in Language Modelscited by 8,355
  3. 2023Toolformer: Language Models Can Teach Themselves to Use Toolscited by 4,072
  4. 2023Lost in the Middle: How Language Models Use Long Contextscited by 3,383
  5. 2023ReWOO: Decoupling Reasoning from Observations for Efficient Augmented Language Modelscited by 174

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  1. 2026Semantic Tool Discovery for Large Language Models: A Vector-Based Approach to MCP Tool Selection
  2. 2026MCP-Atlas: A Large-Scale Benchmark for Tool-Use Competency with Real MCP Servers
  3. 2025RAG-MCP: Mitigating Prompt Bloat in LLM Tool Selection via Retrieval-Augmented Generation
  4. 2025ScaleMCP: Dynamic and Auto-Synchronizing Model Context Protocol Tools for LLM Agents
  5. 2025MCP-RADAR: A Multi-Dimensional Benchmark for Evaluating Tool Use Capabilities in Large Language Models
  6. 2026From Language to Action: Enhancing LLM Task Efficiency with Task-Aware MCP Server Recommendation
  7. 2026Model Context Protocol (MCP) Tool Descriptions Are Smelly! Towards Improving AI Agent Efficiency with Augmented MCP Tool Descriptions
  8. 2025MCP-Zero: Active Tool Discovery for Autonomous LLM Agents