Unveiling the Mechanisms of Multi-Hop Reasoning in Transformers via Identity Bridge

Large language models (LLMs) can solve complex multi-hop problems yet exhibit puzzling failures on simple two-hop queries: although a model may correctly store each individual hop, it often fails to combine them. To understand the internal mechanisms of this phenomenon, we train transformers from scratch in a controlled symbolic environment. Our experiments reveal a pattern in two-hop generalization: models generalize reliably when the second hop follows the training distribution, but always fail when it deviates. Through mechanistic analysis, we provide a complete explanation for these distinct generalization behaviors: in settings where models generalize successfully, performance is driven by the emergence of consistent intermediate representations for the same entities across contexts, whereas failures on settings where the second hop is out-of-distribution arise from a mismatch across layers: lower layers correctly construct these intermediate representations, but upper layers, while trained on corresponding atomic facts, primarily learn to map them to outputs rather than to reason over them. Driven by this insight, we propose a recurrent-style training strategy, which enables transformers to reuse their reasoning circuitry across input forms and substantially improves generalization on out-of-distribution two-hop queries.

Large language models achieve strong performance on many reasoning tasks when allowed to externalize intermediate steps as Chain-of-Thought (CoT). However, many questions require the model to internalize the multi-step reasoning within a single forward pass before generating the answer. We study this challenge through two-hop reasoning, a representative task where the model must compose multiple pieces of parametric knowledge within a single forward pass. Standard non-recurrent Transformers suffer from a depth-local storage problem: facts learned in earlier layers are unavailable where second-hop retrieval happens. We found that Looped Transformers mitigate this issue by reusing the same memory, but still generalize imperfectly. We show that the remaining bottleneck is representational. In the two-hop reasoning task, the first loop often makes the correct bridge entity nearly perfectly decodable, yet the corresponding hidden state remains poorly aligned with the bridge token embedding. Surprisingly, an easy training-free realignment intervention nearly closes the generalization gap. Building upon this insight, we propose DiscoLoop, a looping architecture whose recurrence carries both a discrete embedding channel and a continuous hidden-state channel. DiscoLoop achieves near-perfect accuracy with substantially fewer training steps across symbolic and synthetic-language multi-hop reasoning tasks. When applied to real-world pretraining, DiscoLoop attains lower training loss and stronger benchmark performance than looped-transformer baselines, suggesting that the mixed-channel design transfers to practical language modeling.

While empirical scaling laws for LLM reasoning are well-documented, the theoretical mechanisms governing out-of-distribution (OOD) generalization remain elusive. We formalize reasoning via optimal transport, projecting discrete trajectories into a continuous metric space to quantify domain shifts using the Wasserstein-1 distance. Invoking Kantorovich duality, we bound OOD generalization via architectural Lipschitz continuity and functional approximation limits. This exposes two primary constraints. First, position-dependent attention (e.g., Absolute Positional Encoding) fails to preserve shift invariance, yielding an $Ω(1)$ Lipschitz constant and expected risk, whereas shift-invariant mechanisms (e.g., Rotary Embeddings) preserve equivariance and bound the error. Second, by mapping sequential backtracking to a Dyck-$k$ language, we establish a strict circuit depth lower bound for $\text{TC}^0$ Transformers. Scaling physical layer depth is necessary to avert representation collapse -- a constraint that scaling representation width cannot bypass due to irreducible approximation bounds in Barron spaces. Evaluations across 54 Transformer configurations on combinatorial search corroborate these bounds, demonstrating that generalization risk degrades monotonically with the Wasserstein domain shift.