FitText: Evolving Agent Tool Ecologies via Memetic Retrieval

Large language models deployed as agents over large tool catalogs face a critical tool-retrieval bottleneck. As embedding-based retrieval approaches rely on compact encoders that may under-capture specialized tool semantics, parametric tool retrieval addresses this by encoding each tool as a virtual token appended to the LLM vocabulary, fine-tuned in two stages (memorization then retrieval SFT) to use the LLM as a retriever, achieving strong performance on standard ToolBench retrieval benchmarks. Yet these benchmarks use verbose, fully-specified queries, and their evaluation applies constrained decoding that restricts outputs to valid token paths, neither reveals whether the model actually understands its tools. We introduce \textbf{ToolSense}, an open-source LLM-powered diagnostic framework that takes any tool catalog as input and automatically generates three benchmarks: a Realistic Retrieval Benchmark (RRB) with queries at three ambiguity tiers, an MCQ probing benchmark, and a QA probing benchmark. Applying ToolSense to ToolBench (~47k tools) and evaluating five parametric model training configurations reveals a knowledge-retrieval dissociation: on RRB queries, several configurations collapse by ~50-64 percentage points compared to fully-specified ToolBench benchmarks, falling below the embedding-model baseline. Additionally, despite strong retrieval performance, some models score near-random on factual probes, suggesting a knowledge-retrieval dissociation. We open-source the ToolSense framework and the ToolBench diagnostic benchmarks at https://github.com/SAP/toolsense.

Large language model (LLM) agents increasingly rely on invoking external tools to complete real-world tasks. Tool retrieval, which selects a small task-relevant subset from a library of thousands of tools before the agent acts, has therefore become a critical component of LLM agent pipelines. However, existing retrievers either score each tool in isolation or assemble the tool set sequentially, so the joint utility of a candidate set is never evaluated as a whole. In this paper, we propose HYSET, short for HYperedge-based SEt-level Tool retrieval. Our contributions are threefold: (i) we formulate tool retrieval as query-conditioned hyperedge prediction on a tool co-invocation hypergraph, under which the tool set itself becomes the unit of scoring and most existing retrieval paradigms reduce to restricted instances; (ii) we capture size-dependent tool compatibility through cardinality-specific interactions; and (iii) we design HYSET as a pre-selection module requiring no modification to the downstream agent. Experiments on ToolBench demonstrate that HYSET consistently outperforms state-of-the-art baselines in both tool retrieval performance and end-to-end task success. Beyond the in-domain setting, HYSET further supports zero-shot/few-shot transfer, generalizing to held-out tools/categories and unseen domains with minimal supervision.

Tool retrieval over large API catalogs is a core bottleneck for LLM agents: user queries arrive in colloquial, often underspecified language, while the catalog uses technical API vocabulary that no fixed encoder can bridge on its own. The two dominant training approaches, contrastive encoder fine-tuning and HyDE-style query expansion with a frozen LLM, address this problem from opposite ends and fail in complementary directions: the fine-tuned encoder excels when the query's surface form already matches the catalog but collapses when it does not, while zero-shot HyDE is more robust to underspecified queries yet generates catalog-unaware hypothetical descriptions that degrade retrieval when queries are well-formed. We introduce CoHyDE, an iterative procedure that trains the dense encoder and the LLM rewriter as a single co-evolving system: the encoder is retrained with InfoNCE on catalog-style hypothetical descriptions produced by the rewriter, and the rewriter is preference-aligned via DPO against the encoder's retrieval scores, with both sides warm-started on the tool catalog before the loop begins. On a ~10k tool subset of the ToolBench catalog, three rounds of CoHyDE improve over the strongest single-component baseline by +2.5 pp NDCG@5 on standard queries and +6.3 pp on held-out vague queries, with gains as large as +8 pp on the hardest vague tier. Ablations confirm that co-training is the key ingredient: using either component in isolation fails to match CoHyDE on both well-formed and vague queries, with losses of up to -8 pp on vague queries.