Definition: Optimization of how AI agents access and process codebase information. Reduces inference costs 60-80% and improves accuracy.
— Source: NERVICO, Product Development Consultancy
Context Engineering
Definition
Context Engineering is the discipline that optimizes how AI agents access, process, and use codebase information to generate code and make decisions.
Why It Matters
- Cost reduction: 60-80% less in inference costs through prompt optimization and caching
- Better accuracy: Agents with optimized context make 40% fewer errors
- Scalability: Enables working with >500K LOC codebases without performance degradation
Techniques
- RAG (Retrieval-Augmented Generation)
- Vector databases (Pinecone, Weaviate)
- Semantic search and embedding optimization
- Context window management
- Caching strategies
Related Terms
Last updated: February 2026 Category: AI Development