ToolSense: A Diagnostic Framework for Auditing Parametric Tool Knowledge in LLMs

Ashutosh Hathidara, Sai Shruthi Sistla, Sebastian Schreiber, Sahil Bansal


Abstract
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 **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 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 to encourage further research. (see supplementary material)
Anthology ID:
2026.findings-emnlp.370
Volume:
Findings of the Association for Computational Linguistics: EMNLP 2026
Month:
October
Year:
2026
Address:
Budapest, Hungary
Editors:
Hung-Yi Lee, Sunipa Dev, Jessy Li, Desmond Elliott
Venue:
Findings
SIG:
SIGDAT
Publisher:
Association for Computational Linguistics
Note:
Pages:
7775–7797
Language:
URL:
https://aclanthology.org/2026.findings-emnlp.370/
DOI:
Bibkey:
Cite (ACL):
Ashutosh Hathidara, Sai Shruthi Sistla, Sebastian Schreiber, and Sahil Bansal. 2026. ToolSense: A Diagnostic Framework for Auditing Parametric Tool Knowledge in LLMs. In Findings of the Association for Computational Linguistics: EMNLP 2026, pages 7775–7797, Budapest, Hungary. Association for Computational Linguistics.
Cite (Informal):
ToolSense: A Diagnostic Framework for Auditing Parametric Tool Knowledge in LLMs (Hathidara et al., Findings 2026)
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PDF:
https://aclanthology.org/2026.findings-emnlp.370.pdf