Definition
Prompt caching reuses previously processed prompt content to reduce latency and cost for repeated LLM calls. It is especially useful for long system prompts, RAG context, and agent workflows.
Many LLM applications send the same long instructions, policy text, tool definitions, or reference documents repeatedly. Processing that shared content from scratch on every request increases latency and cost. Prompt caching reuses repeated prompt content so later model calls can be faster or cheaper.
Why it matters
Modern AI workflows often rely on long context: product documentation, code files, retrieved passages, agent instructions, and tool schemas. If a large portion of that context stays the same across turns, caching can make long-context applications more practical. It does not make the model inherently smarter, but it changes the economics of using richer context.
How to read AI news about it
When prompt caching is announced, check what is cached, how long it can be reused, whether the cache applies automatically or requires prompt structure, and how it interacts with tools, streaming, and privacy controls. Pricing details can change, so the durable concept is that repeated prefixes or stable context can be processed more efficiently.
Common uses
Prompt caching is useful for customer support assistants with long policy instructions, RAG systems that reuse the same reference material, coding agents that repeatedly inspect the same repository context, and enterprise agents with many tool definitions. It is especially valuable when a user asks several questions against the same large background.
Watch-outs
Caching helps only when content is actually repeated. If every request has different context, the benefit is limited. Teams also need to think about cache invalidation, sensitive data, and whether updated policies or documents are reflected correctly. In AI news, prompt caching should be read as an infrastructure improvement for long-context workloads, not a general quality upgrade for every prompt.