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How Coding Agents Work: Observe, Model, Act, Verify

Coding agents gather project evidence, choose a next step, act through tools, and use results to guide further work. Learn what each stage establishes—and what still needs human review.
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A coding agent works in a loop: it gathers evidence about a task and project, chooses a next step, acts through development tools, then checks what happened. If the result is incomplete or a check fails, the feedback informs another cycle. The labels observe, model, act, verify are a practical way to explain that process—not a universal standard or a guarantee that an agent will finish correctly.

How the coding-agent loop works

A coding agent combines a language model with tools and a development environment. The surrounding software, often called a harness, coordinates the exchange: context and tool results inform the model’s next decision, and the model can request further actions. Microsoft’s Visual Studio Code documentation describes the pattern this way: “The repeated reasoning, action, and validation steps form the agent loop.” Visual Studio Code documentation.

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1. Observe: gather evidence

The agent takes in the requested goal and relevant project information. Depending on the environment and enabled tools, that may include file contents, code context, command output, test results, or errors. These are observations, not proof that a suspected cause is correct. A test failure, for example, shows that a check failed; it does not by itself identify why.

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2. Model: choose a proportionate next step

The agent reasons about the goal and the evidence available, then chooses what to do next. That could mean inspecting another file, editing a function, or running a focused test. A useful design principle is to keep the action proportional to the task and evidence: when the cause is unclear, gather more context rather than treating an unverified guess as fact.

3. Act: use a tool

The agent can use tools to read or change files, run commands, or trigger build, test, and lint work. What it can do depends on the tools exposed by the environment and the permissions or approvals configured there. A completed tool call establishes that an action ran; it does not establish that the requested outcome was achieved.

4. Verify: compare results with the goal

The agent inspects the action’s results and checks them against the requested outcome. Relevant tests or other checks can provide evidence; failures and errors become new observations that inform the next decision. If a check fails, the cycle can continue with diagnosis, another edit, and revalidation. A human should review the resulting changes and the validation evidence before accepting them.

Why the return path matters

A one-shot code suggestion ends with generated text. An agent loop adds environmental feedback: a tool returns information, that information becomes context for the next reasoning step, and the agent can adapt. Hugging Face describes a related educational pattern as thought, action, and observation, with tool output added to context before the next reasoning step. AWS Prescriptive Guidance describes the broader pattern as “perceive, reason, act”: perception gathers environmental signals, reasoning analyzes goals and context, and action executes goal-directed steps. These labels are related, but they are not identical to the four-stage wording used here.

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For example, in a form-validation task, an agent might first inspect the form and existing project patterns, then change the implementation and tests. It can run the relevant tests, read any failure, revise the code, and run the checks again. The important distinction is between making a change and establishing, through relevant evidence, that it works as intended.

What determines an agent’s behavior

The loop is a useful mental model, but it does not make all coding agents equivalent. Implementations can differ in the context they can observe, the actions they can take, where those actions run, and how state and approvals are handled.

  • Available context: which files, code information, command results, and other project signals can enter the agent’s view.
  • Enabled actions: whether it can inspect files, edit code, run commands, or invoke build, test, and lint tools.
  • Execution and permissions: where tools run, what they can access, and whether a person must approve an action.
  • Feedback and state: which checks are available and how the environment retains tool results, prompts, responses, or revision history.
  • Human review: who examines the edits and validation results before changes are accepted.

AWS describes one possible implementation pattern: receive a query, gather environment context such as active files and code information, send the query and context to a language model, then execute actions in an IDE or runtime. Its examples include build, test, and lint work, as well as options such as Amazon Bedrock, Amazon Q Developer, Lambda or ECS for sandboxing, IDE integrations, and S3 for intermediate data or revision history. These are implementation examples, not required components.

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When should the loop stop?

A sensible stopping rule is to stop when available evidence supports the intended result and the human review is complete. If the agent lacks necessary context, encounters a permission boundary, or cannot resolve a failure, it should request clarification or approval, or escalate rather than claim completion. This is a design recommendation, not a behavior guaranteed by every agent.

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Use completion language that matches what was actually checked. A tool running successfully is not the same as a build passing; a build passing is not necessarily the same as the user’s full request being met. State which relevant checks ran and what they showed, and distinguish checked results from anything left unverified.

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