// GLOSSARY -- AGENTIC AI

What is Structured Output?

1 min read Updated

Structured output refers to LLM responses formatted in machine-readable schemas like JSON or typed objects, enabling reliable integration with downstream systems and APIs.

WHY IT MATTERS

Raw LLM output is free-form text — great for humans, terrible for code. Structured output constrains the model to produce data in a specific format, making it possible to reliably parse agent decisions and route them to the right systems.

Modern approaches include JSON mode, function calling (tool use), and constrained decoding that guarantees schema compliance at the token level. Each trades some flexibility for parsing reliability.

For financial agents, structured output is non-negotiable. A transaction intent needs to be a parseable object with amount, recipient, token, and chain — not a natural language description.

HOW POLICYLAYER USES THIS

PolicyLayer relies on structured transaction intents from agents. When an agent outputs a well-typed spending request, PolicyLayer validates it against policies deterministically. Structured output is the interface between probabilistic AI and deterministic policy enforcement.

FREQUENTLY ASKED QUESTIONS

What's the best way to get structured output from LLMs?
Use the model's native function calling or tool use API. Libraries like Instructor and Outlines provide additional schema enforcement.
Can structured output still contain errors?
Yes. The format will be correct but values can still be wrong — a hallucinated address or incorrect amount. Schema validation catches format errors, not semantic ones.
How does structured output relate to tool use?
Tool use is a form of structured output where the model generates function calls with typed parameters. It's the dominant pattern for AI agents interacting with external systems.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
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