Glossary · Updated May 15, 2026

Tool Use

An LLM's ability to call external functions or APIs as part of its response, enabling actions beyond text generation. Also called function calling.

Also known as: function calling · API calling · actions

What is Tool Use?

Tool use, also called function calling, is an LLM’s ability to call external functions or APIs while responding, so it can read databases, send messages or act. It is what separates AI agents from chatbots. Production tool use needs a tool catalog, structured arguments for each call, and bounded permissions that set what the agent may do or must escalate.

Christos Papadimitriou, theagency47 · Updated May 15, 2026

Why tool use matters

Without tool use, an LLM is a text-in / text-out system. With it, the LLM can read databases, write records, send emails, schedule meetings, check inventory, post to Slack, anything that has an API.

In 2026, production-grade tool use is what makes AI agents viable for business work. The 2023 “chatbot wave” largely lacked tool use; the 2024-2026 “agent wave” is built around it.

How theagency47 uses tools in agent builds

A typical agent has 3–8 tools defined in its catalog. For example, a customer support agent (like Orion) might have:

  • lookup_order(order_id), reads the order database
  • get_customer_profile(email), reads customer history
  • issue_refund(order_id, amount, reason), bounded refund authority
  • escalate_to_human(ticket_id, reason, suggested_response), escalation path
  • update_ticket_status(ticket_id, status), writes ticket state

Each tool has a JSON schema for arguments, a security boundary, and an audit log entry on every call.

FAQ

Are tools different per agent?

Yes. Each agent has a tool catalog tailored to its job. Sales agents call CRM tools; support agents call order DB tools; email agents call Gmail tools. Cross-tool access is restricted unless explicitly granted.

How are dangerous tools handled?

By bounded autonomy: high-stakes tools (delete data, send external email, large refunds) require human approval or are excluded entirely. The eval suite tests this discipline before launch.

Related terms

AI Agent

A software system that takes a goal, plans steps, calls tools, and acts autonomously to produce an output, without step-by-step human prompting.

Bounded Autonomy

The engineering pattern of giving an AI agent specific permissioned actions and explicit escalation rules, letting it act independently within tight, defined boundaries.

Escalation Rule

A configured condition that hands an agent task off to a human when the agent is uncertain, out of scope, or facing high-stakes input.

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