In this article, you will learn how inference caching works in large language models and how to use it to reduce cost and latency in production systems. Topics we will cover include: The fundamentals of inference caching and why it matters The three main caching types: KV caching, prefix caching, and semantic caching How to choose and combine caching strategies in real-world applications The Complete Guide to Inference Caching in LLMsImage by Author Introduction Calling a large language model API at scale is expensive and slow. A significant share of that cost comes from repeated computation: the same system prompt processed from scratch on every request, and the same common queries answered as if the model has never seen them before. Inference caching addresses this by storing the results of expensive LLM computations and reusing them when an equivalent request arrives. Depending on which caching layer you apply, you can skip redundant attention computation mid-request, avoid reprocessing shared prompt prefixes across requests, or serve common queries from a lookup without invoking the model at all. In production systems, this can significantly reduce token spend with almost no change to application logic. This article covers: What inference caching is and why it matters The three main caching types: key-value (KV), prefix, and semantic caching How semantic caching extends coverage beyond exact prefix matches Each section builds toward a practical decision framework for choosing the right caching strategy for your application. What Is Inference Caching? When you send a prompt to a large language model, the model performs a substantial amount of computation to process the input and generate each output token. That computation takes time and costs money. Inference caching is the practice of storing the results of that computation — at various levels of granularity — and reusing them when a similar or identical request arrives. There are three distinct types to understand, each operating at a different layer of the stack: KV caching: Caches the internal attention states — key-value pairs — computed during a single inference request, so the model does not recompute them at every decode step. This happens automatically inside the model and is always on. Prefix caching: Extends KV caching across multiple requests. When different requests share the same leading tokens, such as a system prompt, a reference document, or few-shot examples, the KV states for that shared prefix are stored and reused across all of them. You may also see this called prompt caching or context caching. Semantic caching: A higher-level, application-side cache that stores complete LLM input/output pairs and retrieves them based on semantic similarity. Unlike prefix caching, which operates on attention states mid-computation, semantic caching short-circuits the model call entirely when a sufficiently similar query has been seen before. These are not interchangeable alternatives. They are complementary layers. KV caching is always running. Prefix caching is the highest-leverage optimization you can add to most production applications. Semantic caching is a further enhancement when query volume and similarity are high enough to justify it. Understanding How KV Caching Works KV caching is the foundation that everything else builds on. To understand it, you need a brief look at how transformer attention works during inference. The Attention Mechanism and Its Cost Modern LLMs use the transformer architecture with self-attention. For every token in the input, the model computes three vectors: Q (Query) — What is this token looking for? K (Key) — What does this token offer to other tokens? V (Value) — What information does this token carry? Attention scores are computed by comparing each token’s query against the keys of all previous tokens, then using those scores to weight the values. This allows the model to understand context across the full sequence. LLMs generate output autoregressively — one token at a time. Without caching, generating token N would require recomputing K and V for all N-1 previous tokens from scratch. For long sequences, this cost compounds with every decode step. How KV Caching Fixes This During a forward pass, once the model computes the K and V vectors for a token, those values are saved in GPU memory. For each subsequent decode step, the model looks up the stored K and V pairs for the existing tokens rather than recomputing them. Only the newly generated token requires fresh computation. Here is a simple example: Without KV caching (generating token 100): Recompute K, V for tokens 1–99 → then compute token 100 With KV caching (generating token 100): Load stored K, V for tokens 1–99 → compute token 100 only Without KV caching (generating token 100): Recompute K, V for tokens 1–99 → then compute token 100   With KV caching (generating token 100): Load stored K, V for tokens 1–99 → compute token 100 only This is KV caching in its original sense: an optimization within a single request. It is automatic and universal; every LLM inference framework enables it by default. You do not need to configure it. However, understanding it is essential for understanding prefix caching, which extends this mechanism across requests. For a more thorough explanation, see KV Caching in LLMs: A Guide for Developers. Using Prefix Caching to Reuse KV States Across Requests Prefix caching — also called prompt caching or context caching depending on the provider — takes the KV caching concept one step further. Instead of caching attention states only within a single request, it caches them across multiple requests — specifically for any shared prefix those requests have in common. The Core Idea Consider a typical production LLM application. You have a long system prompt — instructions, a reference document, and few-shot examples — that is identical across every request. Only the user’s message at the end changes. Without prefix caching, the model recomputes the KV states for that entire system prompt on every call. With prefix caching, it computes them once, stores them, and every subsequent request that shares that prefix skips directly to processing the user’s message. The Hard Requirement: Exact