Induction in Both Directions: A Mechanistic Analysis of In-Context Learning in Masked Diffusion Language Models
While the internal mechanisms of autoregressive (AR) transformers have been studied extensively, much less is known about diffusion language models (DLMs), an emerging alternative that generates text by iterative denoising. In this work, we study how DLMs implement induction, a mechanism behind in-context learning in which the model finds a repeated context and copies the token that followed it. Our analysis compares attention-only AR models and absorbing-mask DLMs with matched architectures. We find that DLMs learn a bidirectional induction circuit, where previous-token and next-token heads write local context into the residual stream and later induction heads use it to find and copy the answer from the matching source position. The circuit is direction-symmetric, working whether the source appears in the past or in the future. When only left context is visible, matching what an AR model sees, the DLM does not outperform its AR counterpart in induction capabilities. However, we observe it has stronger induction when both sides of the masked token are visible, pointing to bidirectional context access rather than a stronger one-sided mechanism. Beyond induction, we provide causal evidence that DLMs compute the global fraction of masked tokens and use it as an implicit timestep, even though they are given no explicit timestep embedding.