SADA: Bridging In-Context Learning and Fine-Tuning via State-Aligned Distillation Adapters

Prompt-based in-context learning (ICL) and parameter fine-tuning are two dominant paradigms for incorporating external information into large language models (LLMs), but they incur high inference costs or require expensive retraining. To bridge this gap, context-to-parameter mapping converts prompts into temporary adapter weights. However, we identify a critical failure mode in existing methods: hiddenstate collapse, where the adapter-augmented model's internal states diverge sharply from the full-context oracle in deeper layers. We trace this failure to two coupled gaps: suboptimal Input-Selection and inadequate Supervision-Signal. To address these issues, we propose SADA (State-Aligned Distillation Adapters). We establish the attention-block output as a principled feature interface to improve input selection and introduce statealignment distillation to enforce consistency between the adapter-augmented model and the full-context oracle. Experiments on long-context language modeling (PG19) and downstream NLU and summarization benchmarks show that SADA consistently outperforms strong baselines like StreamAdapter and GenerativeAdapter, achieving performance comparable to ICL while significantly reducing memory footprint and latency. We further analyze when parameterized context compression is effective and when explicit context retention remains preferable. Our code is available at https://github. com/Taylor-Gavel/SADA.git .