A Guide to Building AI Agents

Most AI agent projects fail for predictable reasons. The agent can’t see the data it needs, sees the wrong data, or doesn’t know what actions it’s allowed to take. When that happens, teams blame the model, add more prompt instructions, and hope for the best. None of that fixes the underlying issue.

Building AI agents is primarily a data and systems problem. An agent only performs as well as the context you give it and the tools you let it use. If data is stale, poorly structured, or inaccessible, the agent will behave unpredictably, no matter how advanced the LLM is.

This guide walks through how to build AI agents that actually work in production.

When Should You Build AI Agents?

You should build an AI agent when a workflow requires more than a single response. Agents make sense when the system has to gather information from multiple sources, reason over it, and take actions without you stepping in. If a task needs tool calls, decisions across several steps, or continuous interaction with your data, an agent will outperform a simple LLM prompt.

Teams usually reach this point when their prototype breaks on real data. Support tools fail because they cannot search across Slack, Notion, and ticketing systems. Internal copilots produce inconsistent answers because context is stale. Engineering assistants cannot update code or create PRs without structured actions. Once the work requires planning, data retrieval, and tool use, you need an agent with proper context engineering behind it.

How Do You Build an AI Agent?

Building AI agents is easier when you follow a structured process. The steps below outline how to define the problem, prepare the data, and shape the agent’s reasoning so it performs consistently in production.

1. Define What You Want the Agent to Do

Identify the specific workflow or problem your agent will address. Pick one concrete use case like answering customer support questions, generating code from specifications, or analyzing financial reports.

Define constraints upfront: 

• Which actions can the agent take on its own versus which require human approval? 
• Should it access customer data directly or only query anonymized records? 
• Can it make API calls to external systems? 

These boundaries prevent your agent from taking unintended actions in production.

2. Map the Data Your Agent Needs

List every system your agent will depend on. A support agent might pull from your knowledge base, past tickets, product docs, and customer accounts. A code assistant needs access to your codebase, internal libraries, API documentation, and architecture notes. This gives you a clear picture of what the agent must retrieve before it can do anything useful.

Next, separate structured from unstructured sources. Structured systems like CRMs and databases follow predictable schemas. Unstructured sources like Slack, Notion, and PDFs do not, which means they require different processing and different retrieval patterns. Your entire RAG strategy depends on getting this distinction right.

Map out who should be allowed to see what. Engineers may have full repository access while contractors only see part of the data. If you leave permission work for later, you’ll end up rewriting half your pipeline. It’s much easier to define access rules before you connect anything.

Document which API credentials are required and how authentication works, since OAuth flows differ between platforms and token refresh mechanisms vary.

Document how each system handles authentication. OAuth flows differ across platforms, token refresh behavior is inconsistent, and some services still rely on basic keys. Getting this right early prevents long debugging cycles when your first sync fails.

Step 3: Connect Your Data Sources

Handle authentication for each source system carefully because every service treats credentials differently. Notion uses bearer tokens. Salesforce requires OAuth 2.0 with refresh tokens. Google Drive needs service account credentials. Some older systems still rely on basic authentication. Building these integrations from scratch usually means spending days debugging OAuth flows, token refresh issues, and rate limits.

Airbyte Agentic Data provides hundreds of connectors that handle this batch synchronization layer. The platform extracts data from sources and loads it into a data warehouse or AI-ready storage layer on scheduled intervals. PyAirbyte gives you programmatic control to configure and run these syncs.

Example: Using the PyAirbyte to extract data from Notion with a pre-built connector.

import airbyte as ab
‍
# Connect to Notion (authentication handled by connector)
source = ab.get_source(
    "source-notion",
    config={"api_key": ab.get_secret("notion_key")}
)
‍
# Read data from configured streams
read_result = source.read()
‍
# Access specific streams
documents = read_result["pages"]

Design your data access layer to handle rate limits with retry logic and exponential backoff. Your agent should always be aware of token budgets and quotas so it doesn’t interrupt workflows when an API pushes back.

Normalize data so the agent can use it consistently. Each source returns fields with different names and structures. One system might call a field name, another full_name, and another display_name. Pick one canonical representation and attach metadata like source system, last modified timestamp, author, and permission labels.

4. Build the Retrieval and Context Layer

Chunk your documents into pieces the model can reason over. Most teams use 512–1,024 token chunks, split at sentence boundaries to avoid cutting ideas mid-thought. Recursive character splitting with around 1,000 tokens and 200 tokens of overlap keeps context intact across chunk boundaries.

Generate embeddings for each chunk using a model suited to your domain. General-purpose embedding models like OpenAI's text-embedding-3 work for most use cases. Domain-specific models such as BAAI/bge-large-en-v1.5 often perform better on technical material.

Store embeddings alongside their source text and metadata in a vector database. Select based on your deployment needs:

• Pinecone handles high-QPS managed workloads
• Weaviate works for multi-modal content
• Qdrant or Milvus suit self-hosted deployments
• Chroma allows rapid prototyping

Next, build the query flow. Convert user queries into embeddings using the same model you used for chunks. Search the vector database for semantically similar content and return the strongest matches. This becomes the context the agent reasons over.

Airbyte Agentic Data brings data from different sources into a consistent structure during batch syncs, while preserving important metadata. After ingestion, the data is ready to be transformed and chunked for vector-based AI workflows.

To improve retrieval quality, implement hybrid search. Combining semantic similarity with keyword matching improves recall across diverse query types, especially when a user’s phrasing differs from the original text.

5. Choose the Right Model and Reasoning Style

Choose an LLM based on cost, latency, and quality requirements. GPT-4 delivers strong reasoning but runs slower and costs more. Claude is excellent for long, complex instructions. Open-source models like Llama give you more control and lower cost at the expense of some accuracy.

Test multiple models with real queries from your use case. The right approach depends on the workflow. Direct prompting or RAG is enough for simple question answering. More complex tasks that require multiple steps benefit from multi-step planning.

For those cases, patterns like ReAct work well. The agent thinks about what to do, takes an action through a tool, observes the result, and repeats until the task is done.

Keep prompts modular by separating system instructions, few-shot examples, retrieved context, and the user request. Modular prompts make testing easier and help you isolate what improves or breaks agent performance.

6. Create the Tools and Actions Your Agent Can Perform

Build APIs or function calls for specific tasks the agent needs to perform. These might query databases, call external services, or update records. Each tool should be designed to do one clear thing well, and it needs:

• A clear, descriptive name
• A short explanation of what it does
• Defined input parameters with types
• A predictable output format

Add error handling to every tool. External APIs fail. Database queries time out. Network requests drop. Your tools should catch these errors and return useful messages the agent can act on. For example, to retry, switch strategies, or surface a clear failure. Silent failures are what create “weird” or confusing agent behavior.

Write detailed descriptions explaining when and how to use each tool. The LLM reads these descriptions to decide which tool fits the current sub-task. Vague descriptions or missing parameter details lead to tool selection errors, where the agent either calls the wrong tool or invents parameters that don’t exist.

7. Add Memory and State Management

Decide which information should persist across conversations. Short-term memory holds the active conversation inside the model’s context window, typically 4K–128K tokens depending on the model. Long-term memory stores summaries or important facts in external systems, such as vector databases, so the agent can recall information beyond those limits.

Not everything needs to persist. Be intentional about what is useful to store.

A multi-tiered approach works best. Keep the active conversation in the prompt so the model can see it directly. Store summaries or key details in long-term memory so the agent can reference past sessions and maintain continuity. This balance gives the agent immediate awareness and longer-term recall.

Choose storage based on access patterns. Redis fits fast, short-lived memory needs. PostgreSQL gives you reliable long-term storage with strong query capabilities. Vector databases help the agent search past conversations semantically.

As conversations grow, implement summarization before hitting the model’s context limit. Automatically condense older messages so the agent keeps the essential information without losing the thread of the interaction.

8. Test With Real Data

Start by testing retrieval accuracy. Run common queries through your pipeline and inspect the returned chunks. Check whether the top results are relevant and whether important information appears at all. Retrieval quality directly determines how well the agent performs, no matter how strong the model is.

Test tool calls and failure scenarios across all layers of your system. Use unit tests, integration tests, and scenario simulations. Track metrics such as:

• Task success rate
• Tool-usage accuracy
• Hallucination frequency
• Response latency across p50, p95, and p99

Simulate real user prompts, not just clean test cases. Users will type incomplete questions, misspell words, ask multiple things at once, or phrase requests differently than engineers expect. Your test suite should include this messy input. Build regression tests to ensure the agent behaves consistently as you update prompts, tools, or retrieval logic.

9. Add Guardrails and Observability

Implement logging for every agent interaction so you can understand how the system reached its decisions. Capture user queries, retrieved context, reasoning traces, tool calls, final outputs, and correlation IDs. These logs make it possible to trace issues end-to-end when behavior drifts or tools fail.

Add tracing to visualize multi-step execution. Tools like LangSmith and Langfuse show each step in the agent’s reasoning chain and how it used tools, which helps you diagnose loops, dead ends, and incorrect assumptions.

Use your logs and traces to define clear SLOs for the agent, such as acceptable latency ranges or error budgets. Set up alerts when these SLOs are breached so your team can investigate and take action before users notice problems.

Finally, enforce guardrails around data and actions. Verify user authorization before every data access, and require human approval for sensitive operations like deletions, financial updates, or irreversible changes. These controls keep agents safe and predictable in production environments.

10. Deploy and Iterate

Choose a deployment setup that matches your scale:

• Serverless works for low-volume or unpredictable traffic
• Containers are better for steady, high-volume workloads
• Managed AI platforms reduce operational work but limit flexibility

Monitor data freshness in production. Track when each source was last synced and alert your team if anything falls behind. Stale data leads directly to outdated answers.

Automate your sync schedule. Hourly updates work for most workflows, while fast-changing data may need refreshes every few minutes. For anything requiring near-instant updates, add real-time signals in your query layer.

Roll out gradually instead of going live all at once. Start with internal testing, then release to a small slice of production traffic. Watch quality metrics and user feedback, expand as confidence grows, and refine prompts, tools, and pipelines based on real usage.

What's the Fastest Way to Build AI Agents That Work in Production?

The fastest way to get an agent into production is to stop treating data plumbing as a side project. Agents only work when they have fresh, permissioned, well-structured context, and most engineering teams spend weeks building brittle integrations that break the moment APIs change. Purpose-built context infrastructure removes this entire layer of work. 

Airbyte’s Agent Engine gives you governed connectors, structured and unstructured data support, metadata extraction, and automatic updates with incremental sync and CDC. PyAirbyte adds a flexible, open-source way to configure and manage pipelines programmatically so your team can focus on retrieval quality, tool design, and agent behavior.

Request a demo to see how Airbyte Embedded powers production AI agents with reliable, permission-aware data.

Frequently Asked Questions

What's the difference between an AI agent and a chatbot?

AI agents use tools to take actions and make decisions through multi-step reasoning, while chatbots follow predetermined conversation flows or provide single-turn responses. Agents can plan sequences of actions, invoke APIs, and iterate until completing complex tasks on their own.

Which framework should I use to build an AI agent?

LangChain and LangGraph dominate production deployments for their mature ecosystem, observability integrations, and established deployment patterns. Choose LlamaIndex if your primary focus is data retrieval and indexing. CrewAI works well for multi-agent systems with role-based specialization.

How do I prevent my agent from hallucinating?

Implement retrieval-augmented generation to ground responses in factual data from your knowledge base. Add citations by preserving metadata throughout the pipeline. Include source URLs, document IDs, and timestamps, then configure output formatting to include source attribution in responses. Use structured output formats with Pydantic models or JSON schemas to separate facts from reasoning.

What's the biggest challenge in deploying AI agents to production?

Data access reliability, prompt quality, and observability all determine production success. Agents need consistent, fresh, permission-aware access to enterprise data sources through well-designed RAG pipelines. Most teams underestimate the total engineering effort required to build production-grade AI agents, which spans data infrastructure, framework integration, monitoring, security, and operational systems.