arXiv:2507.18868v1 Announce Type: new Abstract: Systematic compositional generalization - constructing and understanding novel combinations of known building blocks - remains a core challenge for AI systems. Human cognition achieves this flexibility via the interplay of the hippocampus (HPC) and prefrontal cortex (PFC): the hippocampus rapidly encodes episodes, and the prefrontal cortex consolidates them into reusable schemas for reasoning. Drawing on these insights, we present MIRAGE (Meta-Inference with Rules and Abstractions from Generalized Experience), a framework that achieves systematic generalization on compositional tasks. MIRAGE has two interacting modules mirroring the brain's deliberative HPC-PFC loop and intuitive neocortical pattern recognition. (1) The meta-trained Transformer Neural Decomposer, paralleling neocortical "System 1" computation, is trained on a task-agnostic stream of randomly sampled compositional grammars and applies one decomposition step per pass, with successive passes iteratively refining the sequence representation. (2) The Schema Engine, analogous to the HPC-PFC "System 2" loop, dynamically extracts, ranks, and applies reusable schemas, storing variable bindings in episodic memory and expanding them when needed. By explicitly equipping the Transformer component of MIRAGE with actively managed schematic structures, our model performs systematic compositional operations through explicit schema application and transformation, relying solely on frozen weights when solving entirely novel tasks. This approach demonstrates systematic compositional generalization on the SCAN benchmark, achieving > 99% accuracy on all task splits with only 1.19M parameters in the transformer module. Ablation studies confirm that MIRAGE's systematicity critically depends on the quality of extracted schemas and the model's iterative refinement process.