A neural mechanism for online discovery of latent contexts.

Experience unfolds as a stream shaped by hidden causes that change over time. Adaptive behavior requires inferring the underlying states and adjusting when they change. Yet, how neural circuits discover and track latent states remains unclear. Here we introduce NeuraGEM, a neural architecture that combines fast transient activity with slow synaptic plasticity to implement an online analogue of Expectation-Maximization. By separating timescales, NeuraGEM clusters sequential experiences, detects context changes, and stabilizes task-specific computations. The model generalizes beyond conventional recurrent networks and reproduces key features of human contextual learning, including curriculum-dependent effects. It also gives rise to population dynamics resembling those observed in brain circuits, including line-attractor structure and transient error responses at change points. Together, these findings provide a mechanistic account of how neural circuits organize experience into latent states that support rapid inference and adaptive behavior.