dOPSD: On-Policy Self-Distillation for Diffusion Language Models

Abstract: Diffusion LLMs (dLLMs) generate text by iteratively denoising a masked sequence, offering a parallel alternative to autoregressive models, but eliciting strong reasoning through post-training remains difficult: supervised fine-tuning is off-policy and suffers from exposure bias, while reinforcement learning gives only sparse, sequence-level rewards and is hard to apply without tractable sequence likelihoods. On-policy self-distillation (OPSD) offers a promising alternative, using one model as both student and teacher to provide dense, token-level, on-policy supervision, but its effectiveness hinges on giving the teacher privileged information (PI) - typically an instance-specific ground-truth reference unavailable at inference - so the student ends up distilling a weak PI-free consensus policy that yields little improvement on dLLM reasoning. We introduce dOPSD, which instead derives the teacher's privilege directly from the student's own denoising trajectory, evaluating masked positions using later, more-decoded steps of that same trajectory rather than an external label, so the teacher's advantage emerges from the model's own decoding process; on Dream and LLaDA, dOPSD improves both in-domain math reasoning and out-of-domain code generation, outperforming supervised and on-policy baselines.