arXiv:2510.21090v1 Announce Type: cross Abstract: Supervised fine-tuning (SFT) has emerged as a crucial method for aligning large language models (LLMs) with human-annotated demonstrations. However, SFT, being an off-policy approach similar to behavior cloning, often struggles with overfitting and poor out-of-domain generalization, especially in limited-data scenarios. To address these limitations, we propose Self-Rewarding PPO, a novel fine-tuning method that leverages on-policy techniques to enhance generalization performance. Our approach combines the strengths of SFT and proximal policy optimization (PPO) to achieve more effective alignment from demonstration data. At its core is a reward function designed as the log policy ratio between the SFT model and the pretrained base model. This function serves as an implicit reward signal, using the pretrained policy as a baseline and the SFT policy as a target. By doing so, it enables on-policy fine-tuning without relying on human preference annotations. The integration of this self-rewarding mechanism with PPO addresses key limitations of SFT, improving generalization, data efficiency, and robustness. Our empirical evaluation across a range of natural language processing tasks demonstrates that Self-Rewarding PPO consistently outperforms traditional SFT methods. The results highlight the effectiveness of our approach in aligning LLMs using demonstration data, particularly in scenarios where high-quality annotated data is scarce.