This scenario clearly describes an overfitting problem. The neural network performs well on training data but fails to generalize to evaluation data. According to AWS Machine Learning and deep learning best practices, overfitting occurs when a model learns noise or overly specific patterns in the training data instead of generalizable relationships.

L1 and L2 regularization are well-established techniques to combat overfitting. They work by penalizing large weight values during optimization, effectively constraining the model’s complexity. L1 regularization encourages sparsity, while L2 regularization (weight decay) smooths the weight distribution. AWS documentation recommends regularization as a primary method for improving generalization when a model shows a large gap between training and evaluation performance.

Option B is incorrect because removing dropout layers would increase overfitting, not reduce it. Dropout is itself a regularization technique.

Option C would likely worsen overfitting, as training for more epochs allows the model to memorize the training data even further.

Option D increases model complexity, which again exacerbates overfitting rather than resolving it.

Therefore, penalizing large weights using L1 or L2 regularization is the correct solution.