Avery interesting aspect of hippocampal anatomy is the presence of two pathways projecting from the entorhinal cortex (EC) to the CA3 region | one directly via the perforant path (PP), and the other through the dentate gyrus (DG) using the mossy bers of the granule cells. This implies that the place elds of the CA3 arise from the joint in uence of EC and DG. We hypothesize that the DG plays a modulatory role in this scheme, serving to enhance discrimination during the learning of new place codes. Drawing in part on some receny experimental ndings, we modelamechanism whereby DG neurons accomplish pattern separation by modulating the balance of dendritic and somatic inhibition in granule cells. Our results are consistent with a variety of observations in the literature, including the following: 1) DG lesions do not abolish CA3 place elds but disrupt spatial memory � 2) Even similar environments produce di erent place elds in CA3 but not in the EC. We show that DG modulation allows the model hippocampus to control spatial discrimination, and produces realistic place elds.