Diminished evoked response to repeated auditory stimuli, an example of sensory gating normally present in human subjects, is often absent in schizophrenics. To examine the mechanism of the normal response and to delineate possible sites of its abnormality in psychosis, it would be desirable to reproduce the phenomenon in laboratory animals. In this study, we show that the pattern of diminished response to the second of paired auditory stimuli is found in activity recorded from the CA3 region of the hippocampus of anesthetized rats. The evoked potential recorded from this area is predominantly an N40 wave, at identical latency to the prominent negative wave recorded from the skull surface of unanesthetized rats. Similar responses were not found in other areas, including the auditory neocortex and the medial geniculate nucleus. Amphetamine, which diminished sensory gating in both animals and humans, diminished the gating of the evoked potential recorded in the hippocampus. The effect of amphetamine was reversed by haloperidol. The rat hippocampus may therefore contain neurons that can be used to study the neurobiology of sensory gating.