The functional significance of the mammalian hippocampal formation is considered within the context of specific neural circuits responsible for the processing of sensory information. The anatomic and physiologic features of the major input pathways from the hypothalamus, septum, and entorhinal cortex are reviewed with regard to sensory activation of hippocampal cell fields. A model is presented which interrelates the functional plasticity of hippocampal synaptic processes to reciprocal connections between input and output pathways. The manner in which sensory responsiveness is modulated in the rat dentate gyrus as a function of both cognitive and behavioral factors is described. The hippocampus is discussed with respect to its role as a short-term item-specific store of behaviorally relevant sensory information.