The hippocampus performs two complementary processes, pattern separation and pattern completion, to minimize interference and maximize the storage capacity of memories. Classic computational models have suggested that the dentate gyrus (DG) supports pattern separation and the putative attractor circuitry in CA3 supports pattern completion. However, recent evidence of functional heterogeneity along the CA3 transverse axis of the hippocampus suggests that the DG and proximal CA3 work as a functional unit for pattern separation, while distal CA3 forms an autoassociative network for pattern completion. We propose that the outputs of these functional circuits, combined with direct projections from entorhinal cortex to CA1, form interconnected, parallel processing circuits to support accurate memory storage and retrieval.