We present a theory of cortico-hippocampal interaction in discrimination learning. The hippocampal region is presumed to form new stimulus representations which facilitate learning by enhancing the discriminability of predictive stimuli and compressing stimulus-stimulus redundancies. The cortical and cerebellar regions, which are the sites of long-term memory. It also makes several novel predictions which remain to be investigated empirically. The theory implies that the hippocampal region is involved in even the simplest learning tasks; although hippocampal-Iesioned animals may be able to use other strategies to learn these tasks.