In a framework first developed by Hasselmo and colleagues, theta phase separation implies that the theta rhythm of the hippocampus occurs in cycles and various phases of the rhythm entail encoding and retrieval as separate processes.<ref name=c>{{cite journal | last1 = Hasselmo | first1 = ME | last2 = Bodelon | first2 = C | last3 = Wyble | first3 = BP | year = 2002 | title = A proposed function for hippocampal theta rhythm: separate phases of encoding and retrieval enhance reversal of prior learning | url = | journal = Neural Computation | volume = 14 | issue = 4| pages = 793-817 | doi = 10.1162/089976602317318965 }}</ref><ref name=m>{{cite journal | last1 = Kunec | first1 = S | last2 = Hasselmo | first2=ME | last3 = Kopell | first3 = N | year = 2005 | title = Encoding and Retrieval in the CA3 Region of the Hippocampus: A Model of Theta-Phase Separation | url = | journal = Journal of Neurophysiology | volume = 94 | issue = 1| pages = 70–82 | doi = 10.1152/jn.00731.2004 }}</ref> An extra-hippocampal structure, the septum, initiates and regulates the theta rhythm and its associated memory processes. GABAergic activity within the septum inhibits certain classes of CA3 cells (a region of the hippocampus), the divide often drawn between basket cells, pyramidal cells, and interneurons, to distinguish encoding from retrieval mechanisms. The study emphasizes and models the CA3 subfield of the hippocampus as a primary inducement towards encoding and retrieval. Encoding as a procedure begins when septal GABAergic inhibition is at minimum, freeing basket cells to act within CA3, and during brief dis-inhibition periods, other cells receive input: a proximal entorhinal input toward pyramidal cells and a coincident dentate gyrus input toward interneurons.<ref name=c /><ref name=m /> On the other hand, retrieval as a procedure begins when septal GABAergic inhibition is at maximum, occluding basket cell activity and enabling pyramidal cells to signal.<ref name=c /> During this period, Oriens- Lacunosum Moleculare (O-LM) cells disambiguate memory for retrieval.<ref name=m />
CA3 is significant as it is allows auto-associative processes through a recurrent, collateral system.<ref name=c /> The theta phase separation model agrees generally with others on the significance of CA3 but is the first to attribute both the processes of encoding and retrieval to the subfield.<ref name=c /><ref name=m />
