Normal aging is often accompanied by impairments in forming new memories, and studies of aging rodents have revealed structural and functional changes to the hippocampus that might point to the mechanisms behind such memory loss. In this article, we synthesize recent neurobiological and neurophysiological findings into a model of the information-processing circuit of the aging hippocampus. The key point of the model is that small concurrent changes during aging strengthen the auto-associative network of the CA3 subregion at the cost of processing new information coming in from the entorhinal cortex. As a result of such reorganization in aged memory-impaired individuals, information that is already stored would become the dominant pattern of the hippocampus to the detriment of the ability to encode new information.