This study investigates the cellular generation and spatial distribution of gamma frequency (40–100 Hz) activity in the hippocampus of awake rats. Field potentials and unit activity were recorded using multiple-site silicon probes and wire electrode arrays. Key findings include: 1. **Coherence and Power Distribution**: Gamma waves were highly coherent along the long axis of the dentate hilus but showed rapid loss of coherence in the CA3 and CA1 regions. Coherence values between gamma waves from the dentate hilus and CA1 were generally low. 2. **Spatial Coherence**: Gamma oscillations were highly coherent in the septotemporal axis of the hilus but showed a steep phase reversal across the granule cell layer. The coherence of theta and gamma waves decreased rapidly in the transverse direction. 3. **Theta Modulation**: Gamma oscillations were phase-locked to the theta cycle, with the largest power of gamma activity coinciding with the positive portion of the theta waves. 4. **Unit Activity**: Putative interneurons in the dentate gyrus fired rhythmically and phase-locked to the ascending part of gamma waves. These neurons showed a tight phase locking with increasing amplitude of local gamma waves. 5. **Entorhinal Cortex Lesion**: Bilateral removal of the entorhinal cortex significantly reduced theta and gamma activity. In the CA3-CA1 region, high-frequency activity emerged, but the hilar gamma oscillator disappeared or attenuated. The study suggests that gamma oscillation in the hippocampus is generated by an interaction between intrinsic oscillatory properties of interneurons and the network properties of the dentate gyrus. The entorhinal cortex may entrain the hilar gamma oscillation, while the CA3-CA1 circuitry suppresses gamma oscillation under physiological conditions.This study investigates the cellular generation and spatial distribution of gamma frequency (40–100 Hz) activity in the hippocampus of awake rats. Field potentials and unit activity were recorded using multiple-site silicon probes and wire electrode arrays. Key findings include: 1. **Coherence and Power Distribution**: Gamma waves were highly coherent along the long axis of the dentate hilus but showed rapid loss of coherence in the CA3 and CA1 regions. Coherence values between gamma waves from the dentate hilus and CA1 were generally low. 2. **Spatial Coherence**: Gamma oscillations were highly coherent in the septotemporal axis of the hilus but showed a steep phase reversal across the granule cell layer. The coherence of theta and gamma waves decreased rapidly in the transverse direction. 3. **Theta Modulation**: Gamma oscillations were phase-locked to the theta cycle, with the largest power of gamma activity coinciding with the positive portion of the theta waves. 4. **Unit Activity**: Putative interneurons in the dentate gyrus fired rhythmically and phase-locked to the ascending part of gamma waves. These neurons showed a tight phase locking with increasing amplitude of local gamma waves. 5. **Entorhinal Cortex Lesion**: Bilateral removal of the entorhinal cortex significantly reduced theta and gamma activity. In the CA3-CA1 region, high-frequency activity emerged, but the hilar gamma oscillator disappeared or attenuated. The study suggests that gamma oscillation in the hippocampus is generated by an interaction between intrinsic oscillatory properties of interneurons and the network properties of the dentate gyrus. The entorhinal cortex may entrain the hilar gamma oscillation, while the CA3-CA1 circuitry suppresses gamma oscillation under physiological conditions.