The concept of an “active system consolidation” during sleep has been proposed to integrate findings on memory formation during sleep in humans and rodents. The concept originates from the standard consolidation theory, considering also more recent conceptual developments such as the trace transformation theory. It assumes a two-stage memory system entailing a rapidly encoding initial storage system, essentially represented by the hippocampus, and a long-term storage system which encodes at a much slower pace, essentially represented by neocortical and striatal networks (Fig. 2A). During wakefulness new information is encoded under control of the prefrontal–hippocampal episodic memory system both in hippocampal and neocortical networks, whereby the hippocampus specifically encodes the episodic features of this information, binding experienced events into their unique spatio-temporal context. During subsequent sleep and specifically during periods of SWS, slow oscillations predominantly originate from prefrontal neocortical circuitry, used during prior wake for encoding. Through their depolarizing up-states the slow oscillations drive the repeated reactivation of newly encoded neuronal representations in the hippocampus. Simultaneously, the slow oscillations serve to globally down-scale and renormalize synaptic potentiation to prevent excess connectivity. The repeated reactivations in the hippocampus produce, on the one hand, a transient strengthening of select representations. On the other hand, these reactivations spread to extra-hippocampal networks, alongside with the passage of the reactivated memory information from hippocampal to extra-hippocampal networks. The spreading of reactivations and passage of reactivated memory information promotes a more gradual redistribution of the original episodic representation such that essential parts of the representation that are accessed during retrieval are stored outside of the hippocampus. However, this redistribution does not implicate a complete transfer of the memories, as some specific representations remain in the hippocampus. Psychologically, the immediate strengthening effect of reactivations on hippocampal representations expresses itself in a sleep-induced enhancement of episodic memory including its spatio-temporal context. The more gradual effect of hippocampal reactivations redistributing representations toward preferential extra-hippocampal networks is accompanied by a qualitative transformation of the representation, in which the memory becomes unbound from its specific context in which it was originally experienced. Such de-contextualized schema-like memories are mainly stored in neocortical association areas in the case of semantic memories (for facts) and in striatal areas in the case of procedural skills