Despite tremendous progress, the neural circuit dynamics underlying hippocampal mnemonic processing remain poorly understood. We propose a new model for hippocampal function—the simulation‐selection model—based on recent experimental findings and neuroecological considerations. Under this model, the mammalian hippocampus evolved to simulate and evaluate arbitrary navigation sequences. Specifically, we suggest that CA3 simulates unexperienced navigation sequences in addition to remembering experienced ones, and CA1 selects from among these CA3‐generated sequences, reinforcing those that are likely to maximize reward during offline idling states. High‐value sequences reinforced in CA1 may allow flexible navigation toward a potential rewarding location during subsequent navigation. We argue that the simulation‐selection functions of the hippocampus have evolved in mammals mostly because of the unique navigational needs of land mammals. Our model may account for why the mammalian hippocampus has evolved not only to remember, but also to imagine episodes, and how this might be implemented in its neural circuits.