Theta-phase precession in hippocampal place cells is one of the best-studied experimental models of temporal coding in the brain. Theta-phase precession is a change in spike timing in which the place cell fires at progressively earlier phases of the extracellular theta rhythm as the animal crosses the spatially restricted firing field of the neuron. Within individual theta cycles, this phase advance results in a compressed replication of the firing sequence of consecutively activated place cells along the animal's trajectory, at a timescale short enough to enable spike-time-dependent plasticity between neurons in different parts of the sequence. The neuronal circuitry required for phase precession has not yet been established. The fact that phase precession can be seen in hippocampal output stuctures such as the prefrontal cortex suggests either that efferent structures inherit the precession from the hippocampus or that it is generated locally in those structures. Here we show that phase precession is expressed independently of the hippocampus in spatially modulated grid cells in layer II of medial entorhinal cortex, one synapse upstream of the hippocampus. Phase precession is apparent in nearly all principal cells in layer II but only sparsely in layer III. The precession in layer II is not blocked by inactivation of the hippocampus, suggesting that the phase advance is generated in the grid cell network. The results point to possible mechanisms for grid formation and raise the possibility that hippocampal phase precession is inherited from entorhinal cortex.