The discovery of grid cells in the medial entorhinal cortex (MEC) permits the characterization of hippocampal computation in much greater detail than previously possible. The present study addresses how an integrate-and-fire unit driven by grid-cell spike trains may transform the multipeaked, spatial firing pattern of grid cells into the single-peaked activity that is typical of hippocampal place cells. Previous studies have shown that in the absence of network interactions, this transformation can succeed only if the place cell receives inputs from grids with overlapping vertices at the location of the place cell's firing field. In our simulations, the selection of these inputs was accomplished by fast Hebbian plasticity alone. The resulting nonlinear process was acutely sensitive to small input variations. Simulations differing only in the exact spike timing of grid cells produced different field locations for the same place cells. Place fields became concentrated in areas that correlated with the initial trajectory of the animal; the introduction of feedback inhibitory cells reduced this bias. These results suggest distinct roles for plasticity of the perforant path synapses and for competition via feedback inhibition in the formation of place fields in a novel environment. Furthermore, they imply that variability in MEC spiking patterns or in the rat's trajectory is sufficient for generating a distinct population code in a novel environment and suggest that recalling this code in a familiar environment involves additional inputs and/or a different mode of operation of the network.