Animals require two types of fundamental information for accurate navigation: location and directional heading. Current theories hypothesize that animals maintain a neural representation, or cognitive map, of external space in the brain. Whereas cells in the rat hippocampus and parahippocampal regions encode information about location, a second type of allocentric spatial cell encodes information about the animal's directional heading, independent of the animal's on-going behaviors. These head direction (HD) cells are found in several areas of the classic Papez circuit. This review focuses on experimental studies conducted on HD cells and describes their discharge properties, functional significance, role in path integration, and responses to different environmental manipulations. The anterior dorsal thalamic nucleus appears critical for the generation of the directional signal. Both motor and vestibular cues also play important roles in the signal's processing. The neural network models proposed to account for HD cell firing are compared with known empirical findings. Examples from clinical cases of patients with topographical disorientation are also discussed. It is concluded that studying the neural mechanisms underlying the HD signal provides an excellent opportunity for understanding how the mammalian nervous system processes a high level cognitive signal.