Interference is a critical problem for memory systems and a primary cause of retrieval failure. One strategy for minimizing interference is to associate the items to be remembered with the context in which they were learned. For example, human subjects who learn two lists of words in separate contexts experience less interference and better recall than subjects who learn both lists in the same context. The hippocampus has long been known to be involved in processing contextual information and recent studies have shown that hippocampal neurons exhibit context-unique firing patterns that could serve as a neural representation of the context. These observations suggest that hippocampal context processing may play a critical role in overcoming interference. To test this hypothesis, we adapted the context based list learning procedure for use with rats. Control rats and rats given temporary lesions of the hippocampus were trained on two lists of eight odor pairs, either in the same context or in different contexts. In order to induce interference, some of the odors appeared on both lists with their predictive value reversed. As with human subjects, rats that learned the two lists in different contexts performed significantly better than rats that learned the lists in the same context. However, hippocampal lesions completely abolished this contextual learning advantage. We also trained rats on a low interference version of the task by using lists that did not contain any common items. Interestingly, rats with hippocampal lesions were entirely unimpaired when the learning situation did not involve high levels of interference. These findings are consistent with the idea that the hippocampus encodes contexts and further suggest that hippocampal context coding is beneficial because it provides a means of overcoming interference.