Traditionally considered a memory structure, the hippocampus has been shown to contribute to non-memory functions, from perception to language. Recent evidence suggests that the ability to differentiate highly confusable faces could involve pattern separation, a mnemonic process mediated by the hippocampal dentate gyrus (DG). Hippocampal involvement, however, may depend on existing face memories. To investigate these possibilities, we tested BL, a rare individual with bilateral lesions selective to the DG, and healthy controls. Both were administered morphed images of famous and nonfamous faces in a categorical perception (CP) identification and discrimination experiment. All participants exhibited nonlinear identification of famous faces with a midpoint category boundary. Controls identified newly learned nonfamous faces with lesser fidelity, while BL showed a notable shift in category boundary.When discriminating face pairs, controls showed typical CP effects of better between-category than within-category discriminationbut only for famous faces. BL showed extreme withincategory "compression," reflecting his tendency to pattern complete following suboptimal pattern separation. We provide the first evidence that pattern separation contributes to CP of faces.