Aberrant proteostasis of protein aggregation may lead to behavior disorders including chronic mental illnesses (CMI). Furthermore, the neuronal activity alterations that underlie CMI are not well understood. We recorded the local field potential and single‐unit activity of the hippocampal CA1 region in vivo in rats transgenically overexpressing the Disrupted‐in‐Schizophrenia 1 (DISC1) gene (tgDISC1), modeling sporadic CMI. These tgDISC1 rats have previously been shown to exhibit DISC1 protein aggregation, disturbances in the dopaminergic system and attention‐related deficits. Recordings were performed during exploration of familiar and novel open field environments and during sleep, allowing investigation of neuronal abnormalities in unconstrained behavior. Compared to controls, tgDISC1 place cells exhibited smaller place fields and decreased speed‐modulation of their firing rates, demonstrating altered spatial coding and deficits in encoding location‐independent sensory inputs. Oscillation analyses showed that tgDISC1 pyramidal neurons had higher theta phase locking strength during novelty, limiting their phase coding ability. However, their mean theta phases were more variable at the population level, reducing oscillatory network synchronization. Finally, tgDISC1 pyramidal neurons showed a lack of novelty‐induced shift in their preferred theta and gamma firing phases, indicating deficits in coding of novel environments with oscillatory firing. By combining single cell and neuronal population analyses, we link DISC1 protein pathology with abnormal hippocampal neural coding and network synchrony, and thereby gain a more comprehensive understanding of CMI mechanisms.