Sleep enhances integration across multiple stimuli, abstraction of general rules, insight into hidden solutions and false memory formation. Newly learned information is better assimilated if compatible with an existing cognitive framework or schema. This article proposes a mechanism by which the reactivation of newly learned memories during sleep could actively underpin both schema formation and the addition of new knowledge to existing schemata. Under this model, the overlapping replay of related memories selectively strengthens shared elements. Repeated reactivation of memories in different combinations progressively builds schematic representations of the relationships between stimuli. We argue that this selective strengthening forms the basis of cognitive abstraction, and explain how it facilitates insight and false memory formation.What's the gist? I do not remember many details about childhood birthday parties. There was one when we played blind man's bluff, and another with cucumber sandwiches, but in general these affairs blur together under the broad heading of birthdays. About this category I have much information: I know the parties involved hordes of children, that there were presents and invariably a cake. However, which birthday belonged to whom, and exactly what was done there escapes me. This is unsurprising as chronologically old memories rarely include clear episodic details but these aspects of a situation or memory type that are repeated again and again are normally recalled with ease. Central shared concepts of this type can be thought of as the 'gist' (see Glossary), or essential features, of a set of memories, and taken together can form a cognitive framework of expectations or schema (Box 1). This article proposes a physiological mechanism by which memory replay during sleep could be responsible for the abstraction of gist information from newly encoded memories to form cognitive schemata.Recent research has shown that sleep facilitates abstraction of gist information [1][2][3][4][5] as well as integration across multiple memories [6][7][8], insight into hidden solutions [9], and even the ability to make creative connections between distantly related ideas and concepts [10]. These findings build upon a strong body of work demonstrating that sleep plays a crucial role in memory consolidation (for reviews [11][12][13]), as well as a highly influential model of how memories are re-organised and strengthened by replay during slow wave sleep (SWS) (see [11,12,[14][15][16][17] and Box 2). This model elegantly explains how the specific physiology of SWS, in combination with the replay of memories that has been observed in both rats and humans during this sleep stage (Box 3), could assist consolidation by transferring memories from a short-term store in the hippocampus to longer term cortical representations. Importantly, however, this model cannot presently explain why sleep is beneficial for gist extraction, insight or the formation of false memories.A separate line of research investigating th...