Effective memory representations must be specific to prevent interference between episodes that may overlap in terms of place, time, or items present. Pattern separation, a computational process performed by the hippocampus, overcomes this interference by establishing nonoverlapping memory representations. Although it is widely accepted that declarative memories are consolidated during sleep, the effects of sleep on pattern separation have yet to be elucidated. We used whole-brain, high-resolution functional neuroimaging to investigate the effects of sleep on a task that places high demands on pattern separation. Sleep had a selective effect on memory specificity and not general recognition memory. Activity in brain regions related to memory retrieval and cognitive control demonstrated an interaction between sleep and delay. Surprisingly, there was no effect of sleep on hippocampal activity using a group-level analysis. To further understand the role of the hippocampus on our task, we performed a representational similarity analysis, which showed that hippocampal activation was biased toward pattern separation relative to cortical activation and that this bias increased following a delay (regardless of sleep). Cortical activation, conversely, was biased toward pattern completion and this bias was preferentially enhanced by sleep.