Over time, memories lose episodic detail and become distorted, a process with serious ramifications for topics such as eyewitness identification. What are the processes which contribute to such transformation over time? We investigated the roles of post learning sleep and retrieval practice in memory accuracy, transformation, and distortion, using a naturalistic story recollection task. Undergraduate students listened to a recording of the “War of the Ghosts”, a Native American folktale, and were assigned to either a retrieval practice or listen only study condition, and either a sleep or wake delay group. Sleep and retrieval practice independently resulted in more story elements being recalled accurately, and fewer importations of non-story elements, than the wake, no retrieval practice group. However, sleep and retrieval practice also led to more inferences of non-presented, but story related information. These findings suggest that both sleep and retrieval practice contribute equally to narrative memory stabilization and distortion.