Episodic memory formation and recall are complementary processes that put conflicting requirements on neuronal computations in the hippocampus. How this challenge is resolved in hippocampal circuits is unclear. To address this question, we obtained in vivo whole-cell patch-clamp recordings from dentate gyrus granule cells in head-fixed mice trained to explore and distinguish between familiar and novel virtual environments. We observe that the subthreshold membrane potential of silent granule cells shows robust selectivity across different virtual environments. This observation supports the notion that the sparse fraction of active granule cells results from competitive ‘winner-takes-all’ dynamics, in which the cells that receive enough excitatory input to fire action potentials recruit inhibition to silence the others. Furthermore, we find that granule cells consistently display a small transient depolarisation of their membrane potential upon transition to a novel environment. This synaptic novelty signal is sensitive to local application of atropine, indicating that it depends on muscarinic acetylcholine receptors. A computational model suggests that the observed transient synaptic response to novel environments may lead to a bias in the granule cell population activity, which can in turn drive the downstream attractor networks to a new state, thereby favouring the switch from generalisation to discrimination when faced with novelty. Such a novelty-driven cholinergic switch may enable flexible encoding of new memories while preserving stable retrieval of familiar ones.