The lateral entorhinal cortex (LEC) provides multisensory information to the hippocampus, directly to the distal dendrites of CA1 pyramidal neurons. LEC neurons perform important functions for episodic memory processing, coding for contextually salient elements of an environment or experience. However, we know little about the functional circuit interactions between the LEC and the hippocampus. We combine functional circuit mapping and computational modeling to examine how long-range glutamatergic LEC projections modulate compartment-specific excitation-inhibition dynamics in hippocampal area CA1. We demonstrate that glutamatergic LEC inputs can drive local dendritic spikes in CA1 pyramidal neurons, aided by the recruitment of a disinhibitory VIP interneuron microcircuit. Our circuit mapping and modeling further reveal that LEC inputs also recruit CCK interneurons that may act as strong suppressors of dendritic spikes. These results highlight a cortically driven GABAergic microcircuit mechanism that gates nonlinear dendritic computations, which may support compartment-specific coding of multisensory contextual features within the hippocampus.