Entorhinal cortex layer III cells send their axons into hippocampal area CA1, forming the less well studied branch of the perforant path. Using electrophysiological and morphological techniques within a slice preparation, we can classify medial entorhinal cortex layer III cells into four different types. Type 1 and 2 cells were projection cells. Type 1 cells fired regularly and possessed high input resistances and long membrane time constants. Electrical stimulation of the lateral entorhinal cortex revealed a strong excitation by both N-methyl-D-aspartate and non-N-methyl-D-aspartate receptor-mediated excitatory postsynaptic potentials. Type 2 cells accommodated strongly, had lower input resistances, faster time constants and featured prominent synaptic inhibition. Type 1 and 2 cells responded to repetitive synaptic stimulation with a prolonged hyperpolarization. We identified the two other, presumed local circuit, cell types whose axons remained within the entorhinal cortex. Type 3 cells were regular firing, had high input resistances and slow membrane time constants, while type 4 cells fired at higher frequencies and possessed a faster time constant and lower input resistance than type 3 neurons. Type 3 cells presented long-lasting excitatory synaptic potentials. Type 4 neurons were the only ones with different responses to stimulation from different sites. Upon lateral entorhinal cortex stimulation they responded with an excitatory postsynaptic potential, while a monosynaptic inhibitory postsynaptic potential was evoked from deep layer stimulation. In contrast to type 1 and 2 neurons, none of the local circuit cells could be antidromically activated from deep layers, and prolonged hyperpolarizations following synaptic repetitive stimulation were also absent in these cells. Together, the complementing morphology and the electrophysiological characteristics of all the cells can provide the controlled flexibility required during the transfer of cortical information to the hippocampus.