BACKGROUND: Erythropoietin (EPO) improves cognition of human subjects in the clinical setting by as yet unknown mechanisms. We developed a mouse model of robust cognitive improvement by EPO to obtain the first clues of how EPO influences cognition, and how it may act on hippocampal neurons to modulate plasticity. RESULTS: We show here that a 3-week treatment of young mice with EPO enhances long-term potentiation (LTP), a cellular correlate of learning processes in the CA1 region of the hippocampus. This treatment concomitantly alters short-term synaptic plasticity and synaptic transmission, shifting the balance of excitatory and inhibitory activity. These effects are accompanied by an improvement of hippocampus dependent memory, persisting for 3 weeks after termination of EPO injections, and are independent of changes in hematocrit. Networks of EPO-treated primary hippocampal neurons develop lower overall spiking activity but enhanced bursting in discrete neuronal assemblies. At the level of developing single neurons, EPO treatment reduces the typical increase in excitatory synaptic transmission without changing the number of synaptic boutons, consistent with prolonged functional silencing of synapses. CONCLUSION: We conclude that EPO improves hippocampus dependent memory by modulating plasticity, synaptic connectivity and activity of memory-related neuronal networks. These mechanisms of action of EPO have to be further exploited for treating neuropsychiatric diseases.