The functionally different lateral entorhinal cortex (LEC) and medial entorhinal cortex (MEC) are strongly interconnected. The role of this interconnectivity in view of their functional differences is not known. Here we provide details on a circuit that directly connects MEC to neurons in the superficial layers of LEC. Using a combination of anatomical tracing experiments and in vitro electrophysiological recordings in the mouse, we report that axons from MEC somatostatin-expressing GABAergic neurons densely distribute in layer I of LEC, where they drive strong and near selective inhibition of principal neurons in layer IIa. This inhibitory pathway is accompanied by MEC glutamatergic axons that innervate multiple layers of LEC and preferentially synapse onto principal neurons in layers IIb and III. These findings indicate that excitatory and inhibitory projections from MEC may separately regulate the activity of different populations of hippocampal-projecting principal neurons in LEC.