The parasubiculum is a major input structure of layer 2 of medial entorhinal cortex, where most grid cells are found. Here we investigated parasubicular circuits of the rat by anatomical analysis combined with juxtacellular recording/labeling and tetrode recordings during spatial exploration. In tangential sections, the parasubiculum appears as a linear structure flanking the medial entorhinal cortex mediodorsally. With a length of ~ 5.2 mm and a width of only ~ 0.3 mm (approximately one dendritic tree diameter), the parasubiculum is both one of the longest and narrowest cortical structures. Parasubicular neurons span the height of cortical layers 2 and 3, and we observed no obvious association of deep layers to this structure. The “superficial parasubiculum” (layers 2 and 1) divides into ~15 patches, whereas deeper parasubicular sections (layer 3) form a continuous band of neurons. Anterograde tracing experiments show that parasubicular neurons extend long “circumcurrent” axons establishing a “global” internal connectivity. The parasubiculum is a prime target of GABAergic and cholinergic medial septal inputs. Other input structures include the subiculum, presubiculum, and anterior thalamus. Functional analysis of identified and unidentified parasubicular neurons shows strong theta rhythmicity of spiking, a large fraction of head-direction selectivity (50%, 34 of 68), and spatial responses (grid, border and irregular spatial cells, 57%, 39 of 68). Parasubicular output preferentially targets patches of calbindin-positive pyramidal neurons in layer 2 of medial entorhinal cortex, which might be relevant for grid cell function. These findings suggest the parasubiculum might shape entorhinal theta rhythmicity and the (dorsoventral) integration of information across grid scales.