The ability to form precise, episodic memories develops with age, with young children only able to form gist-like memories that lack precision. The cellular and molecular events in the developing hippocampus that underlie the emergence of precise, episodic-like memory are unclear. In mice, the absence of a competitive neuronal engram allocation process in the immature hippocampus precluded the formation of sparse engrams and precise memories until the fourth postnatal week, when inhibitory circuits in the hippocampus mature. This age-dependent shift in precision of episodic-like memories involved the functional maturation of parvalbumin-expressing interneurons in subfield CA1 through assembly of extracellular perineuronal nets, which is necessary and sufficient for the onset of competitive neuronal allocation, sparse engram formation, and memory precision.