The hippocampus and the medial prefrontal cortex (mPFC) participate in episodic and working memory, respectively. In trace conditioning, animals learn to associate a sensory stimulus (CS) and a reward (US) separated by a delay (trace period). Although the neural activity in both areas can be linked to memory representation formation, the neural mechanisms involved in learning the temporal association between CS and US are not known. In this work, we use auditory trace conditioning in head-fixed mice with simultaneous 128-channel silicon probe recordings from the hippocampal CA1 subfield and the medial PFC to investigate this. First, we found that both CA1 and mPFC encoded stimulus and reward onset through neuronal sequences. Interestingly, this temporal representation increased with learning for the rewarded stimulus (CS+), but not for the unrewarded one (CS-) in CA1. Moreover, stimuli and reward temporal representations, which were initially similar, disentangled from each other after learning. The similarity between stimulus and reward temporal representations was partially recovered during incorrect trials, when the animal received an unexpected reward, suggesting that this representation included a component of surprise. Using hidden Markov models, we revealed the emergence of neural states encoding for either CS+ or CS- stimuli after learning. In PFC, CS+ coding states increased their activation specifically during stimulus and trace periods. Crucially, the occurrence of CS+ coding states during CS- trials predicted the onset of a wrong decision, namely a lick leading to an incorrect trial. Together these results help unveil the dynamics of stimulus encoding in the mPFC-hippocampal circuit, suggesting the hippocampus has a role in the initial processing of the stimulus, while mPFC is important to create the stimulus-reward association and to drive the animal’s decision.