The occurrence of dreaming during rapid eye movement (REM) sleep prompts interest in the role of REM sleep in hippocampal-dependent episodic memory. Within the mammalian hippocampus, the dentate gyrus (DG) has the unique characteristic of exhibiting neurogenesis persisting into adulthood. Despite their small numbers and sparse activity, adult-born neurons (ABNs) in the DG play critical roles in memory; however, their memory function during sleep is unknown. Here, we investigate whether young ABN activity contributes to memory consolidation during sleep using Ca2+ imaging in freely moving mice. We found that contextual fear learning recruits a population of young ABNs that are reactivated during subsequent REM sleep against a backdrop of overall reduced ABN activity. Optogenetic silencing of this sparse ABN activity during REM sleep alters the structural remodeling of spines on ABN dendrites and impairs memory consolidation. These findings provide a causal link between ABN activity during REM sleep and memory consolidation. Display omitted •Adult-born neuron (ABN) activity during sleep can be seen using Ca2+ imaging•ABNs active after learning reactivate in subsequent rapid eye movement (REM) sleep•Optogenetic manipulation of ABN activity in REM sleep impairs memory consolidation•This effect may be mediated by ABN synaptic plasticity The neuronal population in the hippocampus responsible for memory consolidation during rapid eye movement (REM) sleep was unknown. Using in vivo imaging and optogenetics, Kumar et al. provide causal evidence that the activity of dentate gyrus adult-born neurons during REM sleep is necessary for contextual fear memory consolidation.