Gamma (30-80 Hz) and beta (12-30 Hz) oscillations such as those displayed by in vitro hippocampal (CA1) slice preparations and by in vivo neocortical EEGs often occur successively, with a spontaneous transition between them. In the gamma rhythm, pyramidal cells fire together with the interneurons, while in the beta rhythm, pyramidal cells fire on a subset of cycles of the interneurons. It is shown that gamma and beta rhythms have different properties with respect to creation of cell assemblies. In the presence of heterogeneous inputs to the pyramidal cells, the gamma rhythm creates an assembly of firing pyramidal cells from cells whose drive exceeds a threshold. During the gamma to beta transition, a slow outward potassium current is activated, and as a result the cell assembly vanishes. The slow currents make each of the pyramidal cells fire with a beta rhythm, but the field potential of the network still displays a gamma rhythm. Hebbian changes of connections among the pyramidal cells give rise to a beta rhythm, and the cell assemblies are recovered with a temporal separation between cells firing in different cycles. We present experimental evidence showing that such a separation can occur in hippocampal slices.