How does the brain form a useful representation of its environment? It is shown here that a layer of simple Hebbian units connected by modifiable anti-Hebbian feed-back connections can learn to code a set of patterns in such a way that statistical dependency between the elements of the representation is reduced, while information is preserved. The resulting code is sparse, which is favourable if it is to be used as input to a subsequent supervised associative layer. The operation of the network is demonstrated on two simple problems.