Nonhuman research has implicated developmental processes within the hippocampus in the emergence and early development of episodic memory, but research in humans has been constrained by the difficulty of examining hippocampal function during early development. In the present study, we assessed 48 2-year-olds with a novel paradigm in which participants completed two games on a tablet that required remembering associations between unique characters, the places they visited, and the temporal order with which they did so. At the completion of each game, a unique, novel song played. Toddlers remembered spatial locations better than temporal order during an immediate test, after a 20-minute delay, and after a week delay. After the last behavioral session, toddlers underwent an fMRI task during natural nocturnal sleep evaluating hippocampal activation in response to learned and novel songs. We found that the extent of hippocampal activation for learned songs compared to novel songs during sleep was correlated with memory for temproal order across all time delays, but not with memory for spatial locations. The results confirm that that the functional contribution of the hippocampus to early memory can be assessed during sleep and suggest that assessment of temporal aspects of memory in the current task best capture this contribution.