When an item is predicted in a particular context but the prediction is violated, memory for that item is weakened (Kim et al., 2014). Here we explore what happens when such previously mispredicted items are later re-encountered. According to prior neural network simulations, this sequence of events - misprediction and subsequent restudy - should lead to differentiation of the item's neural representation from the previous context (on which the misprediction was based). Specifically, misprediction weakens connections in the representation to features shared with the previous context, and restudy allows new features to be incorporated into the representation that are not shared with the previous context. This cycle of misprediction and restudy should have the net effect of moving the item's neural representation away from the neural representation of the previous context. We tested this hypothesis using fMRI, by tracking changes in item-specific BOLD activity patterns in the hippocampus, a key structure for representing memories and generating predictions. In left CA2/3/DG, we found greater neural differentiation for items that were repeatedly mispredicted and restudied compared to items from a control condition that was identical except without misprediction. We also measured prediction strength in a trial-by-trial fashion and found that greater misprediction for an item led to more differentiation, further supporting our hypothesis. Thus, the consequences of prediction error go beyond memory weakening: If the mispredicted item is restudied, the brain adaptively differentiates its memory representation to improve the accuracy of subsequent predictions and to shield it from further weakening.