The retrieval of spatial memory is behaviorally often assessed in tasks like the classical Object-Place-Recognition (OPR) task that requires an updating of memory. The neural dynamics across interconnected brain regions underlying retrieval processing in such tasks, are not well understood. Here, we examined in rats the neural correlates of retrieval processing in the OPR task by comparing a condition of successful OPR retrieval, in which the displaced object during the retrieval phase (3-hours after encoding) induced a spatial memory updating (OPR condition), with a stationary (STA) control condition in which the object configuration at retrieval was identical to encoding and, therefore, did not require spatial updating. Importantly, both conditions involved re-exposure to the previously encountered objects and context, but only the OPR condition imposed demands on updating the stored spatial representation. Expression of c-Fos (as an activity marker) and GAD67 (to identify inhibitory interneurons) was assessed at retrieval in hippocampal subfields, mPFC areas, thalamic nuclei, and posterior cortical regions. Rats in the OPR condition exhibited robust object-place discrimination and enhanced rearing behavior compared to the STA condition. Regional c-Fos activation levels were largely comparable between OPR and STA conditions across hippocampal, cortical, and thalamic regions. However, the OPR condition showed a region-specific increase in the proportion of GAD67-positive active neurons in proximal CA1. Together, these findings identify a specific pattern of inhibitory engagement implicating selective hippocampal inhibitory recruitment in supporting retrieval-driven spatial memory updating rather than elevated global activation.