Recent studies have shown that stellate cells (SCs) of the medial entorhinal cortex become hyper-excitable in animal models of temporal lobe epilepsy. These studies have also demonstrated the existence of recurrent connections among SCs, reduced levels of recurrent inhibition in epileptic networks as compared to control ones, and comparable levels of recurrent excitation among SCs in both network types. In this work, we investigate the biophysical and dynamic mechanism of generation of the fast time scale corresponding to hyper-excitable firing and the transition between theta and fast firing frequency activity in SCs. We show that recurrently connected minimal networks of SCs exhibit abrupt, threshold-like transition between theta and hyper-excitable firing frequencies as the result of small changes in the maximal synaptic (AMPAergic) conductance. The threshold required for this transition is modulated by synaptic inhibition. Similar abrupt transition between firing frequency regimes can be observed in single, self-coupled SCs, which represent a network of recurrently coupled neurons synchronized in phase, but not in synaptically isolated SCs as the result of changes in the levels of the tonic drive. Using dynamical systems tools (phase-space analysis), we explain the dynamic mechanism underlying the genesis of the fast time scale and the abrupt transition between firing frequency regimes, their dependence on the intrinsic SC’s currents and synaptic excitation. This abrupt transition is mechanistically different from others observed in similar networks with different cell types. Most notably, there is no bistability involved. ‘In vitro’ experiments using single SCs self-coupled with dynamic clamp show the abrupt transition between firing frequency regimes, and demonstrate that our theoretical predictions are not an artifact of the model. In addition, these experiments show that high-frequency firing is burst-like with a duration modulated by an M-current.