Navigational decision-making tasks, such as spatial working memory (SWM), rely highly on information integration from several cortical and sub-cortical regions. Performance in SWM tasks is associated with theta rhythm, including low-frequency oscillations related to movement and memory. The interaction of the ventral hippocampus (vHPC) and medial prefrontal cortex (mPFC), reflected in theta synchrony, is essential in various steps of information processing during SWM. We used a closed-loop neurofeedback (CLNF) system to upregulate theta power in the mPFC and investigate its effects on circuit dynamics and behavior in animal models. Specifically, we hypothesized that enhancing the power of the theta rhythm in the mPFC might improve SWM performance. Animals were divided into three groups: closed-loop (CL), random-loop (RL), and OFF (without stimulation). We recorded local field potential (LFP) in the mPFC while electrical reward stimulation contingent on cortical theta activity was delivered to the lateral hypothalamus (LH), which is considered one of the central reward-associated regions. We also recorded LFP in the vHPC to evaluate the related subcortical neural changes. Results revealed a sustained increase in the theta power in both mPFC and vHPC for the CL group. Our analysis also revealed an increase in mPFC-vHPC synchronization in the theta range over the stimulation sessions in the CL group, as measured by coherence and cross-correlation in the theta frequency band. The reinforcement of this circuit improved spatial decision-making performance in the subsequent behavioral results. Our findings provide direct evidence of the relationship between specific theta upregulation and SWM performance and suggest that theta oscillations are integral to cognitive processes. Overall, this study highlights the potential of adaptive CLNF systems in investigating neural dynamics in various brain circuits.