Early studies from psychology suggest that sleep facilitates memory retention by stopping ongoing retroactive interference caused by mental activity or external sensory stimuli. Neuroscience research with animal models, on the other hand, suggests that sleep facilitates retention by enhancing memory consolidation. Recently in Drosophila, the ongoing activity of specific dopamine neurons was shown to regulate the forgetting of olfactory memories. Here we show this ongoing dopaminergic activity is modulated with behavioral state, increasing robustly with locomotor activity and decreasing with rest. Increasing sleep-drive, with either the sleep-promoting agent Gaboxadol or by genetic stimulation of the neural circuit for sleep, decreases ongoing dopaminergic activity, while enhancing memory retention. Conversely, increasing arousal stimulates ongoing dopaminergic activity and accelerates dopaminergic based forgetting. Therefore, forgetting is regulated by the behavioral state modulation of dopaminergic-based plasticity. Our findings integrate psychological and neuroscience research on sleep and forgetting.