Many tasks require flexibly modifying perception and behavior based on current goals. Humans can retrieve episodic memories from days to years ago, using them to contextualize and generalize behaviors across novel but structurally related situations. The brain's ability to control episodic memories based on task demands is often attributed to interactions between the prefrontal cortex (PFC) and hippocampus (HPC). We propose a reinforcement learning model that incorporates a PFC-HPC interaction mechanism for goal-directed generalization. In our model, the PFC learns to generate query-key representations to encode and retrieve goal-relevant episodic memories, modulating HPC memories top-down based on current task demands. Moreover, the PFC adapts its encoding and retrieval strategies dynamically when faced with multiple goals presented in a blocked, rather than interleaved, manner. Our results show that: (1) combining working memory with selectively retrieved episodic memory allows transfer of decisions among similar environments or situations, (2) top-down control from PFC over HPC improves learning of arbitrary structural associations between events for generalization to novel environments compared to a bottom-up sensory-driven approach, and (3) the PFC encodes generalizable representations during both encoding and retrieval of goal-relevant memories, whereas the HPC exhibits event-specific representations. Together, these findings highlight the importance of goal-directed prefrontal control over hippocampal episodic memory for decision-making in novel situations and suggest a computational mechanism by which PFC-HPC interactions enable flexible behavior.