Psychological theories of categorization generally focus on either rule-or exemplar-based explanations. We present 2 experiments that show evidence of both rule induction and exemplar encoding as well as a connectionist model, ATRIUM, that specifies a mechanism for combining rule- and exemplar-based representation. In 2 experiments participants learned to classify items, most of which followed a simple rule, although there were a few frequently occurring exceptions. Experiment 1 examined how people extrapolate beyond the range of training. Experiment 2 examined the effect of instance frequency on generalization. Categorization behavior was well described by the model, in which exemplar representation is used for both rule and exception processing. A key element in correctly modeling these results was capturing the interaction between the rule-and exemplar-based representations by using shifts of attention between rules and exemplars.