The cortex amplifies responses to novel stimuli while suppressing redundant ones. Novelty detection is necessary to efficiently process sensory information and build predictive models of the environment, and it is also altered in schizophrenia. To investigate the circuit mechanisms underlying novelty detection, we used an auditory "oddball" paradigm and two-photon calcium imaging to measure responses to simple and complex stimuli across mouse auditory cortex. Stimulus statistics and complexity generated specific responses across auditory areas. Neuronal ensembles reliably encoded auditory features and temporal context. Interestingly, stimulus-evoked population responses were particularly long lasting, reflecting stimulus history and affecting future responses. These slow cortical dynamics encoded stimulus temporal context and generated stronger responses to novel stimuli. Recurrent neural network models trained on the oddball task also exhibited slow network dynamics and recapitulated the biological data. We conclude that the slow dynamics of recurrent cortical networks underlie processing and novelty detection.