Human behavioral studies demonstrate that healthy aging is often accompanied by increases in memory distortions or errors. Here we used event-related fMRI to examine the neural basis of age-related memory distortions. We used the memory conjunction error paradigm, a laboratory procedure known to elicit high levels of memory errors. For older adults, right parahippocampal gyrus showed significantly greater activity during false than during accurate retrieval. We observed no regions in which activity was greater during false than during accurate retrieval for young adults. Young adults, however, showed significantly greater activity than old adults during accurate retrieval in right hippocampus. By contrast, older adults demonstrated greater activity than young adults during accurate retrieval in right inferior and middle prefrontal cortex. These data are consistent with the notion that age-related memory conjunction errors arise from dysfunction of hippocampal system mechanisms, rather than impairments in frontally mediated monitoring processes.