The hippocampus is well known to contribute to episodic memory encoding. Here we used functional magnetic resonance imaging to investigate the hippocampal response to exponentially varying encoding demands while forming associations between faces and names. We found that only the left hippocampus exhibited a stepped modulation of neuronal activity, which was furthermore correlated with individual memory performance. The right hippocampus, in contrast, showed a constant strong engagement throughout all difficulty levels. We hypothesize that the left hippocampus functionally compensated an overload of right hippocampal resources in an attempt to prevent memory decline. This explanation could help reconcile controversies in the debate of material-specific (i.e. verbal vs. nonverbal) lateralization of hippocampal activation.