Some patients with disorders affecting the hippocampus have relatively intact memory, but the mechanisms underlying this preservation of function are still debated. In particular, it is unclear whether preserved memory is attributable to significant residual function of unaffected hippocampus or to functional brain reorganization. Here, we investigated brain activation during an associative short-term memory task in two human patient groups matched for extent of postsurgical damage to the right hippocampal formation that differed in two key features, memory performance and preoperative disease course. Patients showed strikingly distinct activation patterns that correlated differentially with behavioral performance, strongly suggesting that intact associative short-term memory with hippocampal dysfunction is indeed related to compensatory brain reorganization. This process appears to depend both on activation of the contralesional hippocampus and on increased engagement of a distributed short-term memory network in neocortex. These data clarify the existence of an efficient hippocampal-neocortical mechanism that compensates for hippocampal dysfunction.