This experiment explored the functional significance of age-related hemispheric asymmetry reduction associated with episodic memory and the cognitive mechanisms that mediate this brain pattern. ERPs were recorded while young and older adults performed a word-stem cued-recall task. Results confirmed that the parietal old/new effect was of larger latency and reduced magnitude and less lateralized in the older group than the young group. Correlational and regression analyses indicated that the degree of laterality of brain activity determines the accuracy of memory performance and mediates age-related differences in memory performance among older participants. They also confirmed a cascade model in which the individual level of executive functioning of older adults mediates age-related differences in the degree of lateralization of brain activity, which in turn mediates age-related differences in memory performance.