Age-related differences in brain activity may reflect local neural changes in the regions involved or they may reflect a more global transformation of brain function. To investigate this issue, we applied structural equation modeling to the results of a positron emission tomography (PET) study in which young and old adults encoded and recalled word pairs. In the young group there was a shift from positive interactions involving the left prefrontal cortex during encoding to positive interactions involving the right prefrontal cortex during recall, whereas in the old group frontal interactions were mixed during encoding and bilaterally positive during recall. The present results suggest that age-related changes in neural activation are partly due to age-related changes in effective connectivity in the neural network underlying the task.