The integrity of the hippocampus and surrounding medial-temporal cortices is critical for episodic memory, with the hippocampus being posited to support relational or configural associative learning. The present event-related functional magnetic resonance imaging (fMRI) study investigated the role of specific medial-temporal lobe structures in learning during relational and item-based processing, as well as the extent to which these structures are engaged during item-based maintenance of stimuli in working memory. fMRI indexed involvement of the hippocampus and underlying cortical regions during performance of two verbal encoding conditions, one that required item-based maintenance of word triplets in working memory and the other that entailed the formation of inter-item associations across the words in each triplet. Sixteen subjects were scanned using a rapid event-related fMRI design while they encountered the item-based and relational processing trials. To examine the correlation between fMRI signal in medial-temporal structures during learning and the subject's subsequent ability to remember the stimuli (a measure of effective memory formation), subjects were administered a yes-no recognition memory test following completion of the encoding scans. Results revealed that the hippocampus proper was engaged during both relational and item-based processing, with relational processing resulting in a greater hippocampal response. By contrast, entorhinal and parahippocampal gyri were differentially engaged during item-based processing, providing strong evidence for a functional neuroanatomic distinction between hippocampal and parahippocampal structures. Analysis of the neural correlates of subsequent memory revealed that activation in the bilateral hippocampus was reliably correlated with behavioral measures of effective memory formation only for those stimuli that were encoded in a relational manner. Taken together, these data provide evidence that the hippocampus, while engaged during item-based working memory maintenance, differentially subserves the relational binding of items into an integrated memory trace so that the experience can be later remembered.