The ability to form associations between previously unrelated items of information, such as names and faces, is an essential aspect of episodic memory function. The neural substrate that determines success vs. failure in learning these associations remains to be elucidated. Using event-related functional MRI during the encoding of novel face-name associations, we found that successfully remembered face-name pairs showed significantly greater activation in the anterior hippocampal formation bilaterally and left inferior prefrontal cortex, compared to pairs that were forgotten. Functional connectivity analyses revealed significant correlated activity between the right and left hippocampus and neocortical regions during successful, but not attempted, encoding. These findings suggest that anterior regions of the hippocampal formation, in particular, are crucial for successful associative encoding and that the degree of coordination between hippocampal and neocortical activity may predict the likelihood of subsequent memory.