Neural circuits mediating repetition effect for semantically congruous words on functional MRI were investigated in seventeen normal elderly (mean age=70). Participants determined if written words were semantically congruent (50% probability) with spoken statements. Subsequent cued-recall revealed robust explicit memory only for congruous items (83% versus 8% for incongruous). Event-related BOLD responses to New>Old congruous words were found in the left>right cingulate and fusiform gyri, left parahippocampal cortex, middle and inferior frontal gyri (IFG). A group with above-median subsequent recall had markedly more widespread BOLD responses than a Low-Recall subgroup, with larger responses in the left medial temporal lobe (LMTL), IFG, and bilateral cingulate gyri. The magnitude of LMTL activation (New-Old) correlated with subsequent cued-recall, while the spatial extent of LMTL activation (New>Old) correlated with recall and recognition. Both magnitude and spatial extent of left fusiform activation correlated with subsequent recall/recognition. A neural circuit of left-hemisphere brain regions, many identified as P600 generators by invasive electrophysiological studies, was activated by New>Old congruous words, likely mediating successful verbal encoding.