Demanding cognitive tasks are sometimes carried out under stressful conditions. Several studies indicate that whereas severe stress impairs performance, moderate stress can enhance cognitive performance. In this study, we investigated how moderate stress influences the neural systems supporting working memory. We embedded an N-back working memory task in a moderately stressful context, as indicated by our physiological stress measures, and probed phasic and tonic human brain activity using two fMRI-techniques: conventional blood oxygen level dependent fMRI and arterial spin labeling (ASL). The results showed that the stress induction, as compared to the neutral control condition, led to slightly faster reaction times without changes in accuracy. In general, working memory processing was associated with increased activity in a frontoparietal network and reduced activity in the medial temporal lobe (MTL). The stress induction led to enhanced reduction of phasic MTL responses, specifically the hippocampus and amygdala. In addition, ASL showed that stress increased tonic amygdala activity, while tonic hippocampal activity was unaffected. These findings suggest that the influence of stress on MTL deactivation during working memory processing is task-related rather than a general consequence of the stressful state. The temporal suspension of hippocampal processing in favor of more task relevant processes may allow subjects to maintain normal performance levels under moderate stress. © 2011 Elsevier Inc.