AbstractNovelty can promote subsequent long‐term memory via the mesolimbic system, including the medial temporal lobe and midbrain structures. Importantly, these and other brain regions typically degenerate during healthy aging, which suggests a reduced impact of novelty on learning. However, evidence in favor of such a hypothesis is scarce. Thus, we used functional MRI in combination with an established paradigm in healthy young (19–32 years, n = 30) and older (51–81 years, n = 32) humans. During encoding, colored cues predicted the subsequent presentation of either a novel or previously familiarized image (75% cue validity), and approximately 24 h later, recognition memory for novel images was tested. Behaviorally, expected novel images, as compared to unexpected novel images, were better recognized in young and, to a lesser degree, older subjects. At the neural level, familiar cues activated memory related areas, especially the medial temporal lobe, whereas novelty cues activated the angular gyrus and inferior parietal lobe, which may reflect enhanced attentional processing. During outcome processing, expected novel images activated the medial temporal lobe, angular gyrus and inferior parietal lobe. Importantly, a similar activation pattern was observed for subsequently recognized novel items, which helps to explain the behavioral effect of novelty on long‐term memory. Finally, age‐effects were pronounced for successfully recognized novel images with relatively stronger activations in attention‐related brain regions in older adults; younger adults, on the other hand, showed stronger hippocampal activation. Together, expectancy promotes memory formation for novel items via neural activity in medial temporal lobe structures and this effect appears to be reduced with age.