A main question in emotion and memory literature concerns the relationship between the immediate impact of emotional distraction on perception and the long-term impact of emotion on memory. While previous research shows both automatic and resource-mediated mechanisms to be involved in initial emotion processing and memory, it remains unclear what the exact relationship between the immediate and long-term effects is, and how this relationship may change as a function of manipulations at perception favoring the engagement of either more automatic or mediated mechanisms. Using event-related functional magnetic resonance imaging, we varied the degree of resource availability for processing task-irrelevant emotional information, to determine how the initial (impairing) impact of emotional distraction related to the long-term (enhancing) impact of emotion on memory. Results showed that a direct relationship between emotional distraction and memory was dependent on automatic mechanisms, as this was found only under conditions of limited resource availability and engagement of amygdala (AMY)-hippocampal (HC) mechanisms to both impairing and enhancing effects. A hemispheric disassociation was also identified in AMY-HC, where while both sides were associated with emotional distraction and left AMY and anterior HC were linked to emotional memory, functional asymmetry was only identified in the posterior HC, with only the left side contributing to emotional memory. Finally, areas dissociating between the two opposing effects included the medial frontal, precentral, superior temporal, and middle occipital gyri (linked to emotional distraction), and the superior parietal cortex (linked to emotional memory). These findings demonstrate the relationship between emotional distraction and memory is context dependent and that specific brain regions may be more or less susceptible to the direction of emotional modulation (increased or decreased), depending on the task manipulation, and processes investigated.