Healthy aging is associated with decreased neural selectivity (dedifferentiation) in category-selective cortical regions. This finding has prompted the suggestion that dedifferentiation contributes to age-related cognitive decline. Consistent with this possibility, dedifferentiation has been reported to negatively correlate with fluid intelligence in older adults. Here, we examined whether dedifferentiation is associated with performance in another cognitive domain- episodic memory-that is also highly vulnerable to aging. Given the proposed role of dedifferentiation in age-related cognitive decline, we predicted there would be a stronger link between dedifferentiation and episodic memory performance in older than in younger adults. Young (18 -30 years) and older (64 -75 years) male and female humans underwent fMRI scanning while viewing images of objects and scenes before a subsequent recognition memory test. We computed a differentiation index in two regions of interest (ROIs): parahippocampal place area (PPA) and lateral occipital complex (LOC). This index quantified the selectivity of the BOLD response to preferred versus nonpreferred category of an ROI (scenes for PPA, objects for LOC). The differentiation index in the PPA, but not the LOC, was lower in older than in younger adults. Additionally, the PPA differentiation index predicted recognition memory performance for the studied items. This relationship was independent of and not moderated by age. The PPA differentiation index also predicted performance on a latent "fluency" factor derived from a neuropsychological test battery; this relationship was also age invariant. These findings suggest that two independent factors, one associated with age, and the other with cognitive performance, influence neural differentiation.