Previous positron emission tomography (PET) studies have shown greater medial temporal lobe activation (MTL) for associative memory encoding relative to deep item-oriented encoding. Greater MTL activation has also been reported for associative novelty detection. Although it has been suggested that these patterns of MTL activation could reflect the creation of novel associations into memory, it is unclear whether associative encoding and associative novelty detection rely on the same MTL substructures. In this study, we used event-related functional magnetic resonance imaging (er-fMRI) to reproduce previous reports of greater hippocampal activation for associative encoding using both arbitrary and semantically related object pairs. This paradigm allowed us to assess whether the requirement for associative processing at encoding interacts with associative novelty. Contrasting the pattern of activation for associative versus item-oriented encoding revealed greater right hippocampal activation as well as parahippocampal activation bilaterally, reproducing the findings from previous PET experiments. The orthogonal contrast between arbitrary and related pairs revealed greater activation in the left parahippocampal region, but no significant interaction between the type of encoding (associative or item oriented) and the type of pairs (arbitrary or semantically related) was observed in the medial temporal lobe (MTL). These results suggest that both associative processing and associative novelty detection can activate the MTL. Most importantly, this study suggests that associative processing can activate the MTL regardless of the pre-existence of an association between the items of a pair.