Recent studies have indicated that there are complex interactions between activation changes and structural alterations in aging. To investigate this issue, we combined functional with structural MRI in healthy old and young women. When contrasting correct with incorrect recognition of words, we found decreased right prefrontal as well as increased middle temporal gyrus (MTG) activation in the older adults. Performance was correlated with prefrontal activation in younger and with MTG activation in older subjects, respectively. Furthermore, frontal decrease and MTG increase were associated with reduced gray matter density of the prefrontal cortex (PFC) and the medial temporal lobe (MTL) across young and old subjects. Within older adults, however, left MTG activation and structural integrity were positively correlated. Thus, our data indicates a two-step structure-function interaction of correct retrieval in healthy aging. First, age-related reduced gray matter density is associated with diminished frontal activation, as well as with compensatory activation in the MTG. Second, compensatory utilization of additional resources is dependent upon a certain degree of structural integrity in the PFC and the MTL.