Previous research has shown that the degree of verbal memory decline following left anterior temporal lobectomy (ATL) is inversely related to the extent of neuronal dropout in resected left hippocampus. The goal of this investigation was to clarify further the nature of the free recall impairment and to determine the relative contribution of verbal retrieval and encoding processes. Seventy-six patients who underwent left (n = 46) or right (n = 30) ATL were classified according to the presence or absence of hippocampal sclerosis and pre- to postoperative changes in free recall, cued recall and recognition memory for verbal material were examined. Surgically induced free recall impairments were selectively associated with resection of nonsclerotic left hippocampus and represented a 29-35% decline in verbal learning ability. These free recall deficits were due to postoperative impairment in verbal encoding efficiency, not retrieval difficulties. Assessment of false positive recognition errors indicated that resection of nonsclerotic left hippocampus selectively impaired the ability to encode stimulus uniqueness within correct semantic fields. The clinical and theoretical significance of these results are discussed.