Human beings differ in their ability to form and retrieve lasting long-term memories. To explore the source of these individual differences, we used functional magnetic resonance imaging to measure blood-oxygen-level-dependent (BOLD) activity in healthy young adults (n = 50) during periods of resting fixation that were interleaved with periods of simple cognitive tasks. We report that medial temporal lobe BOLD activity during periods of rest predicts individual differences in memory ability. Specifically, individuals who exhibited greater magnitudes of task-induced deactivations in medial temporal lobe BOLD signal (as compared to periods of rest) demonstrated superior memory during offline testing. This relationship was independent of differences in general cognitive function and persisted across different control tasks (i.e., number judgment versus checkerboard detection) and experimental designs (i.e., blocked versus event-related). These results offer a neurophysiological basis for the variability in mnemonic ability that is present amongst healthy young adults and may help to guide strategies aimed at early detection and intervention of neurological and mnemonic impairment.