Anatomical and functional MRI images were acquired in a group of healthy elderly subjects (n = 11) and a group of patients diagnosed with probable Alzheimer's disease, from mild to moderate severity (n = 8). During functional sessions, verbal episodic Encoding and Recognition tasks were presented to subjects. Both groups were compared in terms of gray matter volume and cerebral activation. Furthermore, in the AD group, correlations between hippocampal gray matter volume and whole-brain activations were examined. When compared to healthy controls, AD patients presented significant gray matter atrophy as well as reduced activations during Encoding and Recognition in the medial temporal lobes and inferior parietal/superior temporal associative areas. In the same regions, the fMRI activity elicited by the Recognition task was positively correlated with hippocampal gray matter volume. Moreover, an increase of left prefrontal activity during Encoding and Recognition was observed in AD patients relative to controls and was correlated with memory performance. This additional activity elicited by episodic memory processes was not found to correlate with the degree of medial temporal atrophy in our group of patients. Our study shows that function in brain regions critical to episodic memory is altered in AD. During episodic Recognition, these functional changes may closely correlate with the progressive structural changes observed in the hippocampal region.