Impaired memory is a hallmark of prodromal Alzheimer’s disease (AD). Prior knowledge associated with the memoranda improves memory in healthy individuals. However, little is known about its effect in early AD. We used functional MRI to investigate whether prior knowledge enhances memory encoding in early AD, and whether the nature of this prior knowledge matters. 17 patients with early AD and 19 controls underwent a task-based fMRI experiment where they learned face-scene associations. Famous faces carried pre-experimental knowledge (PEK), while unknown faces with which participants were familiarized prior to learning carried experimental knowledge (EK). As expected, PEK enhanced subsequent memory in healthy controls, but not in patients. Importantly, partly nonoverlapping brain networks supported PEK vs. EK encoding in healthy controls. Patients displayed impaired activation in a right subhippocampal region where activity predicted successful associative memory formation for PEK stimuli. Despite the limited sample sizes, these findings underline how prior knowledge impacts learning and suggest that the extent of associative memory impairment in early AD has hitherto been underestimated.