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Successful explicit memory encoding is associated with inferior temporal activations and medial parietal deactivations, which are attenuated in aging. Here we used Dynamic Causal Modeling (DCM) of functional magnetic resonance imaging data to elucidate the information flow between hippocampus, parahippocampal place area (PPA) and precuneus during encoding of novel visual scenes. In 117 young adults, DCM revealed pronounced activating input from the PPA to the hippocampus and inhibitory connectivity from the PPA to the precuneus during novelty processing, with both being further up-regulated during successful encoding. This pattern could be replicated in two cohorts (N = 141 and 148) of young and older adults. In both cohorts, older adults selectively exhibited attenuated (negative) PPA-precuneus connectivity, which correlated negatively with memory performance. Our results provide insight into network dynamics underlying explicit memory encoding and suggest that age-related differences in memory-related network activity manifest in altered temporo-parietal neocortical rather than hippocampal connectivity.