Although it is well established that alcohol impairs episodic memory encoding, it is unknown how this occurs on a cerebral level. We scanned intoxicated and sober individuals with functional magnetic resonance imaging (fMRI) while they encoded various materials that were recalled the following day. Alcohol impaired memory for object pairs and face-name pairs, but not for words and phrase-word pairs. Impaired performance was associated with reduced bilateral prefrontal activation and non-specific activation of the parahippocampal gyrus. These results suggest that alcohol impairs episodic memory by interfering with activity of regions involved in encoding, and further indicate which regions are critical for human memory.