Individuals with fragile X syndrome (FXS) commonly display characteristics of social anxiety, including gaze aversion, increased time to initiate social interaction, and difficulty forming meaningful peer relationships. While neural correlates of face processing, an important component of social interaction, are altered in FXS, studies have not examined whether social anxiety in this population is related to higher cognitive processes, such as memory. This study aimed to determine whether the neural circuitry involved in face encoding was disrupted in individuals with FXS, and whether brain activity during face encoding was related to levels of social anxiety. A group of 11 individuals with FXS (5 M) and 11 age- and gender-matched control participants underwent fMRI scanning while performing a face encoding task with online eye-tracking. Results indicate that compared to the control group, individuals with FXS exhibited decreased activation of prefrontal regions associated with complex social cognition, including the medial and superior frontal cortex, during successful face encoding. Further, the FXS and control groups showed significantly different relationships between measures of social anxiety (including gaze-fixation) and brain activity during face encoding. These data indicate that social anxiety in FXS may be related to the inability to successfully recruit higher level social cognition regions during the initial phases of memory formation.