The aims of the present study were to identify the cerebral structures associated with encoding and retrieval of verbal material. To circumvent the inherent disadvantages of the conventional block designs used in functional magnetic resonance imaging (MRI), an event-related design compared activation related to randomly intermixed old and new words during recognition. To support the validity of results, both nonparametric analyses in regions of interest (ROI) and statistical parametric mapping (SPM 96) were used. Twelve healthy volunteers, ages 22-35 years, performed three tasks: intentional encoding of words, recognition of old (previously learned) words, and discrimination between words and nonwords, a task to control for visual input and motor output during recognition. Echo-planar magnetic resonance imaging of blood-level, oxygen-dependent, task-related changes was used to compare cerebral activity under active and resting conditions as well as to detect event-related activity within blocks of trials. Comparable results were obtained following nonparametric statistical analysis of selected ROI and SPM. Encoding of words was associated with increased activity in the left inferior frontal gyrus, including Broca's area and in the left parietal association cortex. Event-related data analysis revealed activation of the right medial frontal gyrus, the right anterior cingulate gyrus, and parietal association cortices during recognition of previously presented words. In the lexical decision task, words in comparison with nonwords were associated with activation of the left parietal association cortex. The right medial frontal gyrus, the right anterior cingulate gyrus, and the right parietal association cortex are likely to be involved in episodic memory functions during recognition of previously presented verbal material. The comparison of event-related activation occurring within one trial block instead of among several trial blocks may significantly improve the performance of memory studies.