Social interaction requires active inferential processing on the part of the listener. Such inferences can affect memory. For example, after hearing the karate champion hit the cinder block, one might erroneously recollect having heard the verb broke (Brewer, 1977)--a reasonable inference, but one not logically necessitated. The mechanisms behind this type of erroneous recollection have not been much explored. Experiments in the present article assessed the influence of repetition, response deadline, and age (cf. Jacoby, 1999), in an effort to demonstrate the dual contributions of familiarity and recollection underlying this phenomenon. For older adults, repetition at encoding increased the later likelihood of erroneously recognizing pragmatic inferences. For younger adults, repetition exerted the opposite effect. Both age groups, however, benefited from a second study-test trial. Experiment 2 demonstrated a similar interaction on a cued recall test for younger adults, whereby repetition exerted different influences as a function of time permitted during retrieval. Implications for theories of memory and discourse processing are considered.