Changes in the cerebrovascular system due to age or disease can significantly alter the blood-oxygenation-level-dependent (BOLD) signal and complicate its interpretation. The simultaneous acquisition of arterial spin labeling (ASL) and BOLD data represents a useful technique to more fully characterize the neurovascular underpinnings of functional brain response to cognition. We conducted a functional magnetic resonance imaging (FMRI) study of episodic memory encoding to investigate whether age is related to cerebral blood flow (CBF) and BOLD response in the medial temporal lobe (MTL). Results demonstrated a significant reduction in resting-state CBF in older compared to young adults. Conversely, older adults showed significantly increased CBF but not BOLD response in the MTL during picture encoding relative to young adults. Correlations between CBF response and cognition were demonstrated whereas associations with BOLD were not observed. Stroke risk was associated with both CBF and BOLD response. Results suggest that aging effects on CBF and BOLD responses to encoding are dissociable and that cerebrovascular alterations contribute to findings of age-related differences.