The apolipoprotein E (APOE) epsilon4 allele is the major genetic risk factor for Alzheimer's disease, but an APOE effect on memory performance and memory-related neurophysiology in young, healthy subjects is unknown. We found an association of APOE epsilon4 with better episodic memory compared with APOE epsilon2 and epsilon3 in 340 young, healthy persons. Neuroimaging was performed in a subset of 34 memory-matched individuals to study genetic effects on memory-related brain activity independently of differential performance. E4 carriers decreased brain activity over 3 learning runs, whereas epsilon2 and epsilon3 carriers increased activity. This smaller neural investment of epsilon4 carriers into learning reappeared during retrieval: epsilon4 carriers exhibited reduced retrieval-related activity with equal retrieval performance. APOE isoforms had no differential effects on cognitive measures other than memory, brain volumes, and brain activity related to working memory. We suggest that APOE epsilon4 is associated with good episodic memory and an economic use of memory-related neural resources in young, healthy humans.