Spatial memory deficits are core features of aging-related changes in cognitive abilities. The neural correlates of these deficits are largely unknown. In the present study, we investigated the neural underpinnings of age-related differences in spatial memory by functional MRI using a navigational memory task with route encoding and route recognition conditions. We investigated 20 healthy young (18-29 years old) and 20 healthy old adults (53-78 years old) in a random effects analysis. Old subjects showed slightly poorer performance than young subjects. Compared to the control condition, route encoding and route recognition showed activation of the dorsal and ventral visual processing streams and the frontal eye fields in both groups of subjects. Compared to old adults, young subjects showed during route encoding stronger activations in the dorsal and the ventral visual processing stream (supramarginal gyrus and posterior fusiform/parahippocampal areas). In addition, young subjects showed weaker anterior parahippocampal activity during route recognition compared to the old group. In contrast, old compared to young subjects showed less suppressed activity in the left perisylvian region and the anterior cingulate cortex during route encoding. Our findings suggest that age-related navigational memory deficits might be caused by less effective route encoding based on reduced posterior fusiform/parahippocampal and parietal functionality combined with diminished inhibition of perisylvian and anterior cingulate cortices correlated with less effective suppression of task-irrelevant information. In contrast, age differences in neural correlates of route recognition seem to be rather subtle. Old subjects might show a diminished familiarity signal during route recognition in the anterior parahippocampal region.