People suppressing their emotions while facing an emotional event typically remember it less well. However, the neural mechanisms underlying the impairing effect of emotion suppression on successful memory encoding are not well understood. Because successful memory encoding relies on the hippocampus and the amygdala, we hypothesized that memory impairments due to emotion suppression are associated with down-regulated activity in these brain areas. 59 healthy females were instructed either to simply watch the pictures or to down-regulate their emotions by using a response-focused emotion suppression strategy. Brain activity was recorded using functional magnetic resonance imaging (fMRI), and free recall of pictures was tested afterwards. As expected, suppressing one's emotions resulted in impaired recall of the pictures. On the neural level, the memory impairments were associated with reduced activity in the right hippocampus during successful encoding. No significant effects were observed in the amygdala. In addition, functional connectivity between the hippocampus and the right dorsolateral prefrontal cortex was strongly reduced during emotion suppression, and these reductions predicted free-recall performance. Our results indicate that emotion suppression interferes with memory encoding on the hippocampal level, possibly by decoupling hippocampal and prefrontal encoding processes, suggesting that response-focused emotion suppression might be an adaptive strategy for impairing hippocampal memory formation in highly arousing situations.