The posterior-to-anterior shift in aging (PASA) effect is seen as a compensatory model that enables older adults to meet increased cognitive demands to perform comparably as their young counterparts. However, empirical support for the PASA effect investigating age-related changes in the inferior frontal gyrus (IFG), hippocampus, and parahippocampus has yet to be established. 33 older adults and 48 young adults were administered tasks sensitive to novelty and relational processing of indoor/outdoor scenes in a 3-Tesla MRI scanner. Functional activation and connectivity analyses were applied to examine the age-related changes on the IFG, hippocampus, and parahippocampus among low/high-performing older adults and young adults. Significant parahippocampal activation was generally found in both older (high-performing) and young adults for novelty and relational processing of scenes. Younger adults had significantly greater IFG and parahippocampal activation than older adults, and greater parahippocampal activation compared to low-performing older adults for relational processing—providing partial support for the PASA model. Observations of significant functional connectivity within the medial temporal lobe and greater negative left IFG-right hippocampus/parahippocampus functional connectivity for young compared to low-performing older adults for relational processing also supports the PASA effect partially.