Functional MRI (fMRI) is used to study medial temporal lobe (MTL) activation during encoding of new information into memory. In most studies, fMRI data of different subjects are averaged in standard coordinate space. However, interindividual differences in activation can be extensive, reflecting functional heterogeneity. Further, anatomical differences in brain structure cause additional variance and loss of registration accuracy. Such differences in structural and functional MTL characteristics may interfere with the efficiency of averaging data across subjects, and may become more significant with aging and dementia. The current study concerns the analysis of individual differences in MTL activation associated with episodic encoding. Twenty-nine healthy elderly men between 60 and 70 years old performed a simple face encoding task during fMRI scanning. Individual data were analyzed in native space, and compared to the group average in standard space (Talairach and Tournoux). MTL volumes between subjects varied between 6.34 and 11.27 cm 3, and had considerable variation when mapped to standard space. Eighteen of the 29 subjects showed MTL activity and activation patterns varied both in location and size (ranging from 0.11 to 1.78 cm3), with the strongest activation in the left posterior part of the MTL. In standard space, no region was significantly activated on a group level at a comparable α level. We conclude that while the majority of elderly subjects show MTL activation during episodic encoding of faces, there is considerable structural and functional variability between subjects. Group analysis in standard space may not be appropriate for studies of a complex structure such as the MTL, particularly not in aging and dementia.