The reliable neuroimaging finding that older adults often show greater activity (over-recruitment) than younger adults is typically attributed to compensation. Yet, the neural mechanisms of over-recruitment in older adults (OAs) are largely unknown. Rodent electrophysiology studies have shown that as number of afferent fibers within a circuit decreases with age, the fibers that remain show higher synaptic field potentials (less wiring, more firing). Extrapolating to system-level measures in humans, we proposed and tested the hypothesis that greater activity in OAs compensates for impaired white-matter connectivity. Using a neuropsychological test battery, we measured individual differences in executive functions associated with the prefrontal cortex (PFC) and memory functions associated with the medial temporal lobes (MTLs). Using event-related functional magnetic resonance imaging, we compared activity for successful versus unsuccessful trials during a source memory task. Finally, we measured white-matter integrity using diffusion tensor imaging. The study yielded 3 main findings. First, low-executive OAs showed greater success-related activity in the PFC, whereas low-memory OAs showed greater success-related activity in the MTLs. Second, low-executive OAs displayed white-matter deficits in the PFC, whereas low-memory OAs displayed white-matter deficits in the MTLs. Finally, in both prefrontal and MTL regions, white-matter decline and success-related activations occurred in close proximity and were negatively correlated. This finding supports the less-wiring-more-firing hypothesis, which provides a testable account of compensatory over-recruitment in OAs.