Reports of superior memory for novel relative to familiar material have figured prominently in recent theories of memory. However, such "novelty effects" are incongruous with long-standing observations that familiar items are remembered better. In 2 experiments, we explored whether this discrepancy was explained by differences in the type of familiarity under consideration or by differences in the difficulty of discriminating targets from lures, which may lead to source confusion for familiar but not novel targets. In Experiment 1, we directly tested whether previously observed novelty effects were the result of novelty, discrimination demands, or both. We used linguistic materials (proverbs) to replicate the novelty effect but found that it occurred only when familiar items were subject to source confusion. In Experiment 2, to examine better how novelty influences episodic memory, we used experimentally familiar, pre-experimentally familiar, and novel proverbs in a paradigm designed to overcome discrimination demand confounds. Memory was better for both types of familiar proverbs. These results indicate that familiarity, not novelty, leads to better episodic memory for studied items, regardless of whether familiarity is experimentally induced or based on prior semantic knowledge. We argue that proposals that state that information is encoded better if it is novel are based on over-generalizations of effects arising from the distinctiveness of novel materials. (Contains 2 tables and 2 figures.)