The present study investigated the effects of approach versus avoidance motivation on declarative learning. Human participants navigated a virtual reality version of the Morris water task, a classic spatial memory paradigm, adapted to permit the experimental manipulation of motivation during learning. During this task, participants were instructed to navigate to correct platforms while avoiding incorrect platforms. To manipulate motivational states participants were either rewarded for navigating to correct locations (approach) or punished for navigating to incorrect platforms (avoidance). Participants' skin conductance levels (SCLs) were recorded during navigation to investigate the role of physiological arousal in motivated learning. Behavioral results revealed that, overall, approach motivation enhanced and avoidance motivation impaired memory performance compared to nonmotivated spatial learning. This advantage was evident across several performance indices, including accuracy, learning rate, path length, and proximity to platform locations during probe trials. SCL analysis revealed three key findings. First, within subjects, arousal interacted with approach motivation, such that high arousal on a given trial was associated with performance deficits. In addition, across subjects, high arousal negated or reversed the benefits of approach motivation. Finally, low-performing, highly aroused participants showed SCL responses similar to those of avoidance-motivation participants, suggesting that for these individuals, opportunities for reward may evoke states of learning similar to those typically evoked by threats of punishment. These results provide a novel characterization of how approach and avoidance motivation influence declarative memory and indicate a critical and selective role for arousal in determining how reinforcement influences goal-oriented learning.