The encoding, consolidation, and retrieval of events and facts form the basis for acquiring new skills and knowledge. Prior knowledge can enhance those memory processes considerably and thus foster knowledge acquisition. But prior knowledge can also hinder knowledge acquisition, in particular when the to-be-learned information is inconsistent with the presuppositions of the learner. Therefore, taking students' prior knowledge into account and knowing about the way it affects memory processes is important for optimization of students' learning. Recent behavioral and neuroimaging experiments have shed new light on the neural mechanisms through which prior knowledge affects memory. However, relatively little is known about developmental differences in the ability to make efficient use of one's knowledge base for memory purposes. In this article, we review and integrate recent empirical evidence from developmental psychology and cognitive neuroscience about the effects of prior knowledge on memory processes. In particular, this may entail an extended shift from processing in the medial temporal lobes of the brain toward processing in the neocortex. Such findings have implications for students as developing individuals. Therefore, we highlight recent insights from cognitive neuroscience that call for further investigation in educational settings, discussing to what extent these novel insights may inform teaching in the classroom.