Some previous studies have shown that increased stress hormone levels have beneficial effects on memory encoding; however, there is no clear consensus on which encoding-related processes are affected by stress hormones. In the present study, we investigated the relationship between interindividual differences in neuroendocrine response to acute stress and interference resolution (i.e., mnemonic discrimination). Participants were healthy young adults who were exposed to physical and psychological stressors (Socially Evaluated Cold Pressor Test). Then participants completed the modified version of the Mnemonic Similarity Task. Specifically, they were presented with photographs of emotionally arousing (negative and positive) and nonarousing (neutral) scenes followed by a recognition memory test where they saw a mixture of old and new stimuli. Crucially, participants were also presented with critical lure items, that is, visually similar stimuli to ones presented at encoding. We found that participants who had higher cortisol response to the stressors were better in discriminating between the studied items and their visually similar lures. This effect was present for the arousing and nonarousing materials as well. These findings suggest that increased hormonal response to acute stress has a beneficial impact on the formation of distinct, nonoverlapping, unique memory representations, and consequently, on episodic memory encoding processes.