Memory for emotional items can be less prone to some types of memory distortion, such as reality-monitoring errors, than memory for neutral items. The present fMRI study examined whether this enhanced reality-monitoring accuracy reflects engagement of distinct processes recruited during encoding of emotional information. Participants only imagined named objects (word-only trials) or imagined named objects and then also viewed photos of them (word-picture trials). Half of the items were emotional (e.g., snake, casket). Later, participants heard object names and indicated whether the corresponding photo had been shown. Reality-monitoring errors occurred when participants attributed an item from a word-only trial to a word-picture trial. Such misattribution errors occurred less frequently for emotional than neutral items. Activity in emotion-processing regions (e.g., orbitofrontal cortex, amygdala) reduced the likelihood of later misattributions, likely due in part to interactions with regions that promote memory accuracy (e.g., the hippocampus). Distinct neural processes also increased the likelihood of reality-monitoring errors, depending on the emotional content of the items. Activity spanning the fusiform and parahippocampal gyri (likely reflecting mental imagery) increased the likelihood of reality-monitoring errors for neutral items, while activity in the anterior cingulate increased the likelihood of reality-monitoring errors for emotional items.