One of the primary contributors to forgetting is interference from overlapping memories. Intuitively, this suggests-and prominent theoretical models argue-that memory interference is best avoided by encoding overlapping memories as if they were unrelated. It is therefore surprising that reactivation of older memories during new encoding has been associated with reduced memory interference. Critically, however, prior studies have not directly established why reactivation reduces interference. Here, we first developed a behavioral paradigm that isolates the negative influence that overlapping memories exert during memory retrieval. We then show that reactivating older memories during the encoding of new memories dramatically reduces this interference cost at retrieval. Finally, leveraging multiple fMRI decoding approaches, we show that spontaneous reactivation of older memories during new encoding leads to integration of overlapping memories and, critically, that integration during encoding specifically reduces interference between overlapping, and otherwise competing, memories during retrieval.