A number of recent studies have indicated that the medial temporal lobe (MTL) plays a critical role in working memory (WM) and perception, but these results have been highly controversial given the traditional association of MTL with long-term memory. We review the research and highlight important factors that need to be considered in determining the role of MTL in WM including set-size of used stimuli and feature complexity and/or feature conjunctions/bindings embedded in those stimuli. These factors relate to hierarchical and, accordingly, domain-specific theories of functional organization within the temporal lobe. In addition, one must consider process-specific theories too, because two key processes commonly understood to contribute recognition memory, namely, recollection and familiarity, also have robust support from neurophysiological and neuroimaging research as to their functional dissociations within MTL. PFC has long been heavily implicated in WM; however, relatively less is known about how the PFC contributes to recollection and familiarity, although dynamic prefrontal coding models in WM may help to explain their neural mechanisms. The MTL and PFC are heavily interconnected and do not operate independently in underlying WM. We propose that investigation of the interactions between these two regions in WM, particularly their coordinated neural activities, and the modeling of such interactions, will be crucial for the advancing understanding of the neural mechanisms of WM.