Cognitive abilities such as working memory (WM) capacity decrease with age. To determine the neurophysiological correlates of age-related reduction in working memory capacity, we studied 10 young subjects (<35 years of age; mean age=29) and twelve older subjects (>55 years of age; mean age=59) with whole brain blood oxygenation-level dependent (BOLD) fMRI on a 1.5 T GE MR scanner using a SPIRAL FLASH pulse sequence (TE=24 ms, TR=56 ms, FA=60 degrees , voxel dimensions=3.75 mm(3)). Subjects performed a modified version of the "n" back working memory task at different levels of increasing working memory load (1-Back, 2-Back and 3-Back). Older subjects performed as well as the younger subjects at 1-Back (p=0.4), but performed worse than the younger subjects at 2-Back (p<0.01) and 3-Back (p=0.06). Older subjects had significantly longer reaction time (RT) than younger subjects (p<0.04) at all levels of task difficulty. Image analysis using SPM 99 revealed a similar distribution of cortical activity between younger and older subjects at all task levels. However, an analysis of variance revealed a significant group x task interaction in the prefrontal cortex bilaterally; within working memory capacity, as in 1-Back when the older subjects performed as well as the younger subjects, they showed greater prefrontal cortical (BA 9) activity bilaterally. At higher working memory loads, however, when they performed worse then the younger subjects, the older subjects showed relatively reduced activity in these prefrontal regions. These data suggest that, within capacity, compensatory mechanisms such as additional prefrontal cortical activity are called upon to maintain proficiency in task performance. As cognitive demand increases, however, they are pushed past a threshold beyond which physiological compensation cannot be made and, a decline in performance occurs.