Forming new associations is a fundamental process of building our knowledge system. At the brain level, how prior-knowledge influences acquisition of novel associations has not been thoroughly investigated. Based on recent cognitive neuroscience literature on multiple-component memory processing, we hypothesize that prior-knowledge triggers additional evaluative, semantic, or episodic-binding processes, mainly supported by the ventromedial prefrontal cortex (vmPFC), anterior temporal pole (aTPL), and hippocampus (HPC), to facilitate new memory encoding. To test this hypothesis, we scanned 20 human participants with functional magnetic resonance imaging (fMRI) while they associated novel houses with famous or nonfamous faces. Behaviorally, we found beneficial effects of prior-knowledge on associative memory. At the brain level, we found that the vmPFC and HPC, as well as the parahippocampal place area (PPA) and fusiform face area, showed stronger activation when famous faces were involved. The vmPFC, aTPL, HPC, and PPA also exhibited stronger activation when famous faces elicited stronger emotions and memories, and when associations were later recollected. Connectivity analyses also suggested that HPC connectivity with the vmPFC plays a more important role in the famous than nonfamous condition. Taken together, our results suggest that prior-knowledge facilitates new associative encoding by recruiting additional perceptual, evaluative, or associative binding processes.