Congruence with prior knowledge and incongruence/novelty have long been identified as two prominent factors that, despite their opposing characteristics, can both enhance episodic memory. Using narrative film clip stimuli, this study investigated these effects in naturalistic event memories – examining behaviour and neural activation to help explain this paradox. Furthermore, we examined encoding, immediate retrieval, and one-week delayed retrieval to determine how these effects evolve over time. Behaviourally, both congruence with prior knowledge and incongruence/novelty enhanced memory for events, though incongruent events were recalled with more errors over time. During encoding, greater congruence with prior knowledge was correlated with medial prefrontal cortex (mPFC) and parietal activation, suggesting that these areas may play a key role in linking current episodic processing with prior knowledge. Encoding of increasingly incongruent events, on the other hand, was correlated with increasing activation in, and functional connectivity between, the medial temporal lobe (MTL) and posterior sensory cortices. During immediate and delayed retrieval the mPFC and MTL each demonstrated functional connectivity that varied based on the congruence of events with prior knowledge; with connectivity between the MTL and occipital regions found for incongruent events, while congruent events were associated with functional connectivity between the mPFC and the inferior parietal lobules and middle frontal gyri. These results demonstrate patterns of neural activity and connectivity that shift based on the nature of the event being experienced or remembered, and that evolve over time. Furthermore, they suggest potential mechanisms by which both congruence with prior knowledge and incongruence/novelty may enhance memory, through mPFC and MTL functional connectivity, respectively.