This study investigated motivational effect of reward and punishment on directed forgetting using the event-related potential technique. Participants were instructed to encode two-character words in Chinese, followed by the indicator of ‘remember’ or ‘forget’. Then, participants were required accomplishing the judgment task of old and new words. The results suggest that (i) directed forgetting effect is significant in the punishment condition but not in the reward condition, and (ii) a positive amplitude is induced in the punishment condition but not in the reward condition. Furthermore, directed forgetting can be effectively influenced by reward motivation, whereas punishment motivation is antagonistic to active forgetting because a substantial cognitive resource attracts considerable attention. Therefore, this study supports encoding inhibition theory.