We investigated how the hippocampus and its adjacent mediotemporal structures contribute to contextual and noncontextual declarative memory retrieval by manipulating the amount of contextual information across two levels of the same contextual dimension in a source memory task. A first analysis identified medial temporal lobe (MTL) substructures mediating either contextual or noncontextual retrieval. A linearly weighted analysis elucidated which MTL substructures show a gradually increasing neural activity, depending on the amount of contextual information retrieved. A hippocampal engagement was found during both levels of source memory but not during item memory retrieval. The anterior MTL including the perirhinal cortex was only engaged during item memory retrieval by an activity decrease. Only the posterior parahippocampal cortex showed an activation increasing with the amount of contextual information retrieved. If one assumes a roughly linear relationship between the blood-oxygenation level-dependent (BOLD) signal and the associated cognitive process, our results suggest that the posterior parahippocampal cortex is involved in contextual retrieval on the basis of memory strength while the hippocampus processes representations of item-context binding. The anterior MTL including perirhinal cortex seems to be particularly engaged in familiarity-based item recognition. If one assumes departure from linearity, however, our results can also be explained by one-dimensional modulation of memory strength.