The default-mode network (DMN) is a distributed functional-anatomic network implicated in supporting memory. Current resting-state functional connectivity studies in humans remain divided on the exact involvement of medial temporal lobe (MTL) in this network at rest. Notably, it is unclear to what extent the MTL regions involved in successful memory encoding are connected to the cortical nodes of the DMN during resting state. Our findings using functional connectivity MRI analyses of resting-state data indicate that the parahippocampal gyrus (PHG) is the primary hub of the DMN in the MTL during resting state. Also, connectivity of the PHG is distinct from connectivity of hippocampal regions identified by an associative memory-encoding task. We confirmed that several hippocampal encoding regions lack significant functional connectivity with cortical DMN nodes during resting state. Additionally, a mediation analysis showed that resting-state connectivity between the hippocampus and posterior cingulate cortex—a major hub of the DMN—is indirect and mediated by the PHG. Our findings support the hypothesis that the MTL memory system represents a functional subnetwork that relates to the cortical nodes of the DMN through parahippocampal functional connections. Hum Brain Mapp 35:1061–1073, 2014. © 2013 Wiley Periodicals, Inc.