Although the hippocampus had been traditionally thought to be exclusively involved in long-term memory, recent studies raised controversial explanations why hippocampal activity emerged during short-term memory tasks. For example, it has been argued that long-term memory processes might contribute to performance within a short-term memory paradigm when memory capacity has been exceeded. It is still unclear, though, whether neural activity in the hippocampus predicts visual short-term memory (VSTM) performance. To investigate this question, we measured BOLD activity in 21 healthy adults (age range 19–27 yr, nine males) while they performed a match-to-sample task requiring processing of object-location associations (delay period = 900 ms; set size conditions 1, 2, 4, and 6). Based on individual memory capacity (estimated by Cowan's K-formula), two performance groups were formed (high and low performers). Within whole brain analyses, we found a robust main effect of “set size” in the posterior parietal cortex (PPC). In line with a “set size × group” interaction in the hippocampus, a subsequent Finite Impulse Response (FIR) analysis revealed divergent hippocampal activation patterns between performance groups: Low performers (mean capacity = 3.63) elicited increased neural activity at set size two, followed by a drop in activity at set sizes four and six, whereas high performers (mean capacity = 5.19) showed an incremental activity increase with larger set size (maximal activation at set size six). Our data demonstrated that performance-related neural activity in the hippocampus emerged below capacity limit. In conclusion, we suggest that hippocampal activity reflected successful processing of object-location associations in VSTM. Neural activity in the PPC might have been involved in attentional updating. © 2013 Wiley Periodicals, Inc.