Amnestic mild cognitive impairment (aMCI) is a high-risk and often prodromal state for the development of Alzheimer's disease (AD) and is characterised by isolated episodic memory impairment. Functional neuroimaging studies in healthy subjects consistently report left prefrontal cortex (PFC) activation during verbal episodic memory encoding. The PFC activation at encoding is related to semantic processing which enhances memory. The purpose of this study was to ascertain whether impaired verbal episodic memory in aMCI is related to PFC dysfunction. Using functional magnetic resonance imaging (fMRI) we compared 10 aMCI patients with 10 elderly controls during verbal encoding. The encoding task was sensitive to the effects of semantic processing. Subsequent recognition was tested to measure encoding success. Behavioural results revealed impaired recognition and a lower false recognition rate for semantically related distracters (lures) in aMCI, which suggest impaired semantic processing at encoding. Both groups activated left hemispheric PFC, insula, premotor cortex and cerebellum, but group comparisons revealed decreased activation in left ventrolateral PFC in the aMCI group. The magnitude of activation in left ventrolateral PFC during encoding was positively correlated with recognition accuracy in the control group but not in the aMCI group. We propose that verbal episodic memory impairment in aMCI is related to PFC dysfunction which affects semantic processing at encoding.