A key task for the brain is to determine which pieces of information are worth storing in memory. To build a more complete representation of the environment, memory systems may prioritize new information that has not already been stored. Here, we propose a mechanism that supports this preferential encoding of new information, whereby prior experience attenuates neural activity for old information that is competing for processing. We evaluated this hypothesis with fMRI by presenting a series of novel stimuli concurrently with repeated stimuli at different spatial locations in Experiment 1 and from different visual categories (i.e., faces and scenes) in Experiment 2. Subsequent memory for the novel stimuli could be predicted from the reduction in activity in ventral temporal cortex for the accompanying repeated stimuli. This relationship was eliminated in control conditions where the competition during encoding came from another novel stimulus. These findings reveal how prior experience adaptively guides learning toward new aspects of the environment.