The negative priming (NP) effect refers to the observed increase in identification time for a current target stimulus or stimulus feature (the “probe”) that has been employed as a distractor stimulus or stimulus feature on the previous trial (the “prime”), representing strong evidence that ignored information is actively processed to a high level by selective attention systems. However, theoretical accounts of NP differ in whether they attribute the effect to processes of selective inhibition or episodic memory retrieval. Here we derived neurophysiological predictions from the rival “selective inhibition” and “episodic retrieval” models of NP, and employed event-related fMRI in a color-naming Stroop task to assess neural responses to probe trials that were subject to either no priming or negative priming. Compared to no-priming probe trials, NP resulted in increased activation of the right dorsolateral prefrontal cortex, in a region which has been closely linked with episodic memory retrieval functions. NP was also accompanied by activation of the right thalamus, particularly the mediodorsal nucleus, which has been implicated in the pathophysiology of schizophrenia, a condition associated with diminished NP effects. Our results support the proposal that ignored stimulus information is fully encoded in memory, and that episodic retrieval, not selective inhibition, of such information affects selective attention performance on subsequent trials.