Based on a two-component model of episodic memory development across the lifespan, we examined the contribution of memory monitoring and binding processes to older adults' increased susceptibility to false memories with high subjective confidence. Younger and older adults worked on a modified version of the continuous recognition task (Schnider, von Daniken, & Gutbrod, 1996). Participants saw the same set of unrelated word pairs in three subsequent runs and had to identify pairs that were repeated within runs. Age group differences in the veridical recognition of repeated word pairs across the three runs were not reliable. False recognition of lure pairs increased across runs in older adults only, indicating increasing interference from previous encounters of the word pairs. Both age groups showed a decrease in false recognition of rearranged pairs across runs, but this decrease was more pronounced in younger adults. Older adults were more confident than younger adults when falsely recognising both lure and rearranged word pairs, indicating that overall memory-confidence calibration is less accurate in old age relative to early adulthood. Taken together, our results suggest that age-related decline in memory monitoring, in interaction with binding deficits, contribute to age differences in false memory for highly familiar events.