Contextual features are integral to episodic memories; yet, we know little about context effects on pattern separation, a hippocampal function promoting orthogonalization of overlapping memory representations. Recent studies suggested that various extrahippocampal brain regions support pattern separation; however, the specific role of the parahippocampal cortex-a region involved in context representation-in pattern separation has not yet been studied. Here, we investigated the contribution of the parahippocampal cortex (specifically, the parahippocampal place area) to context reinstatement effects on mnemonic discrimination, using functional magnetic resonance imaging. During scanning, participants saw object images on unique context scenes, followed by a recognition task involving the repetitions of encoded objects or visually similar lures on either their original context or a lure context. Context reinstatement at retrieval improved item recognition but hindered mnemonic discrimination. Crucially, our region of interest analyses of the parahippocampal place area and an object-selective visual area, the lateral occipital cortex indicated that while during successful mnemonic decisions parahippocampal place area activity decreased for old contexts compared to lure contexts irrespective of object novelty, lateral occipital cortex activity differentiated between old and lure objects exclusively. These results imply that pattern separation of contextual and item-specific memory features may be differentially aided by scene and object-selective cortical areas.