The main goal of the present study was to investigate whether schema-based encoding of novel word pairs (i.e., novel compound words) supports the formation of unitized representations and thus, associative familiarity-based recognition. We report two experiments that both comprise an incidental learning task, in which novel noun-noun compound words were presented in semantically congruent contexts, enabling schema-supported processing of both constituents, contrasted with a schema-neutral condition. In Experiment 1, the effects of schema congruency on memory performance were larger for associative memory performance than for item memory performance in a memory test in which intact, recombined, and new compound words had to be discriminated. This supports the view that schema congruency boosts associative memory by promoting unitization. When contrasting event-related potentials (ERPs) for hits with correct rejections or associative misses, an N400 attenuation effect (520–676 ms) indicating absolute familiarity was present in the congruent condition, but not in the neutral condition. In line with this, a direct comparison of ERPs on hits across conditions revealed more positive waveforms in the congruent than in the neutral condition. This suggests that absolute familiarity contributes to associative recognition memory when schema-supported processing is established. In Experiment 2, we tested whether schema congruency enables the formation of semantically overlapping representations. Therefore, we included semantically similar lure compound words in the test phase and compared false alarm rates to these lures across conditions. In line with our hypothesis, we found higher false alarm rates in the congruent as compared to the neutral condition. In conclusion, we provide converging evidence for the view that schema congruency enables the formation of unitized representations and supports familiarity-based memory retrieval.