Similar to adults with posttraumatic stress disorder, children with early life adversity show bias in memory for negative emotional stimuli. However, it is not well understood how childhood adversity impacts mechanisms underlying emotional memory. N = 56 children (8-14 years, 48% female) reported on adverse experiences including potentially traumatic events and underwent fMRI while attending to emotionally pleasant, neutral, or negative images. Post-scan, participants completed a cued recall test to assess memory for these images. Emotional difference-in-memory (DM) scores were computed by subtracting negative or positive from neutral recall performance. All children showed enhancing effects of emotion on recall, with no effect of trauma load. However, children with less trauma showed a larger emotional DM for both positive and negative stimuli when amygdala or anterior hippocampal activity was higher. In contrast, highly trauma-exposed children demonstrated a lower emotional DM with greater amygdala or hippocampal activity. This suggested that alternative neural mechanisms might support emotional enhancement of encoding in children with greater trauma load. Whole-brain analyses revealed that right fusiform activity during encoding positively correlated with both trauma load and successful later recall of positive images. Therefore, highly trauma-exposed children may use alternative, potentially adaptive neural pathways via the ventral visual stream to encode positive emotional events.