Rewarding events enhance memory encoding via dopaminergic influences on hippocampal plasticity. Phasic dopamine release depends on immediate reward magnitude, but presumably also on tonic dopamine levels, which may vary as a function of the average accumulation of reward over time. Using model-based fMRI in combination with a novel associative memory task, we show that immediate reward magnitude exerts a monotonically increasing influence on the nucleus accumbens, ventral tegmental area (VTA), and hippocampal activity during encoding, and enhances memory. By contrast, average reward levels modulate feedback-related responses in the VTA and hippocampus in a non-linear (inverted U-shape) fashion, with similar effects on memory performance. Additionally, the dorsal anterior cingulate cortex (dACC) monotonically tracks average reward levels, while VTA-dACC functional connectivity is non-linearly modulated (inverted U-shape) by average reward. We propose that the dACC computes the net behavioral impact of average reward and relays this information to memory circuitry via the VTA.