Memory deficits are considered the hallmark of Alzheimer's disease and indices of episodic memory and learning are critical in early identification of AD. Poor performance on episodic memory tests precedes detectable clinical change and global psychometric deterioration in individuals who develop AD. Performance on delayed story recall tasks is a sensitive measure of memory impairments associated with dementia. This task involves presenting a short story auditorily which subjects recall immediately and at different time delays. However, there is limited information on the effects of encoding conditions on this task. Given the high prevalence of hearing loss in older adults, administering a story recall task via auditory presentation may not enable optimal encoding of information. This could lead to spuriously poor performance on memory tests, an overlooked consideration when testing older adults. The primary purpose of this study was to determine how varying encoding conditions influence story recall in healthy, older adults and those with AD. A secondary purpose was to investigate recognition abilities and learning effects in dementia patients. All participants were administered a story recall task (comprising three stories) in three modalities: (1) auditory, (2) visual (silent reading), and (3) auditory and visual. Free recall was assessed immediately, and at delays of 15 and 30 minutes. Following recall at 30 minutes, half of the healthy elders and AD participants were given a multiple-choice recognition task and the stories were repeated for the other half. After repetition, story recall was assessed immediately and after 15 minutes. Three noteworthy findings emerged from this study. First, the AD participants recalled a story best after silently reading the story, compared to hearing an examiner tell the story, or simultaneously hearing and reading the story. Second, testing recognition memory with a multiple-choice test revealed that AD patients could recognize information which they could not freely recall. Finally, both AD patients and normal elders improved their free recall of stories after they were presented a second time. These results have important implications for assessing and managing memory deficits in healthy elders and those with AD.