In prospective memory (PM), an intention to act in response to an external event is formed, retained, and at a later stage, when the event occurs, the relevant action is performed. PM typically shows a decline in late adulthood, which might affect functions of daily living. The neural correlates of this decline are not well understood. Here, 15 young (6 female; age range = 23-30 years) and 16 older adults (5 female; age range = 64-74 years) were scanned with fMRI to examine age-related differences in brain activation associated with event-based PM using a task that facilitated the separation of transient and sustained components of PM. We show that older adults had reduced performance in conditions with high demands on prospective and working memory, while no age-difference was observed in low-demanding tasks. Across age groups, PM task performance activated separate sets of brain regions for transient and sustained responses. Age-differences in transient activation were found in fronto-striatal and MTL regions, with young adults showing more activation than older adults. Increased activation in young, compared to older adults, was also found for sustained PM activation in the IFG. These results provide new evidence that PM relies on dissociable transient and sustained cognitive processes, and that age-related deficits in PM can be explained by an inability to recruit PM-related brain networks in old age.