Although many epidemiological studies suggest the beneficial effects of higher cognitive reserve (CR) in reducing age-related cognitive decline and dementia risk, the neural basis of CR is poorly understood. To our knowledge, the current study represents the first electrophysiological investigation of the relationship between CR and neural reserve (i.e., neural efficiency and capacity). Specifically, we examined whether CR modulates event-related potentials (ERPs) associated with performance on a verbal recognition memory task with three set sizes (1, 4, or 7 letters) in healthy younger and older adults. Neural data showed that as task difficulty increased, the amplitude of the parietal P3b component during the probe phase decreased and its latency increased. Notably, the degree of these neural changes was negatively correlated with CR in both age groups, such that individuals with higher CR showed smaller changes in P3b amplitude and less slowing in P3b latency (i.e., smaller changes in the speed of neural processing) with increasing task difficulty, suggesting greater neural efficiency. These CR-related differences in neural efficiency may underlie reserve against neuropathology and age-related burden.