Despite bilateral hippocampal damage dating to perinatal or early-childhood period, patients with developmental amnesia (DA) exhibit well-developed semantic memory, but severely impaired episodic memory. It is not clear, however, whether the residual hippocampus plays a role in encoding and/or retrieval of new information, or the surrounding cortical areas rescue aspects of these critical cognitive memory processes after early injury. We used manual MRI segmentation to estimate the volume of three hippocampal subregions and three surrounding cortical areas in 23 patients with DA and 32 controls. In patients, the level of atrophy in CA-DG subregions and subicular complex was more than 40% while the atrophy of the uncus was moderate (-23%). In contrast, volumes of entorhinal, perirhinal and parahippocampal cortices were smaller than those of controls, but not statistically different. Patients' recall, Verbal IQ, Working Memory Index and Processing Speed Index scores correlated negatively with the volume of the uncus while spatial perception/immediate memory performance correlated negatively with the volume of the subicular complex. We propose that in patients with DA, no other structure can perform the function of the hippocampus in episodic memory. However, cognitive memory processing is compromised as a function of extent of atrophy in hippocampal subregions, such that the greater the damage, the more likely that preserved surrounding cortical areas will be recruited to rescue the putative functions of the damaged subregions. Our findings document for the first time not only the extent, but also the limits of circuit reorganization occurring in the young brain following bilateral hippocampal damage.