Alterations in hippocampal function have been shown in older adults, which are expressed as changes in hippocampal activity and connectivity. While hippocampal activation during memory demands has been demonstrated to decrease with age, some older individuals present increased activity, or hyperactivity, of the hippocampus which is associated with increased neuropathology and poor memory function. In addition, lower functional coherence between the hippocampus and core hubs of the default mode network (DMN), namely, the posteromedial and medial prefrontal cortices, as well as increased local intrahippocampal connectivity, were also demonstrated in cognitively intact older adults. Aerobic exercise has been shown to elicit neuroprotective effects on hippocampal structure and vasculature in aging, and improvements in cardiorespiratory fitness have been suggested to mediate these exercise-related effects. However, how these lifestyle factors relate to hippocampal function is not clear. Fifty-two cognitively intact older adults (aged 65–80 years) have been recruited and divided into physically active (n = 29) or non-active (n = 23) groups based on their aerobic activity lifestyle habits. Participants underwent resting-state and task-based fMRI experiments which included an associative memory encoding paradigm followed by a post-scan memory recognition test. In addition, 44 participants also performed cardiopulmonary exercise tests to evaluate cardiorespiratory fitness by measuring peak oxygen consumption (Vo2peak). While both groups demonstrated increased anterior hippocampal activation during memory encoding, a physically active lifestyle was associated with significantly lower activity level and higher memory performance in the recognition task. In addition, the physically active group also demonstrated higher functional connectivity of the anterior and posterior hippocampi with the core hubs of the DMN and lower local intra-hippocampal connectivity within and between hemispheres. Vo2peak was negatively associated with the hippocampal activation level and demonstrated a positive correlation with hippocampal-DMN connectivity. According to these findings, an aerobically active lifestyle may be associated with attenuation of hippocampal dysfunction in cognitively intact older adults.