As we comprehend narratives, our attentional engagement fluctuates over time. Despite theoretical conceptions of narrative engagement as emotion-laden attention, little empirical work has characterized the cognitive and neural processes that comprise subjective engagement in naturalistic contexts or its consequences for memory. Here, we relate fluctuations in narrative engagement to patterns of brain coactivation, and test whether neural signatures of engagement predict later recall. In behavioral studies, participants continuously rated how engaged they were as they watched a television episode or listened to a story. Self-reported engagement was synchronized across individuals and driven by the emotional content of the narratives. During fMRI, we observed highly synchronized activity in the default mode network when people were, on average, more engaged in the same narratives. Models based on time-varying whole-brain functional connectivity predicted evolving states of engagement across participants and even across different datasets. The same functional connections also predicted post-scan event recall, suggesting that engagement during encoding impacts subsequent memory. Finally, group-average engagement was related to fluctuations of an independent functional connectivity index of sustained attention. Together, our findings characterize the neural signatures of engagement dynamics and elucidate relationships between narrative engagement, sustained attention, and event memory.