Associative memory refers to the formation of memories for discrete items and the relationship between them. Associative memory is more difficult, and hence associated with increased memory errors, relative to memory for single items. In the present study, I attempted to enhance associative memory for unrelated image pairs by grouping them proximal to each other relative to distally spaced image pairs. This manipulation is a form of unitization, whereby associative stimuli are encouraged to be processed more like a single unit than a set of discrete items, supporting associative memory by taking advantage of the relative ease of item memory. Behaviorally, proximal image pairs were more discriminable than distal image pairs, driven by a reduction in false alarms for the former stimuli. However, neural patterns in the medial temporal lobe (MTL) underlying proximal image pairs were more similar to that of distal image pairs than single images. Hence, memory improved with spatial proximity, but not because the proximal image pairs were processed like a single item. The present study sought to investigate the neural basis of this behavioral benefit. Results provide more insight and nuance into the neural mechanisms supporting unitized processing via spatial proximity.