The Method of Loci is one, if not the most, efficient mnemonic encoding strategy. This spatial mnemonic combines the core cognitive processes commonly linked to medial temporal lobe (MTL) activity: spatial and associative memory processes. During such processes fMRI studies consistently demonstrate medial temporal lobe (MTL) activity, while electrophysiological studies have emphasized the important role of theta oscillations (3-8 Hz) in the MTL. However, it is still unknown whether increases or decreases in theta power co-occur with increased BOLD signal in the MTL during memory encoding. To investigate this question we recorded EEG and fMRI separately while human participants used the spatial Method of Loci or the Pegword Method, a similarly associative but non spatial mnemonic. The more effective spatial mnemonic induced a pronounced theta power decrease source localized to the left MTL compared to the non-spatial associative mnemonic strategy. This effect was mirrored by BOLD signal increases in the MTL. Successful encoding, irrespective of the used strategy, elicited decreases in left temporal theta power and increases in MTL BOLD activity. This pattern of results suggests a negative relationship between theta power and BOLD signal changes in the MTL during memory encoding and spatial processing. The findings extend the well-known negative relation of alpha/beta oscillations and BOLD signals in the cortex to theta oscillations in the MTL.