Emotion processing has been shown to vary with age: relative to young adults (YAs), older adults (OAs) exhibit increased frontal activations to emotional materials as well as cognitive biases toward positive versus negative stimuli. This latter effect is hypothesized to depend on OAs’ capacity for controlled elaboration. To test this hypothesis, YAs and OAs were scanned while they viewed negative, neutral, and positive pictures during a semantic elaboration task or a perceptual task. fMRI results revealed that emotion-related activity in the amygdala is preserved in aging, regardless of encoding task. Furthermore, age-related differences in valence processing are indeed modulated by elaboration: relative to YAs, OAs show enhanced activity in the medial PFC and ventrolateral PFC in response to positive versus negative stimuli, but only when using an elaborative encoding strategy. These positive valence effects were predicted by how well OAs perform on a neuropsychological battery testing executive function. Finally, functional connectivity analyses highlighted age effects on the relationship between medial PFC and ventral striatum, a region involved in reward processing, suggesting another possible source for valence shifts in aging. Altogether, these findings provide support for the hypothesis that valence shifts in the aging brain are mediated by controlled processes such as semantic elaboration, self-referential processing, and emotion regulation.