Failure of contextual retrieval can lead to false recall, wherein people retrieve an item or experience that occurred in a different context, or did not occur at all. Whereas the hippocampus is thought to play a crucial role in contextually-mediated retrieval, the neural process leading to false recalls is not yet understood. Using direct electrical recordings from the human hippocampus, we investigate the neural mechanisms underlying the false recall phenomenon. In two large datasets, we characterize key physiological differences between correct and false recalls, emerging immediately prior to vocalization. By differentiating between false recalls that share high or low contextual similarity with the target context, we identify the neural process underlying retrieval of item-context associations. Applying multivariate decoding methods, we were able to reliably predict whether the to-be-recalled item would be a veridical or false memory. Our findings provide a mechanistic insight into the process of retrieving context-bound memories, and open new avenues for interventions aimed at reducing false recalls when those lead to functional impairment.