Aging is associated with changes in spatial navigation behavior. In addition to an overall performance decline, older adults tend to rely more on proximal location cue information than on environmental boundary information during spatial navigation compared to young adults. The fact that older adults are more susceptible to errors during spatial navigation might be partly attributed to deficient dopaminergic modulation of hippocampal and striatal functioning. Hence, elevating dopamine levels might differentially modulate spatial navigation and memory performance in young and older adults. In this work, we administered levodopa (L-DOPA) in a double-blind within-subject, placebo-controlled design and recorded functional neuroimaging while young and older adults performed a 3D spatial navigation task in which boundary geometry or the position of a location cue were systematically manipulated. An age by intervention interaction on the neural level revealed an upregulation of brain responses in older adults and a downregulation of responses in young adults within the medial temporal lobe (including hippocampus and parahippocampus) and brainstem, during memory retrieval. Behaviorally, L-DOPA had no effect on older adults’ overall memory performance; however, older adults whose spatial memory improved under L-DOPA also showed a shift towards more boundary processing under L-DOPA. In young adults, L-DOPA induced a decline in spatial memory performance in task-naïve participants. These results are consistent with the inverted-U-shaped hypothesis of dopamine signaling and cognitive function and suggest that increasing dopamine availability improves hippocampus-dependent place learning in some older adults.