Retrieving a memory is a reconstructive process in which encoded representations can be changed and distorted. This process sometimes leads to the generation of "false memories," that is, when people remember events that, in fact, never happened. Such false memories typically represent a kind of "gist" being extracted from single encountered events. The stress hormone cortisol is known to substantially impair memory retrieval. Here, in a double-blind, placebo-controlled crossover design, we tested the effect of an intravenous cortisol infusion before retrieval testing on the occurrence of false memories and on recall of correct memories using a modified Deese-Roediger-McDermott paradigm. Subjects studied sets of abstract shapes, with each set being derived from one prototype that was not presented during learning. At retrieval taking place 9 hr after learning, subjects were presented with studied shapes, nonstudied shapes, and the prototypes, and had to indicate whether or not each shape had been presented at learning. Cortisol administration distinctly reduced susceptibility to false memories (i.e., false recognition of prototypes) and, in parallel, impaired retrieval of correct memories (i.e., correct recognition of studied shapes). Response bias as well as confidence ratings and remember/know/guess judgments were not affected. Our results support gist-based theories of false memory generation, assuming a simultaneous storage of the gist and specific details of an event. Cortisol, by a general impairing influence on retrieval operations, decreases, in parallel, retrieval of false (i.e., gist) and correct (i.e., specific) memories for the event.