Adults segment continuous and dynamic environment into discrete units, and individual differences in segmentation predict individual differences in memory. Similar parsing mechanisms have been identified in infants, using different methods, but little is known about event segmentation in older children or about its relations to memory. We tested event segmentation and its relations to memory in 5- to 7-year-old children and adults. Participants performed two event comprehension tasks with short animated narrative movies: a unitization task, in which they pressed a key to mark boundaries between meaningful events, and a dwell time task, in which they viewed a self-paced slideshow, and completed two memory tasks. Adults outperformed children as expected. For both age groups, better event comprehension was associated with better memory, though which measures showed this relationship varied. Thus, by school age, children have developed event segmentation mechanisms that, like adults, contribute to episodic memory formation.