Background: Episodic memory deficits are a characteristic of cognitive dysfunction in people with Down syndrome (DS). However, less is known about the processes (i.e. encoding, retention or using learned information flexibly) that underlie these deficits. Method: We explored these abilities by administering a relational memory and inference task to participants with DS and mental age-matched controls and testing both immediately and after a 24-h delay. Results: Adults with DS learned paired associates more slowly than controls but showed good recognition at both the immediate and delayed tests. Despite memory for learned pairs, adults with DS were less able to use relational learning flexibly to make inferential judgements than controls. Conclusions: These results deepen our understanding of the cognitive profile of adults with DS, demonstrating deficits in both encoding new information, and flexibly using such information. These results have important implications for workplace training and intervention programs for people with DS.