We examined the factors that contribute to enhanced recall for emotionally arousing words by analyzing behavioral performance, the P300 as an index of distinctiveness, and the N400 as an index of semantic expectancy violation in a modified Von Restorff paradigm. While their EEG was recorded, participants studied three list types (1) neutral words including one emotionally arousing isolate (either positive or negative), (2) arousing, negative words including one neutral isolate, or (3) arousing, positive words including one neutral isolate. Immediately after each list, free recall was tested. Negative, but not positive, words exhibited enhanced recall when presented as isolates in lists of neutral words and elicited a larger P300 for subsequently recalled than not‐recalled words. This suggests that arousing, negative words stand out and that their distinctiveness contributes to their superior recall. Positive valence had an enhancing effect on recall only when the list contained mostly other positive words. Neutral isolates placed in either positive or negative lists elicited an N400, suggesting that semantic expectations developed in emotional word lists regardless of valence. However, semantic relatedness appeared to more strongly contribute to recall for positive than negative words. Our results suggest that distinctiveness and semantic relatedness contribute to episodic encoding of arousing words, but the impact of each factor depends on both a word's valence and its context.