Mild cognitive impairment (MCI) is a heterogeneous condition with variable outcomes. Improving diagnosis to increase the likelihood that MCI reliably reflects prodromal Alzheimer's Disease (AD) would be of great benefit for clinical practice and intervention trials. In 230 cognitively normal (CN) and 394 MCI individuals from the Alzheimer's Disease Neuroimaging Initiative, we studied whether an MCI diagnostic requirement of impairment on at least two episodic memory tests improves 3-year prediction of medial temporal lobe atrophy and progression to AD. Based on external age-adjusted norms for delayed free recall on the Rey Auditory Verbal Learning Test (AVLT), MCI participants were further classified as having normal (AVLT+, above -1 SD, n = 121) or impaired (AVLT -, -1 SD or below, n = 273) AVLT performance. CN, AVLT+, and AVLT- groups differed significantly on baseline brain (hippocampus, entorhinal cortex) and cerebrospinal fluid (amyloid, tau, p-tau) biomarkers, with the AVLT- group being most abnormal. The AVLT- group had significantly more medial temporal atrophy and a substantially higher AD progression rate than the AVLT+ group (51% vs. 16%, p < 0.001). The AVLT+ group had similar medial temporal trajectories compared to CN individuals. Results were similar even when restricted to individuals with above average (based on the CN group mean) baseline medial temporal volume/thickness. Requiring impairment on at least two memory tests for MCI diagnosis can markedly improve prediction of medial temporal atrophy and conversion to AD, even in the absence of baseline medial temporal atrophy. This modification constitutes a practical and cost-effective approach for clinical and research settings.