Sleep benefits the stabilization of newly acquired information – a process known as memory consolidation. Age-related alterations in sleep physiology may affect memory consolidation and account for reduced episodic memory performance in healthy older individuals. The striking parallelism of age-related changes in sleep and episodic memory has provoked a considerable increment in empirical studies investigating the link between age-related changes in sleep and memory. Still, evidence remains inconclusive under which circumstances and by which mechanisms memory consolidation is affected during aging. In this review we provide an exhaustive summary of the status quo of research on episodic memory consolidation during sleep in healthy aging. On this basis, we derive a cohesive explanatory framework to understand age-related changes in consolidation mechanisms during sleep. Consolidation impairments are not solely caused by sleep changes but arise in synergy with age-related alterations in brain structure and neuromodulation. We argue that sleep oscillations during deep non-rapid eye movement (NREM) sleep guide the reactivation, integration, and redistribution of memory traces. Neuromodulators supporting these mechanisms change in old age. In combination with alterations in brain structure, the generation of sleep oscillations during NREM sleep is impaired, their coordination becomes diffuse, and the processes necessary to render stable episodic memories are impaired.