Older African Americans tend to perform poorly in comparison with older Whites on episodic memory tests. Observed group differences may reflect some combination of biological differences, measurement bias, and other confounding factors that differ across groups. Cognitive reserve refers to the hypothesis that factors, such as years of education, cognitive activity, and socioeconomic status, promote brain resilience in the face of pathological threats to brain integrity in late life. Educational quality, measured by reading test performance, has been postulated as an important aspect of cognitive reserve. Previous studies have not concurrently evaluated test bias and other explanations for observed differences between older African Americans and Whites. We combined data from two studies to address this question. We analyzed data from 273 African American and 720 White older adults. We assessed DIF using an item response theory/ordinal logistic regression approach. DIF and factors associated with cognitive reserve did not explain the relationship between race, and age- and sex-adjusted episodic memory test performance. However, reading level did explain this relationship. The results reinforce the importance of considering education quality, as measured by reading level, when assessing cognition among diverse older adults.