Periods of rest and sleep help us find hidden solutions to new problems and infer unobserved relationships between discrete events. However, the mechanisms that formulate these new, adaptive behavioural strategies remain unclear. One possibility is that memory reactivation during periods of rest and sleep has the capacity to generate new knowledge that extends beyond direct experience. Here, we test this hypothesis using a pre-registered study design that includes a rich behavioural paradigm in humans. We use contextual Targeted Memory Reactivation (TMR) to causally manipulate memory reactivation during awake rest. We demonstrate that TMR during rest enhances performance on associative memory tests, with improved discovery of new, non-directly trained associations, and no change observed for directly trained associations. Our findings suggest that memory reactivation during awake rest plays a critical role in extracting new, unobserved associations to support adaptive behavioural strategies such as inference.