Background: Auditory verbal hallucinations in schizophrenia have been linked to defective monitoring of one's own verbal thoughts. Previous studies have shown that patients with auditory verbal hallucinations show attenuated activation of brain regions involved with auditory processing during the monitoring of inner speech. However, there are no functional magnetic resonance imaging studies explicitly comparing the perception of external speech with internal speech in the same patients with schizophrenia. The present study investigated the functional neuroanatomy of inner and external speech in both patients with schizophrenia and healthy control subjects. Methods: Fifteen patients with schizophrenia and 12 healthy control subjects were studied using functional magnetic resonance imaging while listening to sentences or imagining sentences. Results: Significant interactions between group (control subjects vs. patients) and task (listening vs. inner speech) were seen for the left superior temporal gyrus, as well as regions within the cingulate gyrus. Conclusions: Attenuated deactivation of the left superior temporal gyrus in schizophrenia patients during the processing of inner speech may reflect deficits in the forward models subserving self-monitoring. © 2010 Society of Biological Psychiatry.