The neural basis for perceptual grouping operations in the human visual system, including the processes which generate illusory contours, is fundamental to understanding human vision. We have employed functional magnetic resonance imaging to investigate these processes noninvasively. Images were acquired on a GE Signa 1.5T scanner equipped for echo planar imaging with an in-plane resolution of 1.5 x 1.5 mm and slice thicknesses of 3.0 or 5.0 mm. Visual stimuli included nonaligned inducers (pacmen) that created no perceptual contours, similar inducers at the corners of a Kanizsa square that created illusory contours, and a real square formed by continuous contours. Multiple contiguous axial slices were acquired during baseline, visual stimulation, and poststimulation periods. Activated regions were identified by a multistage statistical analysis of the activation for each volume element sampled and were compared across conditions. Specific brain regions were activated in extrastriate cortex when the illusory contours were perceived but not during conditions when the illusory contours were absent. These unique regions were found primarily in the right hemisphere for all four subjects and demonstrate that specific brain regions are activated during the kind of perceptual grouping operations involved in illusory contour perception.