The pathophysiology of auditory verbal hallucinations (AVH) is largely unknown. Several functional imaging studies have measured cerebral activation during these hallucinations, but sample sizes were relatively small (one to eight subjects) and findings inconsistent. In this study cerebral activation was measured using fMRI in 24 psychotic patients while they experienced AVH in the scanner and, in another session, while they silently generated words. All patients were right handed and diagnosed with schizophrenia, schizo-affective disorder or psychotic disorder not otherwise specified. Group analysis for AVH revealed activation in the right homologue of Brocas area, bilateral insula, bilateral supramarginal gyri and right superior temporal gyrus. Brocas area and left superior temporal gyrus were not activated. Group analysis for word generation in these patients yielded activation in Brocas and Wernickes areas and to a lesser degree their right-sided homologues, bilateral insula and anterior cingulate gyri. Lateralization of activity during AVH was not correlated with language lateralization, but rather with the degree to which the content of the hallucinations had a negative emotional valence. The main difference between cerebral activity during AVH and activity during normal inner speech appears to be the lateralization. The predominant engagement of the right inferior frontal area during AVH may be related to the typical low semantic complexity and negative emotional content.