The understanding of sarcasm reflects a complex process, which involves recognizing the beliefs of the speaker. There is a clear association between deficits in mentalizing, which is the ability to understand other people's behavior in terms of their mental state, and the understanding of sarcasm in individuals with autistic spectrum disorders. This suggests that mentalizing is important in pragmatic non-literal language comprehension. To highlight the neural substrates of sarcasm, 20 normal adult volunteers underwent functional magnetic-resonance imaging. We used scenario-reading tasks, in which sentences describing a certain situation were presented, followed by the protagonist's comments regarding that situation. Depending on the situation, the semantic content of the comments was classified as sarcastic, non-sarcastic, or contextually unconnected. As the combination of the first and second sentences represented discourse-level information that was not encoded in the individual sentences, sarcasm detection was represented as the differential activation induced by the second sentences. Sarcasm detection activated the left temporal pole, the superior temporal sulcus, the medial prefrontal cortex, and the inferior frontal gyrus (Brodmann's area [BA] 47). The left BA 47 was activated more prominently by sarcasm detection than by the first sentence. These findings indicate that the detection of sarcasm recruits the medial prefrontal cortex, which is part of the mentalizing system, as well as the neural substrates involved in reading sentences. The left BA 47 might therefore be where mentalizing and language processes interact during sarcasm detection.