We used functional magnetic resonance imaging (fMRI) to determine whether neural activity can differentiate between true memory, false memory, and deception. Subjects heard a series of semantically related words and were later asked to make a recognition judgment of old words, semantically related nonstudied words (lures for false recognition), and unrelated new words. They were also asked to make a deceptive response to half of the old and unrelated new words. There were 3 main findings. First, consistent with the notion that executive function supports deception, 2 types of deception (pretending to know and pretending not to know) recruited prefrontal activity. Second, consistent with the sensory reactivation hypothesis, the difference between true recognition and false recognition was found in the left temporoparietal regions probably engaged in the encoding of auditorily presented words. Third, the left prefrontal cortex was activated during pretending to know relative to correct rejection and false recognition, whereas the right anterior hippocampus was activated during false recognition relative to correct rejection and pretending to know. These findings indicate that fMRI can detect the difference in brain activity between deception and false memory despite the fact that subjects respond with “I know” to novel events in both processes.