Observing other people’s actions activates a network of brain regions that is also activated during the execution of these actions. Here, we used functional magnetic resonance imaging to test whether these “mirror” regions in frontal and parietal cortices primarily encode the spatiomotor aspects or the functional goal-related aspects of observed tool actions. Participants viewed static depictions of actions consisting of a tool object (e.g., key) and a target object (e.g., keyhole). They judged the actions either with regard to whether the objects were oriented correctly for the action to succeed (spatiomotor task) or whether an action goal could be achieved with the objects (function task). Compared with a control condition, both tasks activated regions in left frontoparietal cortex previously implicated in action observation and execution. Of these regions, the premotor cortex and supramarginal gyrus were primarily activated during the spatiomotor task, whereas the middle frontal gyrus was primarily activated during the function task. Regions along the intraparietal sulcus were more strongly activated during the spatiomotor task but only when the spatiomotor properties of the tool object were unknown in advance. These results suggest a division of labor within the action observation network that maps onto a similar division previously proposed for action execution.