We used measures of the human event-related brain potential (ERP) to investigate the neural mechanisms underlying error processing during action observation. Participants took part in two conditions, a task execution condition and a task observation condition. We found that activity in both the medial frontal cortex and the motor cortices, as measured via the error-related negativity and the lateralized readiness potential, respectively, was modulated by the correctness of observed behavior. These data suggest that similar neural mechanisms are involved in monitoring one's own actions and the actions of others.