We can discriminate between the memories of real and imagined events. In this study, the traces of the perceived external events and the imagined internal events were investigated in the established paradigm of reality monitoring using event-related fMRI. In the retrieval phase, we found that the left parahippocampal gyrus represented the traces of visually encoded memory. The right inferior parietal cortex was activated when subjects judged that the original event was imagined. We suggest that these traces are used to distinguish what is seen from what is thought during reality monitoring. Furthermore, we found that the incorrect judgments were associated with signal increases in the left frontal operculum, suggesting that this area is a candidate for the monitoring system of contextual information or failure in the retrieval phase.