Auditory verbal hallucinations (AVH, 'hearing voices') are an important symptom of schizophrenia but their biological basis is not well understood. One longstanding approach proposes that they are perceptual in nature, specifically that they reflect spontaneous abnormal neuronal activity in the auditory cortex, perhaps with additional 'top down' cognitive influences. Functional imaging studies employing the symptom capture technique-where activity when patients experience AVH is compared to times when they do not-have had mixed findings as to whether the auditory cortex is activated. Here, using a novel variant of the symptom capture technique, we show that the experience of AVH does not induce auditory cortex activation, even while real speech does, something that effectively rules out all theories that propose a perceptual component to AVH. Instead, we find that the experience of AVH activates language regions and/or regions that are engaged during verbal short-term memory.