It has been shown that visual perception can be strongly affected by auditory stimuli. It is unclear, however, what brain circuitry subserves these interactions. We used the sound-induced illusory flash effect (a single flash accompanied by two auditory beeps is perceived as two flashes (Nature 2000)) as a tool to investigate this question. This illusion is much stronger in the periphery than fovea. In a previous ERP study (NeuroReport 2001), the temporal onsets and patterns of modulation suggested that the modulation of activity by sound occurs within the visual cortex. In the present study we tried to localize the brain regions involved in the perception of the illusory flash more directly and accurately using event-related fMRI. We collected functional images of 3 participants in the following conditions. Unimodal conditions Vp and Vf consisted of visual stimulation: a small disk flashed once in the periphery or fovea, respectively. Bimodal conditions AVp and AVf consisted of auditory-visual stimulation: combination of 2 beeps with visual stimuli Vp and Vf, respectively. In another unimodal condition, Vp2, a physical double flash was presented in the periphery. Trials were randomized. Contrasting (the illusion) condition AVp against Vp resulted in activity in Brodmann’s areas 17, 18, and 19. However, contrasting (no-illusion) condition AVf vs. Vf, revealed no differential activity in visual cortex. Thus, the auditory stimulation, per se, or attentional effects, could not account for the visual cortex activity associated with the illusory flash percept. Considering that the visual stimulus was identical in AVp and Vp, the enhanced activity of early visual areas in AVp can only be attributed to the perception of the illusory flash caused by sound. Similar brain areas were indicated when contrasting Vp2 against Vp, corresponding to a physical second flash. These results altogether suggest that the activity in the early visual cortical areas is modulated by sound.