Auditory verbal hallucinations (AVHs) are a cardinal feature of psychosis. Recent research is reviewed which has attempted to advance our knowledge of the mechanisms underlying this symptom. Phenomenological surveys have confirmed the importance of the content of such hallucinations and their meaning to the voice-hearer. Psychological and neuroimaging studies of inner speech and source monitoring have provided a neuropsychological framework for AVHs as well as some novel therapeutic strategies. There have also been successful attempts to 'capture' neural activity coincident with the experience of hallucinations using PET, SPECT and functional magnetic resonance imaging (MRI). This body of knowledge in combination with work on in-vivo receptor binding (dopamine and GABA) provides the beginnings of a cognitive and neurophysiological understanding of this complex and intriguing phenomenon.