The development of the field of cognitive neuroscience has inspired a revival of interest in the brain mechanisms involved in the processing of rewards, punishments, and abstract performance feedback. One fruitful line of research in this area was initiated by the report of an electrophysiological brain potential in humans that was differentially sensitive to negative and positive performance feedback [J. Cogn. Neurosci. 9 (1997) 788]. Here we review current knowledge regarding the neural basis and functional significance of this feedback-evoked 'error-related negativity' (ERN). Our review is organized around a set of predictions derived from a recent theory, which holds that the ERN is associated with the arrival of a negative reward prediction error signal in anterior cingulate cortex.