Whether observation of distress in others leads to empathic concern and altruistic motivation, or to personal distress and egoistic motivation, seems to depend upon the capacity for self-other differentiation and cognitive appraisal. In this experiment, behavioral measures and event-related functional magnetic resonance imaging were used to investigate the effects of perspective-taking and cognitive appraisal while participants observed the facial expression of pain resulting from medical treatment. Video clips showing the faces of patients were presented either with the instruction to imagine the feelings of the patient ("imagine other") or to imagine oneself to be in the patient's situation ("imagine self"). Cognitive appraisal was manipulated by providing information that the medical treatment had or had not been successful. Behavioral measures demonstrated that perspective-taking and treatment effectiveness instructions affected participants' affective responses to the observed pain. Hemodynamic changes were detected in the insular cortices, anterior medial cingulate cortex (aMCC), amygdala, and in visual areas including the fusiform gyrus. Graded responses related to the perspective-taking instructions were observed in middle insula, aMCC, medial and lateral premotor areas, and selectively in left and right parietal cortices. Treatment effectiveness resulted in signal changes in the perigenual anterior cingulate cortex, in the ventromedial orbito-frontal cortex, in the right lateral middle frontal gyrus, and in the cerebellum. These findings support the view that humans' responses to the pain of others can be modulated by cognitive and motivational processes, which influence whether observing a conspecific in need of help will result in empathic concern, an important instigator for helping behavior.