Functional MRI (fMRI) is a valuable method for use by clinical investigators to study task-related brain activation in patients with neurological or neuropsychiatric illness. Despite the relative infancy of the field, the rapid adoption of this functional neuroimaging technology has resulted from, among other factors, its ready availability, its relatively high spatial and temporal resolution, and its safety as a noninvasive imaging tool that enables multiple repeated scans over the course of a longitudinal study, and thus may lend itself well as a measure in clinical drug trials. Investigators have used fMRI to identify abnormal functional brain activity during task performance in a variety of patient populations, including those with neurodegenerative, demyelinating, cerebrovascular, and other neurological disorders that highlight the potential utility of fMRI in both basic and clinical spheres of research. In addition, fMRI studies reveal processes related to neuroplasticity, including compensatory hyperactivation, which may be a universally-occurring, adaptive neural response to insult. Functional MRI is being used to study the modulatory effects of genetic risk factors for neurological disease on brain activation; it is being applied to differential diagnosis, as a predictive biomarker of disease course, and as a means to identify neural correlates of neurotherapeutic interventions. Technological advances are rapidly occurring that should provide new applications for fMRI, including improved spatial resolution, which promises to reveal novel insights into the function of fine-scale neural circuitry of the human brain in health and disease.