We used functional MRI and the anesthetic agent propofol to assess the relationship among neural responses to speech, successful comprehension, and conscious awareness. Volunteers were scanned while listening to sentences containing ambiguous words, matched sentences without ambiguous words, and signal-correlated noise (SCN). During three scanning sessions, participants were nonsedated (awake), lightly sedated (a slowed response to conversation), and deeply sedated (no conversational response, rousable by loud command). Bilateral temporal-lobe responses for sentences compared with signal-correlated noise were observed at all three levels of sedation, although prefrontal and premotor responses to speech were absent at the deepest level of sedation. Additional inferior frontal and posterior temporal responses to ambiguous sentences provide a neural correlate of semantic processes critical for comprehending sentences containing ambiguous words. However, this additional response was absent during light sedation, suggesting a marked impairment of sentence comprehension. A significant decline in postscan recognition memory for sentences also suggests that sedation impaired encoding of sentences into memory, with left inferior frontal and temporal lobe responses during light sedation predicting subsequent recognition memory. These findings suggest a graded degradation of cognitive function in response to sedation such that "higher-level" semantic and mnemonic processes can be impaired at relatively low levels of sedation, whereas perceptual processing of speech remains resilient even during deep sedation. These results have important implications for understanding the relationship between speech comprehension and awareness in the healthy brain in patients receiving sedation and in patients with disorders of consciousness.