Individuals sometimes experience an illusory or hallucinatory perception. This unreal perception is usually resolved after the individual recognizes that the perception was not real. In this study, we investigated the brain mechanisms involved in the process to an illusory or hallucinatory perception through 'obtaining insight into unreality'. We used a novel and intuitive paradigm designed by combining functional magnetic resonance imaging and augmented reality technology to simulate visual illusory stimuli that mimic hallucinations during brain scanning. The results showed various brain activations, predominantly in the amygdala in the early phase, the medial frontal cortex and the occipitotemporal junction in the middle phase, and the thalamus in the late phase, which correlated with a subject's proneness to hallucinating. These activations may correspond to a 'responding stage' for a perception-based immediate emotional reaction, a 'monitoring stage' for integration and recalibration to ascertain that the perception was not real, and a 'resolving stage' for controlling the information and finally settling it, respectively. Our paradigm and findings may be useful in understanding the mechanisms for discriminating and coping with hallucinatory perceptions.