The understanding of actions of tool use depends on the motor act that is performed and on the function of the objects involved in the action. We used event-related potentials (ERPs) to investigate the processes that derive both kinds of information in a task in which inserting actions had to be judged. The actions were presented as two consecutive frames, one showing an effector/instrument and the other showing a potential target object of the action. Two mismatches were possible. An orientation mismatch occurred when the spatial object properties were not consistent with a motor act of insertion being performed (i.e., different orientations of insert and slot). A functional mismatch happened when the instrument (e.g., screwdriver) would usually not be applied to the target object (e.g., keyhole). The order in which instrument and target object were presented was also varied. The two kinds of mismatch gave rise to similar but not identical negativities in the latency range of the N400 followed by a positive modulation. The results indicate that the motor act and the function of the objects are derived by two at least partially different subprocesses and become integrated into a common representation of the observed action.