The way we grasp an object varies depending on how we want to use that object, and this knowledge can be used to predict the object-related behavior of others. In this study, we assessed the neural correlates that determine the action intention of another person based on observed prehensile movements. Fourteen right-handed volunteers watched video clips of a person performing right-handed transitive grasping gestures that were either aimed at displacing or using a tool-object. Clips showing the grasping and displacement of neutral shapes served as a control condition. By discrimination of the actor's intention, three roughly symmetrical foci were activated in the anterior, middle, and caudal segments of the intraparietal sulci, and in the fusiform gyri and parts of the lateral occipital complex. Anterior intraparietal activation has been associated with the representation of object goals (object specific), and the present findings extend its involvement to functional goals (use-specific). Activation in the middle intraparietal region during intention discrimination was very similar to the activation elicited in a saccadic localizer task, suggesting a relation with spatial attention and eye movements. The caudal intraparietal region has been related with visuospatial guidance of reaching, and its activation during action intention discrimination indicates that the visuospatial properties of the observed reaching movement contribute to understanding of actions. As these parietal regions are strongly linked with motor behavior, our results appear to support the motor simulation hypothesis for action understanding with the preferential recruitment of the mirror-neuron system. This could at least be the case when no contextual information other than the visual properties of the movement is provided to discriminate the intention of an observed hand action.