To determine the neural mechanism underlying the effects of sound therapy on tinnitus, we hypothesize that sound therapy may be effective by modulating both local neural activity and functional connectivity that is associated with auditory perception, auditory information storage or emotional processing. In this prospective observational study, 30 tinnitus patients underwent resting-state functional magnetic resonance imaging scans at baseline and after 12 weeks of sound therapy. Thirty-two age- and gender-matched healthy controls also underwent two scans over a 12-week interval; 30 of these healthy controls were enrolled for data analysis. The amplitude of low-frequency fluctuation was analysed, and seed-based functional connectivity measures were shown to significantly alter spontaneous local brain activity and its connections to other brain regions. Interaction effects between the two groups and the two scans in local neural activity as assessed by the amplitude of low-frequency fluctuation were observed in the left parahippocampal gyrus and the right Heschl's gyrus. Importantly, local functional activity in the left parahippocampal gyrus in the patient group was significantly higher than that in the healthy controls at baseline and was reduced to relatively normal levels after treatment. Conversely, activity in the right Heschl's gyrus was significantly increased and extended beyond a relatively normal range after sound therapy. These changes were found to be positively correlated with tinnitus relief. The functional connectivity between the left parahippocampal gyrus and the cingulate cortex was higher in tinnitus patients after treatment. The alterations of local activity and functional connectivity in the left parahippocampal gyrus and right Heschl's gyrus were associated with tinnitus relief. Resting-state functional magnetic resonance imaging can provide functional information to explain and 'visualize' the mechanism underlying the effect of sound therapy on the brain.