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When we speak, we provide ourselves with auditory speech input. Efficient monitoring of speech is often hypothesized to depend on matching the predicted sensory consequences from internal motor commands ( forward model) with actual sensory feedback. In this paper we tested the forward model hypothesis using functional Magnetic Resonance Imaging. We administered an overt picture naming task in which we parametrically reduced the quality of verbal feedback by noise masking. Presentation of the same auditory input in the absence of overt speech served as listening control condition. Our results suggest that a match between predicted and actual sensory feedback results in inhibition of cancellation of auditory activity because speaking with normal unmasked feedback reduced activity in the auditory cortex compared to listening control conditions. Moreover, during self-generated speech, activation in auditory cortex increased as the feedback quality of the self-generated speech decreased. We conclude that during speaking early auditory cortex is involved in matching external signals with an internally generated model or prediction of sensory consequences, the locus of which may reside in auditory or higher order brain areas. Matching at early auditory cortex may provide a very sensitive monitoring mechanism that highlights speech production errors at very early levels of processing and may efficiently determine the self-agency of speech input.