Inner speech has been implicated in important aspects of normal and atypical cognition, including the development of auditory hallucinations. Studies to date have focused on covert speech elicited by simple word or sentence repetition, while ignoring richer and arguably more psychologically significant varieties of inner speech. This study compared neural activation for inner speech involving conversations ('dialogic inner speech') with single-speaker scenarios ('monologic inner speech'). Inner speech-related activation differences were then compared with activations relating to Theory-of-Mind (ToM) reasoning and visual perspective-taking in a conjunction design. Generation of dialogic (compared with monologic) scenarios was associated with a widespread bilateral network including left and right superior temporal gyri, precuneus, posterior cingulate and left inferior and medial frontal gyri. Activation associated with dialogic scenarios and ToM reasoning overlapped in areas of right posterior temporal cortex previously linked to mental state representation. Implications for understanding verbal cognition in typical and atypical populations are discussed.