AbstractRecent work regarding the analysis of brain imaging data has focused on examining functional and effective connectivity of the brain. We develop a novel descriptive and inferential method to analyze the connectivity of the human brain using functional MRI (fMRI). We assess the relationship between pairs of distinct brain regions by comparing expected joint and marginal probabilities of elevated activity of voxel pairs through a Bayesian paradigm, which allows for the incorporation of previously known anatomical and functional information. We define the relationship between two distinct brain regions by measures of functional connectivity and ascendancy. After assessing the relationship between all pairs of brain voxels, we are able to construct hierarchical functional networks from any given brain region and assess significant functional connectivity and ascendancy in these networks. We illustrate the use of our connectivity analysis using data from an fMRI study of social cooperation among women who played an iterated “Prisoner's Dilemma” game. Our analysis reveals a functional network that includes the amygdala, anterior insula cortex, and anterior cingulate cortex, and another network that includes the ventral striatum, orbitofrontal cortex, and anterior insula. Our method can be used to develop causal brain networks for use with structural equation modeling and dynamic causal models. Hum Brain Mapp, 2005. © 2005 Wiley‐Liss, Inc.