Although we feel, see, and experience our hands as our own (body or hand ownership), recent research has shown that illusory hand ownership can be induced for fake or virtual hands and may be useful for neuroprosthetics and brain–computer interfaces. Despite the vast amount of behavioral data on illusory hand ownership, neuroimaging studies are rare, in particular electrophysiological studies. Thus, while the neural systems underlying hand ownership are relatively well described, the spectral signatures of body ownership as measured by electroencephalography (EEG) remain elusive. Here we induced illusory hand ownership in an automated, computer-controlled manner using virtual reality while recording 64-channel EEG and found that illusory hand ownership is reflected by a body-specific modulation in the mu-band over fronto-parietal cortex. In a second experiment in the same subjects, we then show that mu as well as beta-band activity in highly similar fronto-parietal regions was also modulated during a motor imagery task often used in paradigms employing non-invasive brain–computer interface technology. These data provide insights into the electrophysiological brain mechanisms of illusory hand ownership and their strongly overlapping mechanisms with motor imagery in fronto-parietal cortex. They also highlight the potential of combining high-resolution EEG with virtual reality setups and automatized stimulation protocols for systematic, reproducible stimulus presentation in cognitive neuroscience, and may inform the design of non-invasive brain–computer interfaces.