Extensive research has shown that faces appear grotesque when the internal features are inverted, but that this effect is virtually eliminated when the entire face is then rotated 180 degrees. One common explanation for this effect, dubbed the “Thatcher Illusion,” appeals to the hypothesis that configural (holistic) and featural (part-based) processing mechanisms are involved preferentially in processing upright and inverted face, respectively. According to this hypothesis, observers rely more heavily on featural or part-based mechanisms when processing an inverted face, and are therefore less sensitive to the inherently configural distortions that are produced by “thatcherization.” Here we tested a straightforward prediction of this hypothesis concerning the number of features that are manipulated. If inverted face processing relies to a greater extent on part-based processing mechanisms, then the number of features that are distorted should have a greater effect on performance when viewing inverted faces than when viewing upright faces. We tested this prediction by systematically manipulating the number of internal features that were thatcherized while participants judged whether faces were normal or distorted. We also sought to determine the neural correlates of these effects using functional magnetic resonance imaging (fMRI) at 3T. Behavioral results provided strong support for our predictions: performance was virtually unaffected by this manipulation when observers processed upright faces, but was significantly reduced as the number of distorted parts decreased when observers processed inverted faces. Preliminary fMRI data suggest that thatcherization resulted in significantly greater activity in a number of brain regions including the fusiform face area, the amygdala, and the anterior cingulate. These results provide novel evidence concerning the neural correlates of the Thatcher Illusion, and support the hypothesis that the effect is due, at least in part, to the shift from configural to featural processing that accompanies face inversion.