Task-induced deactivation (TID) refers to a regional decrease in blood flow during an active task relative to a “resting” or “passive” baseline. We tested the hypothesis that TID results from a reallocation of processing resources by parametrically manipulating task difficulty within three factors: target discriminability, stimulus presentation rate, and short-term memory load. Subjects performed an auditory target detection task during functional magnetic resonance imaging (fMRI), responding to a single target tone or, in the short-term memory load conditions, to target sequences. Seven task conditions (a common version and two additional levels for each of the three factors) were each alternated with “rest” in a block design. Analysis of covariance identified brain regions in which TID occurred. Analyses of variance identified seven regions (left anterior cingulate/superior frontal gyrus, left middle frontal gyrus, right anterior cingulate gyrus, left and right posterior cingulate gyrus, left posterior parieto-occipital cortex, and right precuneus) in which TID magnitude varied across task levels within a factor. Follow-up tests indicated that for each of the three factors, TID magnitude increased with task difficulty. These results suggest that TID represents reallocation of processing resources from areas in which TID occurs to areas involved in task performance. Short-term memory load and stimulus rate also predict suppression of spontaneous thought, and many of the brain areas showing TID have been linked with semantic processing, supporting claims that TID may be due in part to suspension of spontaneous semantic processes that occur during “rest” (Binder et al., 1999). The concept that the typical “resting state” is actually a condition characterized by rich cognitive activity has important implications for the design and analysis of neuroimaging studies.