Several theories of the mechanisms linking perception and action require that the links are bidirectional, but there is a lack of consensus on the effects that action has on perception. We investigated this by measuring visual event-related brain potentials to observed hand actions while participants prepared responses that were spatially compatible (e.g., both were on the left side of the body) or incompatible and action type compatible (e.g., both were finger taps) or incompatible, with observed actions. An early enhanced processing of spatially compatible stimuli was observed, which is likely due to spatial attention. This was followed by an attenuation of processing for both spatially and action type compatible stimuli, likely to be driven by efference copy signals that attenuate processing of predicted sensory consequences of actions. Attenuation was not response-modality specific; it was found for manual stimuli when participants prepared manual and vocal responses, in line with the hypothesis that action control is hierarchically organized. These results indicate that spatial attention and forward model prediction mechanisms have opposite, but temporally distinct, effects on perception. This hypothesis can explain the inconsistency of recent findings on action–perception links and thereby supports the view that sensorimotor links are bidirectional. Such effects of action on perception are likely to be crucial, not only for the control of our own actions but also in sociocultural interaction, allowing us to predict the reactions of others to our own actions.