The dynamic integration of signals from different sensory modalities plays a key role in bodily self-perception. When visual information is used in the multisensory process of localizing and identifying one's own limbs, the sight of a body part often plays a dominant role. For example, it has repeatedly been shown that a viewed object must resemble a humanoid body part to permit illusory self-attribution of that object. Here, we report a perceptual illusion that challenges these assumptions by demonstrating that healthy (nonamputated) individuals can refer somatic sensations to a discrete volume of empty space and experience having an invisible hand. In 10 behavioral and one fMRI experiment, we characterized the perceptual rules and multisensory brain mechanisms that produced this “invisible hand illusion.” Our behavioral results showed that the illusion depends on visuotactile-proprioceptive integration that obeys key spatial and temporal multisensory rules confined to near-personal space. The fMRI results associate the illusion experience with increased activity in regions related to the integration of multisensory body-related signals, most notably the bilateral ventral premotor, intraparietal, and cerebellar cortices. We further showed that a stronger feeling of having an invisible hand is associated with a higher degree of effective connectivity between the intraparietal and ventral premotor cortices. These findings demonstrate that the integration of temporally and spatially congruent multisensory signals in a premotor-intraparietal circuit is sufficient to redefine the spatial boundaries of the bodily self, even when visual information directly contradicts the presence of a physical limb at the location of the perceived illusory hand.