The aim of this fMRI study was to identify neuroanatomical substrates of immediate memory underlying phonological processing. To distinguish encoding of immediate memory from rehearsal, participants were required to match tones from the first and last positions of a three-syllable list to their following probes in an immediate-recognition paradigm. The first position task included intervening distractors between the target and probe. Increased activations were found in the left inferior frontal gyrus, right lateral cerebellum, and medial frontal gyrus for the target tone in first position. This network mediates articulatory encoding in immediate-response, and articulatory rehearsal in delayed-response paradigms. These findings support a working memory model in which rehearsal is optional, while encoding is an obligatory component of the phonological loop.