Neuropsychological studies highlight the importance of the prefrontal cortex in abstract reasoning ability. The prefrontal cortex is anatomically connected to the basal ganglia through a series of parallel loops. The dorsolateral prefrontal cortex shares relatively greater connectivity with the caudate head, and it has been proposed that the caudate head may be more sensitive to executive processing. To investigate the frontostriatal circuitry underlying abstract reasoning, we designed a reasoning task in which stimuli varied sequentially across one dimension. Critically, the task required that subjects deduce and apply a sequencing rule. We also developed a match-to-sample working memory task in order to identify and contrast brain regions involved in working memory. We observed reasoning-related activation in both cortical and subcortical regions. Subcortically, the caudate was found to be bilaterally active during both the reasoning and matching tasks, and the left caudate head was more active for reasoning compared to matching. An anatomically defined region of interest analysis demonstrated activity for both reasoning and matching tasks within the body of the caudate. In contrast, the left caudate head was found to more specifically support reasoning. Cortically, we observed activity of bilateral rostrolateral prefrontal cortex, right ventrolateral prefrontal cortex, and bilateral parietal cortex during reasoning. Our results suggest that reasoning requires an interaction between cortical areas and the caudate nucleus, in which the caudate body supports both reasoning and working memory and the head of the caudate is specifically involved in the executive demands of reasoning, namely deducing and applying a sequence rule.