Humans excel at reciprocal altruism in which two individuals exchange altruistic acts to their mutual advantage. The evolutionary stability of this system depends on recognition of and discrimination against non-reciprocators, and the human mind is apparently specialized for detecting non-reciprocators. Here we investigate the neural response to non-reciprocation of cooperation by imaging human subjects with fMRI as they play an iterated Prisoner's dilemma game with two assumed human partners. Unreciprocated cooperation was associated with greater activity in bilateral anterior insula, left hippocampus and left lingual gyrus, compared with reciprocated cooperation. These areas were also more responsive to unreciprocated cooperation than to unsuccessful risk taking in a non-social context. Finally, functional connectivity between anterior insula and lateral orbitofrontal cortex (OFC) in response to unreciprocated cooperation predicted subsequent defection. The anterior insula is involved in awareness of visceral, autonomic feedback from the body and, in concert with the lateral orbitofrontal cortex, may be responsible for negative feeling states that bias subsequent social decision making against cooperation with a non-reciprocating partner.