Witnessing others’ plights can be funny for observers, but may also trigger one to empathically cringe with the victim of the predicament. In the present study, we examined the common and distinct neural networks involved in schadenfreude (i.e. pleasure derived from another's misfortune) and fremdscham (i.e. empathically sharing the embarrassment about another's misfortune). Using functional magnetic resonance imaging we examined a total of N = 34 participants while they observed social integrity threats of a misfortunate other and either reported on their schadenfreude or fremdscham. In this between-subject design, we found that despite a broad overlap in brain regions involved in social cognition, the left anterior insula (AI) was activated less if observers were asked to focus on their schadenfreude. Further, the nucleus accumben's activity exclusively covaried with the intensity of the schadenfreude experience and had a higher functional connectivity with the left AI in the context of schadenfreude than during fremdscham. With the present findings, we demonstrate that the valence and intensity of interpersonal emotions strongly depend on the experimental context and that empathy and reward circuits are involved in shaping the subjective experience.