It is well known that information that is initially thought to be correct but then revealed to be false, often continues to influence human judgement and decision making despite people being aware of the retraction. Yet little research has examined the underlying neural substrates of this phenomenon, which is known as the ‘continued influence effect of misinformation’ (CIEM). It remains unclear how the human brain processes critical information that retracts prior claims. To address this question in further detail, 26 healthy adults underwent functional magnetic resonance imaging (fMRI) while listening to brief narratives which either involved a retraction of prior information or not. Following each narrative, subjects’ comprehension of the narrative, including their inclination to rely on retracted information, was probed. As expected, it was found that retracted information continued to affect participants’ narrative-related reasoning. In addition, the fMRI data indicated that the continued influence of retracted information may be due to a breakdown of narrative-level integration and coherence-building mechanisms implemented by the precuneus and posterior cingulate gyrus.