One's experience of self as a "subject of consciousness" or an observer who is conscious of sensory objects, and simultaneously conscious of itself, is an illusory experience that results from the physical and subjective aspects of source monitoring. Physically, one's nervous system monitors whether the innervation of one's sensations is peripheral or central in origin, so long as such source monitoring is not diminished by sleep, hypnosis, dissociation, psychosis, or subliminal innervation. Subjectively, the neural monitoring of sensations with a peripheral source is paralleled by the tacit knowledge that one is perceiving, whereas the neural monitoring of self-generated sensations with a central source is paralleled by the tacit knowledge that one is imaging. Most importantly, the meta-awareness that one is perceiving sensations or that one is imaging sensations gives rise to the generic experience that one is "having" sensations-that is, to the illusory experience of a "self as subject" which has, not is, its sensations. This source-monitoring explanation for the illusion of an "observing self" is initially introduced in the context of historic approaches to the problem of self and, then, is fully described and discussed in the context of empirical research.