When people confuse and reject a non-word that is created by switching two adjacent letters from an actual word, is called the transposition confusability effect (TCE). The TCE is known to occur at the very early stages of visual word recognition with such unit exchange as letters or syllables, but little is known about the brain mechanisms of TCE. In this study, we examined the neural correlates of TCE and the effect of a morpheme boundary placement on TCE. We manipulated the placement of a morpheme boundary by exchanging places of two syllables embedded in Korean morphologically complex words made up of lexical morpheme and grammatical morpheme. In the two experimental conditions, the transposition syllable within-boundary condition (TSW) involved exchanging two syllables within the same morpheme, whereas the across-boundary condition (TSA) involved the exchange of syllables across the stem and grammatical morpheme boundary. During fMRI, participants performed the lexical decision task. Behavioral results revealed that the TCE was found in TSW condition, and the morpheme boundary, which is manipulated in TSA, modulated the TCE. In the fMRI results, TCE induced activation in the left inferior parietal lobe (IPL) and intraparietal sulcus (IPS). The IPS activation was specific to a TCE and its strength of activation was associated with task performance. Furthermore, two functional networks were involved in the TCE: the central executive network and the dorsal attention network. Morpheme boundary modulation suppressed the TCE by recruiting the prefrontal and temporal regions, which are the key regions involved in semantic processing. Our findings propose the role of the dorsal visual pathway in syllable position processing and that its interaction with other higher cognitive systems is modulated by the morphological boundary in the early phases of visual word recognition.