Action observation modulates corticospinal excitability (CSE) measured via TMS in humans, which presumably exposes the effect of mirror neuron activation on corticospinal pathways. These responses can consist of both facilitation and suppression, and the balance of these two may restrict the outflow of activity into movement. Evidence also suggests that task context can considerably influence CSE changes during action observation.Here, we assessed whether embedding action observation within a Go-NoGo paradigm, which emphasizes movement withholding on observation and NoGo trials, influenced CSE modulation. Fourteen healthy subjects received single pulse TMS over left primary motor cortex (M1) during a baseline period, grasp observation onset, or after a NoGo cue, while performing, observing, or withholding two distinct reach-to-grasp actions. We assessed modulation of MEPs in three intrinsic hand muscles, which were recruited in a grasp-specific manner during action execution.Although CSE during the task generally increased relative to a pre-task baseline, modulation of grasp observation MEPs relative to an intra-task baseline was limited, and predominantly suppressive in nature both during grasp and NoGo. Seven subjects performed the same task without the NoGo condition (“Go only” block) immediately before the “Go & NoGo” block. Although this still failed to produce overall facilitation, we found evidence for grasp-specific modulation of CSE, which matched the recruitment pattern of the muscles during action execution. Within these subjects, modulation was attenuated when the NoGo condition was introduced, but was still distinct from modulation in the first group.These results suggest that bottom-up grasp-specific modulation of MEPs during action observation is attenuated by the top-down contextual requirement to suppress self-movement, and facilitation and suppression effects may be determined by the balance between these two processes.