The use of the wavelet transform is explored for the detection of differences between brain functional magnetic resonance images (fMRI's) acquired under two different experimental conditions. The method benefits from the fact that a smooth and spatially localized signal can be represented by a small set of localized wavelet coefficients, while the power of white noise is uniformly spread throughout the wavelet space. Hence, a statistical procedure is developed that uses the imposed decomposition orthogonality to locate wavelet-space partitions with large signal-to-noise ratio (SNR), and subsequently restricts the testing for significant wavelet coefficients to these partitions. This results in a higher SNR and a smaller number of statistical tests, yielding a lower detection threshold compared to spatial-domain testing and, thus, a higher detection sensitivity without increasing type I errors. The multiresolution approach of the wavelet method is particularly suited to applications where the signal bandwidth and/or the characteristics of an imaging modality cannot be well specified. The proposed method was applied to compare two different fMRI acquisition modalities. Differences of the respective useful signal bandwidths could be clearly demonstrated; the estimated signal, due to the smoothness of the wavelet representation, yielded more compact regions of neuroactivity than standard spatial-domain testing.