Individuals can learn by interacting with the environment and experiencing a difference between predicted and obtained outcomes (prediction error). However, many species also learn by observing the actions and outcomes of others. In contrast to individual learning, observational learning cannot be based on directly experienced outcome prediction errors. Accordingly, the behavioral and neural mechanisms of learning through observation remain elusive. Here we propose that human observational learning can be explained by two previously uncharacterized forms of prediction error, observational action prediction errors (the actual minus the predicted choice of others) and observational outcome prediction errors (the actual minus predicted outcome received by others). In a functional MRI experiment, we found that brain activity in the dorsolateral prefrontal cortex and the ventromedial prefrontal cortex respectively corresponded to these two distinct observational learning signals.