Functional MRI (fMRI) by means of spin-echo (SE) techniques provides an interesting alternative to gradient-echo methods because the contrast is based primarily on dynamic averaging associated with the blood oxygenation level-dependent (BOLD) effect. In this article the contributions from different brain compartments to BOLD signal changes in SE echo planar imaging (EPI) are investigated. To gain a better understanding of the underlying mechanisms that cause the fMRI contrast, two experiments are presented: First, the intravascular contribution is decomposed into two fractions with different regimes of flow by means of diffusion-weighting gradient schemes which are either flow-compensated, or will maximally dephase moving spins. Second, contributions from the intra- and extravascular space are selectively suppressed by combining flow-weighting with additional refocusing pulses. The results indicate two qualitatively different components of flowing blood which contribute to the BOLD contrast and a nearly equal share in functional signal from the intra- and extravascular compartments at TE approximately 80 ms and 3 T. Combining these results, there is evidence that at least one-half of the functional signal originates from the parenchyma in SE fMRI at 3 T. The authors suggest the use of flow-compensated diffusion weighting for SE fMRI to improve the sensitivity to the parenchyma.