Chinese is a logographic language system that differs from alphabetic languages, and some of the neurocognitive mechanisms underlying Chinese logographic reading also differ from those underlying alphabetic word reading (Tan, 2000, 2001). Our recent studies (Wu, 2007; Cai, 2007) have found functional segregation in the left inferior frontal gyrus, in which the dorsal regions are related to automatic access to an articulator representation at the syllable or phoneme level, and the ventral parts are related to lexical or semantic processing. However, it is still unknown whether education level effects the neural activation associated with the processing of Chinese. In this study, we used functional magnetic resonance imaging (fMRI) to investigate the effects of education level on brain activation related with Chinese character font size and phonological processing of Chinese. Specifically, we designed two fMRI experiments with illiterate and literate subjects to assess the issue. In experiment 1, thirteen literate and thirteen illiterate subjects participated the visual Chinese characters and simple figures discrimination tasks. Subjects were asked to view the character or figure pairs and discriminate whether the characters or figures of each stimuli pair were the same or not using response keys. In experiment 2, the Chinese character voice and pure tone discrimination tasks were performed with twenty-six subjects. The subjects were also asked to press the response keys to discriminate whether the voice of characters or the pure tone pairs were the same or not. The results of behavioral measurement and fMRI analysis showed that stronger activations of Chinese literates than illiterates during language processing. In the experiment 1, we observed that the brain network of Chinese character font size processing in the left middle frontal gyrus (BA9), the left superior temporal gyrus (BA22) and the left inferior parietal gyrus (BA39). In the experiment 2, we observed that the brain network of Chinese phonological processing in the left middle frontal gyrus (BA6), the bilateral inferior frontal gyrus (BA47), the bilateral superior temporal gyrus (BA21/22), the left middle temporal gyrus (BA38) and the right inferior parietal gyrus (BA40). As conclusion, Chinese character have different processing pattern than the English processing pattern in the human brain and literacy may affect brain plasticity by enhancing its cognitive valence during Chinese language processing.