Abstract. Functional magnetic resonance (fMRI) data are often corrupted with colored noise. To account for this type of noise, many prewhitening and pre-coloring strategies have been proposed to process the fMRI time series prior to statistical inference. In this paper, a generalized likelihood ratio test for brain activation detection is proposed in which the temporal correlation structure of the noise is modelled as an autoregressive (AR) model. The order of the AR model is determined from experimental null data sets. Simulation tests reveal that, for a fixed false alarm rate, the proposed test is slightly (2-3%) better than current tests incorporating colored noise in terms of detection rate.