Accurate self-awareness is essential for adapting one's tasks and goals to one's actual abilities. Patients with neurodegenerative diseases, particularly those with right frontal involvement, often present with poor self-awareness of their functional limitations that may exacerbate their already jeopardized decision-making and behaviour. We studied the structural neuroanatomical basis for impaired self-awareness among patients with neurodegenerative disease and healthy older adults. One hundred and twenty-four participants (78 patients with neurodegenerative diseases including Alzheimer's disease, behavioural variant frontotemporal dementia, right-temporal frontotemporal dementia, semantic variant and non-fluent variant primary progressive aphasia, and 46 healthy controls) described themselves on the Patient Competency Rating Scale, rating observable functioning across four domains (daily living activities, cognitive, emotional control, interpersonal). All participants underwent structural magnetic resonance imaging. Informants also described subjects' functioning on the same scale. Self-awareness was measured by comparing self and informant ratings. Group differences in discrepancy scores were analysed using general linear models, controlling for age, sex and disease severity. Compared with controls, patients with behavioural variant frontotemporal dementia overestimated their functioning in all domains, patients with Alzheimer's disease overestimated cognitive and emotional functioning, patients with right-temporal frontotemporal dementia overestimated interpersonal functioning, and patients with non-fluent aphasia overestimated emotional and interpersonal functioning. Patients with semantic variant aphasia did not overestimate functioning on any domain. To examine the neuroanatomic correlates of impaired self-awareness, discrepancy scores were correlated with brain volume using voxel-based morphometry. To identify the unique neural correlates of overlooking versus exaggerating deficits, overestimation and underestimation scores were analysed separately, controlling for age, sex, total intracranial volume and extent of actual functional decline. Atrophy related to overestimating one's functioning included bilateral, right greater than left frontal and subcortical regions, including dorsal superior and middle frontal gyri, lateral and medial orbitofrontal gyri, right anterior insula, putamen, thalamus, and caudate, and midbrain and pons. Thus, our patients' tendency to under-represent their functional decline was related to degeneration of domain-general dorsal frontal regions involved in attention, as well as orbitofrontal and subcortical regions likely involved in assigning a reward value to self-related processing and maintaining accurate self-knowledge. The anatomic correlates of underestimation (right rostral anterior cingulate cortex, uncorrected significance level) were distinct from overestimation and had a substantially smaller effect size. This suggests that underestimation or 'tarnishing' may be influenced by non-structural neurobiological and sociocultural factors, and should not be considered to be on a continuum with overestimation or 'polishing' of functional capacity, which appears to be more directly mediated by neural circuit dysfunction.