The interaction between language and spatial laterality and its association with cognitive ability was explored in a group of 42 right-handers and 40 left-handers using functional magnetic resonance imaging. Cognitive ability measures including working memory, verbal comprehension and perceptual organisation were assessed using the Wechsler Adult Intelligence Scale (version III). Left-handers show lower working memory scores than right-handers. Increased rightward language laterality is also associated with decreased working memory performance, which we suggest is related to the involvement of the left inferior frontal gyrus in subvocal rehearsal during working memory tasks. The interaction between language and spatial laterality is associated with performance on verbal comprehension and perceptual organisation, such that when language and spatial laterality are dissociated between the hemispheres a significant increase in verbal comprehension and perceptual organisation performance is found. There is a decrease in performance on the verbal comprehension and perceptual organisation subtests when language and spatial processing are associated to the same hemisphere (i.e. both lateralised to the right hemisphere or both lateralised to the left). This interaction is interpreted in relation to the ‘hemispheric crowding’ hypothesis, which proposes increased cognitive ability when language and spatial laterality are dissociated.