Lexical embedding is common in all languages and elicits mutual orthographic interference between an embedded word and its carrier. The neural basis of such interference remains unknown. We employed a novel fMRI prime-target embedded word paradigm to test for involvement of a visual word form area (VWFA) in left ventral occipitotemporal cortex in co-activation of embedded words and their carriers. Based on the results of related fMRI studies we predicted either enhancement or suppression of fMRI responses to embedded words initially viewed as primes, and repeated in the context of target carrier words. Our results clearly showed enhancement of fMRI responses in the VWFA to embedded-carrier word pairs as compared to unrelated prime-target pairs. In contrast to non-visual language-related areas (e.g., left inferior frontal gyrus), enhanced fMRI responses did not occur in the VWFA when embedded-carrier word pairs were restricted to the left visual hemifield. Our finding of fMRI enhancement in the VWFA is novel evidence of its involvement in representational rivalry between orthographically similar words, and the co-activation of embedded words and their carriers.