We present a contextual clustering procedure for statistical parametric maps (SPM) calculated from time varying three-dimensional images. The algorithm can be used for the detection of neural activations from functional magnetic resonance images (fMRI). An important characteristic of SPM is that the intensity distribution of background (nonactive area) is known whereas the distributions of activation areas are not. The developed contextual clustering algorithm divides an SPM into background and activation areas so that the probability of detecting false activations by chance is controlled, i.e., hypothesis testing is performed. Unlike the much used voxel-by-voxel testing, neighborhood information is utilized, an important difference. This is achieved by using a Markov random field prior and iterated conditional modes (ICM) algorithm. However, unlike in the conventional use of ICM algorithm, the classification is based only on the distribution of background. The results from our simulations and human fMRI experiments using visual stimulation demonstrate that a better sensitivity is achieved with a given specificity in comparison to the voxel-by-voxel thresholding technique. The algorithm is computationally efficient and can be used to detect and delineate objects from a noisy background in other applications.