Hierarchical structures play a central role in many aspects of human cognition, prominently including both language and music. In this study we addressed hierarchy in the visual domain, using a novel paradigm based on fractal images. Fractals are self-similar patterns generated by repeating the same simple rule at multiple hierarchical levels. Our hypothesis was that the brain uses different resources for processing hierarchies depending on whether it applies a "fractal" or a "non-fractal" cognitive strategy. We analyzed the neural circuits activated by these complex hierarchical patterns in an event-related fMRI study of 40 healthy subjects. Brain activation was compared across three different tasks: a similarity task, and two hierarchical tasks in which subjects were asked to recognize the repetition of a rule operating transformations either within an existing hierarchical level, or generating new hierarchical levels. Similar hierarchical images were generated by both rules and target images were identical. We found that when processing visual hierarchies, engagement in both hierarchical tasks activated the visual dorsal stream (occipito-parietal cortex, intraparietal sulcus and dorsolateral prefrontal cortex). In addition, the level-generating task specifically activated circuits related to the integration of spatial and categorical information, and with the integration of items in contexts (posterior cingulate cortex, retrosplenial cortex, and medial, ventral and anterior regions of temporal cortex). These findings provide interesting new clues about the cognitive mechanisms involved in the generation of new hierarchical levels as required for fractals.