In "Thatcherized" faces, the eyes and mouth regions are turned upside-down. Only when presented upright they are perceived as severely distorted. Common theories explain this effect by the loss of configural information for inverted faces. We investigated neural correlates of Thatcherization using event related potentials (ERPs). Sixteen right-handed participants performed identity classifications on Thatcherized or original familiar faces, presented either for 34 ms or 200 ms at an orientation of either 0 degrees, 90 degrees or 180 degrees. For the occipito-temporal N170, we found (1) strong non-linear effects of orientation and (2) interactions between Thatcherization and orientation: Thatcherization resulted in larger N170 for upright faces, but smaller N170 for inverted faces. The novel finding of N170 effects of Thatcherization in inverted faces suggests differences in the neural encoding of Thatcherized and original inverted faces, even though Thatcherization escapes subjective perception in inverted faces.