Since the concept of inclusion of other in the self (IOS) appeared, the topic of interpersonal distance has become an important research framework in social cognition. Similar to the self-reference effect, the other-reference effect was found when information related to close others (e.g. mother) was processed. These findings suggest that the representations of self and others are similar. Interestingly, studies on overcome evaluation indicated the same phenomenon. When participants monitor errors made by others, a similar ERP waveform could be detected by the observers just as they committed errors themselves. It is so-called observer feedback related negativity (oFRN). Although interpersonal distance is considered to play an important role, it is still unclear that how self- and other representation are modulated by interpersonal distance, since there are no consistent findings in previous studies. Thus, the purpose of this article was to confirm the effect of interpersonal distance on the oFRN, and to reveal the similarity of brain mechanism between self and others. Seventeen participants (9 males and 8 females) completed a simplified monetary gambling task in self-execution, friend-observation, and stranger-observation conditions, respectively. Actual observation paradigm was used in observation conditions, in which the electroencephalogram (EEG) participant and the partner were sitting side by side in the gambling task. The data were recorded from 64 scalp sites using tin electrodes mounted in an elastic cap. ERPs time-locked to the onset of feedback stimuli were averaged for epochs of 700ms starting 100ms prior to the stimulus (baseline). The ERPs were statistically evaluated by SPSS 15.0 with repeated measure analysis of variance (ANOVA). Results showed that there were more negative ERP responses, as indexed by the FRN, for loss trials compare to gain trials in monitoring both self and friend gambling (p<0.01, respectively). No significant difference was detected between loss and gain trials in stranger-observation condition (p>0.05), but a negative deflection was found in loss feedback. As for the oFRN, a marginally significant difference was found between friend- and stranger-observation conditions when distinct waves were statistically evaluated (p = 0.062). A correlation analysis was made to further explore the agency effect on the oFRN, and the results showed that interpersonal distance (evaluated by a subjective assessment) and the ERPs were significantly related (p<0.05). It indicates that a friend (who was rated closer) might be represented slightly more important than a stranger in “mirror” performance-monitoring system. That is, the oFRN is sensitive to interpersonal distance. The negative deflection across three agency conditions in loss trials suggested that similar monitoring mechanisms for both self- and other generated errors may be partly based on the mirror neuron system. However, the agency difference on the oFRN between friend and stranger observation conditions suggested that the vicarious experiences of others were modulated by interpersonal distance.