We often perform actions while observed by others, yet the behavioural and neural signatures of audience effects remain understudied. Performing actions while being observed has been shown to result in more emphasized movements in musicians and dancers, as well as during communicative actions. Here, we investigate the behavioural and neural mechanisms of observed actions in relation to individual actions in isolation and interactive joint actions. Movement kinematics and EEG were recorded in 42 participants (21 pairs) during a mirror-game paradigm, while participants produced improvised movements alone, while observed by a partner, or by synchronizing movements with the partner. Participants produced largest movements when being observed, and observed actors and dyads in interaction produced slower and less variable movements in contrast with acting alone. On a neural level, we observed increased mu suppression during interaction, as well as to a lesser extent during observed actions, relative to individual actions. Moreover, we observed increased widespread functional brain connectivity during observed actions relative to both individual and interactive actions, suggesting increased intra-individual monitoring and action-perception integration as a result of audience effects. These results suggest that observed actors take observers into account in their action plans by increasing self-monitoring; on a behavioural level, observed actions are similar to emergent interactive actions, characterized by slower and more predictable movements.