Sensory over-responsivity (SOR) is a common condition in autism spectrum disorders (ASD) that is associated with greater social impairment. However, the mechanisms through which sensory stimuli may affect social functioning are not well understood. This study used fMRI to examine brain activity while interpreting communicative intent in 15 high-functioning youth with ASD and 16 age- and IQ-matched typically-developing (TD) controls. Participants completed the task with and without a tactile sensory distracter, and with and without instructions directing their attention to relevant social cues. When completing the task in the presence of the sensory distracter, TD youth showed increased activity in auditory language and frontal regions whereas ASD youth showed decreased activation in these areas. Instructions mitigated this effect such that ASD youth did not decrease activation during tactile stimulation; instead, the ASD group showed increased medial prefrontal activity. SOR severity modulated the effect of the tactile stimulus on social processing. Results demonstrate for the first time a neural mechanism through which sensory stimuli cause disruption of social cognition, and that attentional modulation can restore neural processing of social cues through prefrontal regulation. Findings have implications for novel, integrative interventions that incorporate attentional directives to target both sensory and social symptoms.