Recent evidence suggests that hand-stimulus proximity enhances the visuo-motor Simon effect. The present study used event-related potentials (ERP) to examine the timing at which hand-stimulus proximity modulates the Simon effect. The results show that the P1 and N1 components were not modulated by hand-stimulus proximity, suggesting that early sensory processing is not altered by hand-stimulus proximity. However, the interference effect (the difference between incompatible versus compatible trials) on the N2 component was significantly attenuated near the hands compared to far from the hands, indicating that hand-stimulus proximity impairs conflict monitoring. We also found significant effects on a later component, as the P3 was reduced and had a shorter latency for the hand-proximal condition relative to the hand-distal condition. These new findings suggest that the critical stage at which hand-stimulus proximity affects cognitive processing lies past the early perceptual processing, acting instead on later stages of processing related to executive functioning.