The auditory N1 event-related potential has previously been observed to be attenuated for tones that are triggered by human actions. This attenuation is thought to be generated by motor prediction mechanisms and is considered to be important for agency attribution. The present study was designed to rigorously test the notion of action prediction-based sensory attenuation. Participants performed one of four voluntary actions on each trial, with each button associated with either predictable or unpredictable action effects. In addition, actions with each hand could result in action effects that were either congruent or incongruent with hand-specific prediction. We observed no significant differences in N1 amplitude between predictable and unpredictable tones. When contrasting action effects that were congruent or incongruent with hand-specific prediction, we observed significant attenuation for prediction-congruent compared to prediction-incongruent action-effects. These novel findings suggest that accurate action-effect prediction drives sensory attenuation of auditory stimuli. These findings have important implications for understanding the mechanisms of action-effect prediction and sensory attenuation, and may have clinical implications for studies investigating action awareness and agency in schizophrenia.