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Background Motor resonance reflects the activation of the motor system during the observation of others’ actions and is considered a physiological marker of the human mirror neuron system (MNS). This study investigated whether the excitatory and inhibitory balance in the primary motor cortex, driven by glutamatergic and GABAergic mechanisms, is linked to the strength of muscle-specific responses during action observation (AO). Objectives To determine whether cortical excitation-inhibition balance relates to muscle-specific motor resonance during AO. Methods Using single pulse Transcranial Magnetic Stimulation (spTMS), we measured motor evoked potentials (MEPs) from the first dorsal interosseous (FDI) and abductor digiti minimi (ADM) during an AO task involving videos of index and little finger movements. In addition, corticospinal excitability indices were assessed using single-pulse (SP), intracortical facilitation (ICF), and short-interval intracortical inhibition (SICI) protocols before and after AO. ICF reflects glutamatergic facilitation, while SICI indexes GABA-A mediated inhibition. Results Across excitability protocols ICF consistently elicited the largest MEPs, followed by SP and SICI. After AO, MEPs increased in both ICF and SP protocols, whereas SICI showed reduced inhibitory effects. During AO, SP-induced MEPs in the FDI showed reduced corticospinal excitability during little finger movement observation, whereas ADM displayed increased excitability during neutral and little finger movement conditions. Correlation analyses indicated that both pre- and post-AO excitability measures correlated with task-related MEP modulation. Notably, higher post-AO ICF in ADM was associated with stronger ADM responses during observation of little finger movements. Greater pre-AO SICI in ADM was associated with stronger suppression of SP-induced ADM MEPs during observation of index finger movements. Additionally, FDI ICF, both before and after AO, correlated with SP-induced FDI MEP responses during index finger observation. Conclusion Taken together, these results indicate that motor resonance arises from the interplay between excitatory and inhibitory processes in the motor cortex and that individual differences in motor resonance are constrained by stable excitatory–inhibitory properties indexed by ICF and SICI. These insights into cortical excitation-inhibition dynamics provide a neurophysiological basis for individualized interventions in neuropsychiatric and motor disorders characterized by disrupted motor resonance or corticospinal excitability.