Interpersonal space can be defined as a safety zone immediately surrounding our body, which allows us to feel comfortable during social interactions. Previous studies indicate that the size of interpersonal space at which the other is perceived as intrusive (permeability) and the ability to adapt interpersonal distance based on contextual factors (flexibility) are altered in children and adults with Autism Spectrum Disorder (ASD). The present fMRI study aimed at extending the previous findings by investigating the behavioral and neurophysiological underpinnings of interpersonal space permeability and flexibility in adults with ASD. Individuals with ASD and matched controls (CTR) performed a modified version of the stop-distance paradigm for measuring interpersonal space preferences. Participants observed prerecorded videos of two confederates moving towards them and rated their comfort to the observed distance. The assessment of interpersonal space preferences was performed before and after engaging in cooperative and non-cooperative social interactions with the confederates, experimentally induced by means of a repeated trust game. We observed general lower comfort in response to an approaching confederate in the ASD group compared to the CTR group, indicating preference for larger interpersonal space in autism (altered permeability). This preference was accompanied by reduced activity in bilateral dorsal intraparietal sulcus (dIPS) and left fusiform face area (FFA), regions previously shown to be involved in interpersonal space regulation. Furthermore, we observed differences in effective connectivity among dIPS, FFA, and amygdala in ASDs compared to CTRs, depending on the level of experienced comfort. No differences between ASDs and CTRs were observed in the adaptation of interpersonal space following a cooperative and non-cooperative social interaction, suggesting preserved interpersonal space flexibility in the ASD adult population. The present study provides evidence for impaired permeability of interpersonal space in adults with ASD. The findings suggest that a dysregulation of the activity and connectivity of brain areas involved in the processing of interpersonal space may contribute to preference for larger distance and avoidance of physical proximity in ASDs. Future research is needed to examine whether the observed alteration of interpersonal space processing is an effect of or a contributing factor to the social disabilities characterizing autism.