Transformations of hand movements by tools such as levers or electronic input devices can invoke performance costs compared to untransformed movements. This study investigated by means of the Psychological Refractory Period (PRP) paradigm at which stage of information processing such tool-transformation costs arise. We used an inversion transformation, that is, the movement of the operating hand was transformed into a spatially incompatible movement of a lever. As a basic tool-transformation effect, the initiation of inverted tool movements was delayed compared to noninverted movements. Experiment 1 suggested a central (or postcentral) locus of this tool-transformation effect and ruled out a (precentral) perceptual locus. Experiments 2 and 3 confirmed the central locus and ruled out a later, motor-related stage of processing. The results show that spatially incompatible tool movements delay a capacity-limited stage of information processing, often referred to as response selection.