In slot machine gambling, the “near-miss effect” (when a losing display physically resembles an actual win display) has been implicated in pathological gambling (PG). Functional magnetic resonance imaging (fMRI) with PG and non-PG participants shows that near-misses recruit reward-related circuitry, but little is known about the temporal dynamics and oscillatory changes underlying near-misses. The present multi-modal imaging study investigated the near-miss effect by combining the spatial resolution of blood oxygen-level dependent (BOLD)-fMRI with the spatial and temporal resolution of magnetoencephalography (MEG) during a slot machine task in PG and non-PG groups. Given previous findings on outcome (win and near-miss) processing, functional overlap was hypothesized between induced changes in temporal oscillations and BOLD response to wins and near-misses in PG. We first validated our task in a sample of varying gambling severity using BOLD-fMRI and then compared PG and non-PG participants using MEG to investigate changes in induced oscillatory power associated with win and near-miss, relative to loss, outcomes. Across both modalities, near-misses recruited similar brain regions to wins, including right inferior frontal gyrus and insula. Using MEG, increased theta-band (4–7 Hz) oscillations to near-misses were observed in the insula and right orbitofrontal cortex (OFC). Furthermore, this theta-band activity was positively associated with gambling severity. These findings demonstrate that the near-miss effect in insula and OFC is associated with induced theta oscillations. The significance of these findings for theories of PG and the development of potential biomarkers and therapeutic targets is discussed