The correct statement is:
In first-person narration, the story is told by a character in the story, and third-person narration uses a point of view from outside the narrative.
This statement accurately describes the difference between the two narrative styles. In first-person narration, the narrator is a character within the story who uses "I" or "we," while in third-person narration, the narrator is not a character in the story and refers to characters using "he," "she," or "they."