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OBJECTIVE: Patients with schizophrenia improve episodic memory accuracy when given organizational strategies through levels-of-processing paradigms. This study tested if improvement is accompanied by normalized frontotemporal function. METHOD: Event-related blood-oxygen-level-dependent functional magnetic resonance imaging (fMRI) was used to measure activation during shallow (perceptual) and deep (semantic) word encoding and recognition in 14 patients with schizophrenia and 14 healthy comparison subjects. RESULTS: Despite slower and less accurate overall word classification, the patients showed normal levels-of-processing effects, with faster and more accurate recognition of deeply processed words. These effects were accompanied by left ventrolateral prefrontal activation during encoding in both groups, although the thalamus, hippocampus, and lingual gyrus were overactivated in the patients. During word recognition, the patients showed overactivation in the left frontal pole and had a less robust right prefrontal response. CONCLUSIONS: Evidence of normal levels-of-processing effects and left prefrontal activation suggests that patients with schizophrenia can form and maintain semantic representations when they are provided with organizational cues and can improve their word encoding and retrieval. Areas of overactivation suggest residual inefficiencies. Nevertheless, the effect of teaching organizational strategies on episodic memory and brain function is a worthwhile topic for future interventional studies.