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OBJECTIVE: Neuropsychological studies have shown that deficits in verbal episodic memory in schizophrenia occur primarily during encoding and retrieval stages of information processing. The current study used positron emission tomography to examine the effect of schizophrenia on change in cerebral blood flow (CBF) during these memory stages. METHOD: CBF was measured in 23 healthy comparison subjects and 23 patients with schizophrenia during four conditions: resting baseline, motor baseline, word encoding, and word recognition. The motor baseline was used as a reference that was subtracted from encoding and recognition conditions by using statistical parametric mapping. RESULTS: Patients’ performance was similar to that of healthy comparison subjects. During word encoding, patients showed reduced activation of left prefrontal and superior temporal regions. Reduced left prefrontal activation in patients was also seen during word recognition, and additional differences were found in the left anterior cingulate, left mesial temporal lobe, and right thalamus. Although patients’ performance was similar to that of healthy comparison subjects, left inferior prefrontal activation was associated with better performance only in the comparison subjects. CONCLUSIONS: Left frontotemporal activation during episodic encoding and retrieval, which is associated with better recognition in healthy people, is disrupted in schizophrenia despite relatively intact recognition performance and right prefrontal function. This may reflect impaired strategic use of semantic information to organize encoding and facilitate retrieval.