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OBJECTIVE: Impaired prefrontal cortical function is regarded as a central feature of schizophrenia. Although many neuroimaging studies have found evidence of abnormal prefrontal activation when patients with schizophrenia perform cognitive tasks, the extent to which this abnormality depends on the presence of active psychotic symptoms and on the demands of the task is unclear. The authors tested the hypothesis that prefrontal functional abnormalities in schizophrenia would be more evident in patients with active psychosis than in patients who were in remission and would become more apparent in the face of increasing task demands. METHOD: The authors used functional magnetic resonance imaging (fMRI) to examine prefrontal cortical activity during a paced letter verbal fluency task in three groups of subjects: acutely psychotic patients with schizophrenia, schizophrenia patients in remission, and healthy volunteers. Online subject performance was measured by utilizing a clustered fMRI acquisition sequence that allowed overt verbal responses to be made in the relative absence of scanner noise. RESULTS: Patients with schizophrenia showed less activation than the healthy comparison subjects in the anterior cingulate and the inferior frontal and right middle frontal cortices, independent of psychotic state and task demand. Acutely psychotic patients showed less activation than the healthy comparison subjects, but these differences were less marked than the differences between the patients in remission and the healthy comparison subjects. Acutely psychotic patients had less activation than the comparison subjects in the anterior cingulate but no significant difference in lateral prefrontal activation. Increasing task demand led to greater anterior cingulate and middle frontal activation in patients with active psychosis than in patients in remission. CONCLUSIONS: Schizophrenia is associated with impaired prefrontal function, but its manifestation depends on the severity of psychotic symptoms and the level of task difficulty.