Hallucinations characterize schizophrenia, with approximately 59% of patients reporting auditory hallucinations and 27% reporting visual hallucinations. Prior neuroimaging studies suggest that hallucinations are linked to disrupted communication across distributed (sensory, salience-monitoring and subcortical) networks. Yet, our understanding of the neurophysiological mechanisms that underlie auditory and visual hallucinations in schizophrenia remains limited. This study integrates two resting-state functional magnetic resonance imaging (fMRI) analysis methods – amplitudes of low-frequency fluctuations (ALFF) and functional network connectivity (FNC) – to explore the hypotheses that (1) abnormal FNC between salience and sensory (visual/auditory) networks underlies hallucinations in schizophrenia, and (2) disrupted hippocampal oscillations (as measured by hippocampal ALFF) beget changes in FNC linked to hallucinations. Our first hypothesis was supported by the finding that schizophrenia patients reporting hallucinations have higher FNC between the salience network and an associative auditory network relative to healthy controls. Hippocampal ALFF was negatively associated with FNC between primary auditory cortex and the salience network in healthy subjects, but was positively associated with FNC between these networks in patients reporting hallucinations. These findings provide indirect support favoring our second hypothesis. We suggest future studies integrate fMRI with electroencephalogram (EEG) and/or magnetoencephalogram (MEG) methods to directly probe the temporal relation between altered hippocampal oscillations and changes in cross-network functional communication.