Schizophrenia affects approximately 1% of the population and continues to be associated with poor outcome because of the limited efficacy of and noncompliance with existing antipsychotic medications. An alternative hypothesis invoking the excitatory neurotransmitter, glutamate, arose out of clinical observations that NMDA receptor antagonists, the dissociative anesthetics like ketamine, can replicate in normal individuals the full range of symptoms of schizophrenia including psychosis, negative symptoms, and cognitive impairments. Low dose ketamine can also re-create a number of physiologic abnormalities characteristic of schizophrenia. Postmortem studies have revealed abnormalities in endogenous modulators of NMDA receptors in schizophrenia as well as components of a postsynaptic density where NMDA receptors are localized. Gene association studies have revealed several genes that affect NMDA receptor function whose allelic variants are associated with increased risk for schizophrenia including genes encoding d-amino acid oxidase, its modulator G72, dysbindin, and neuregulin. The parvalbumin-positive, fast-firing GABAergic interneurons that provide recurrent inhibition to cortical-limbic pyramidal neurons seem to be most sensitive to NMDA receptor hypofunction. As a consequence, disinhibition of glutamatergic efferents disrupts cortical processing, causing cognitive impairments and negative symptoms, and drives subcortical dopamine release, resulting in psychosis. Drugs designed to correct the cortical-limbic dysregulated glutamatergic neurotransmission show promise for reducing negative and cognitive symptoms of schizophrenia as well as its positive symptoms.