Poor attention and impaired memory are enduring and core features of schizophrenia. These impairments have been attributed either to global cortical dysfunction or to perturbations of specific components associated with the dorsolateral prefrontal cortex (DLPFC), hippocampus and cerebellum. Here, we used positron emission tomography (PET) to dissociate activations in DLPFC and hippocampus during verbal episodic memory retrieval. We found reduced hippocampal activation during conscious recollection of studied words, but robust activation of the DLPFC during the effort to retrieve poorly encoded material in schizophrenic patients. This finding provides the first evidence of hippocampal dysfunction during episodic memory retrieval in schizophrenia.