The hippocampus is crucial for normal brain function, especially for the encoding and retrieval of multimodal sensory information. Neuropsychiatric disorders such as temporal lobe epilepsy, amnesia, and the dementias are associated with structural and functional abnormalities of specific hippocampal neurons. More recently we have also found evidence for a role of the hippocampus in the pathophysiology of schizophrenia. The most consistent finding is a subtle, yet significant volume difference in schizophrenia. Here we review the cellular and molecular basis of smaller hippocampal volume in schizophrenia. In contrast to neurodegenerative disorders, total hippocampal cell number is not markedly decreased in schizophrenia. However, the intriguing finding of a selective loss of hippocampal interneurons deserves further study. Two neurotransmitter receptors, the GABAA and AMPA/kainate glutamate receptors, appear to be abnormal, whereas changes of the NMDA glutamate receptor are less robust. The expression of several genes, including those related to the GABAergic system, neurodevelopment, and synaptic function, is decreased in schizophrenia. Taken together, recent studies of hippocampal cell number, protein expression, and gene regulation point towards an abnormality of hippocampal architecture in schizophrenia.