Impaired auditory sensory gating is considered characteristic of schizophrenia and a marker of the information processing deficit inherent to that disorder. Predominance of negative symptoms also reflects the degree of deficit in schizophrenia and is associated with poorer pre-morbid functioning, lower IQ, and poorer outcomes. However, a consistent relationship between auditory sensory gating and negative symptoms in schizophrenia has yet to be demonstrated. The absence of such a finding is surprising, since both impaired auditory gating and negative symptoms have been linked with impaired fronto-temporal cortical function. The present study measured auditory gating using the P50 event related potential (ERP) in a paired-click paradigm and capitalized on the relative localization advantage of magnetoencephalography (MEG) to assess auditory sensory gating in terms of the event related field (ERF) M50 source dipoles on bilateral superior temporal gyrus (STG). The primary hypothesis was that there would be a positive correlation between lateralized M50 auditory sensory gating measures and negative symptoms in patients with schizophrenia. A standard paired-click paradigm was used during simultaneous EEG and MEG data collection to determine S2/S1 sensory gating ratios in a group of 20 patients for both neuroimaging techniques. Participants were administered the Schedule for the Assessment of Negative Symptoms (SANS), the Positive and Negative Symptom Scale (PANSS), and the Calgary Depression Scale for Schizophrenia. Consistent with previous reports, there was no relationship between ERP P50 sensory gating and negative symptoms. However, right (not left) hemisphere ERF M50 sensory gating ratio was significantly and positively correlated with negative symptoms. This finding is compatible with information processing theories of negative symptoms and with more recent findings of fronto-temporal abnormality in patients with predominantly negative symptoms.