Until recently, the social cognitive impairment in schizophrenia has been underappreciated and remains essentially untreated. Deficits in emotional processing, social perception and knowledge, theory of mind, and attributional bias may contribute to functional social cognitive impairments in schizophrenia. The amygdala has been implicated as a key component of social cognitive circuitry in both animal and human studies. In addition, structural and functional studies of schizophrenia reproducibly demonstrate abnormalities in the amygdala and dopaminergic signaling. Finally, the neurohormone oxytocin plays an important role in multiple social behaviors in several mammals, including humans. We propose a model of social cognitive dysfunction in schizophrenia and discuss its therapeutic implications. The model comprises abnormalities in oxytocinergic and dopaminergic signaling in the amygdala that result in impaired emotional salience processing with consequent social cognitive deficits.