Dopamine agonists impair and antagonists normalize prepulse inhibition (PPI) of startle and gating of the P50 event-related potential (ERP), but the within-subject effect of treatment on impaired gating in schizophrenia has not been studied. We report the first results of a longitudinal study using PPI of ERPs as a measure of sensory gating in an auditory Go/NoGo discrimination. After admission and approximately 3 months later, at discharge, 15 patients with schizophrenia performed a discrimination between a 1.4 kHz target tone and an 0.8 kHz non-target tone with no prepulse, or with a prepulse at 100 ms or 500 ms before either tone. ERPs were recorded from 19 sites. Healthy subjects were studied twice, with 3 months between sessions. PPI of the P50 peak in the 100-ms condition was reduced in patients on admission. At discharge, decreased negative symptoms correlated with enhanced P50-PPI at frontocentral sites. After treatment increased N100-PPI at centrotemporal sites correlated with fewer positive symptoms. At frontal sites in the 100-ms condition, the initially small difference of non-target minus target P300 amplitudes increased as negative symptoms decreased. It is concluded that weak auditory prepulses interfere with early auditory stimulus processing (P50), channel selection (N100) and selective attention (P300). Gating of these stages of processing is impaired in psychotic patients and treatment tends to normalize gating in tandem with improvements of different types of symptoms.