Abstract Schizophrenia (Sz) is associated with deficits in fluent reading ability that compromise functional outcomes. Here, we utilize a combined eye-tracking, neurophysiological, and computational modeling approach to analyze underlying visual and oculomotor processes. Subjects included 26 Sz patients (SzP) and 26 healthy controls. Eye-tracking and electroencephalography data were acquired continuously during the reading of passages from the Gray Oral Reading Tests reading battery, permitting between-group evaluation of both oculomotor activity and fixation-related potentials (FRP). Schizophrenia patients showed a marked increase in time required per word (d = 1.3, P < .0001), reflecting both a moderate increase in fixation duration (d = .7, P = .026) and a large increase in the total saccade number (d = 1.6, P < .0001). Simulation models that incorporated alterations in both lower-level visual and oculomotor function as well as higher-level lexical processing performed better than models that assumed either deficit-type alone. In neurophysiological analyses, amplitude of the fixation-related P1 potential (P1f) was significantly reduced in SzP (d = .66, P = .013), reflecting reduced phase reset of ongoing theta-alpha band activity (d = .74, P = .019). In turn, P1f deficits significantly predicted increased saccade number both across groups (P = .017) and within SzP alone (P = .042). Computational and neurophysiological methods provide increasingly important approaches for investigating sensory contributions to impaired cognition during naturalistic processing in Sz. Here, we demonstrate deficits in reading rate that reflect both sensory/oculomotor- and semantic-level impairments and that manifest, respectively, as alterations in saccade number and fixation duration. Impaired P1f generation reflects impaired fixation-related reset of ongoing brain rhythms and suggests inefficient information processing within the early visual system as a basis for oculomotor dyscontrol during fluent reading in Sz.