Background The brain reward circuitry innervated by dopamine is critically disturbed in schizophrenia. This study aims to investigate the role of dopamine-related brain activity during prediction of monetary reward and loss in first episode schizophrenia patients. Methods We measured blood–oxygen-level dependent (BOLD) activity in 10 patients with schizophrenia (SCH) and 12 healthy controls during dopamine depletion with α-methylparatyrosine (AMPT) and during a placebo condition (PLA). Results AMPT reduced the activation of striatal and cortical brain regions in SCH. In SCH vs. controls reduced activation was found in the AMPT condition in several regions during anticipation of reward and loss, including areas of the striatum and frontal cortex. In SCH vs. controls reduced activation of the superior temporal gyrus and posterior cingulate was observed in PLA during anticipation of rewarding stimuli. PLA patients had reduced activation in the ventral striatum, frontal and cingulate cortex in anticipation of loss. The findings of reduced dopamine-related brain activity during AMPT were verified by reduced levels of dopamine in urine, homovanillic-acid in plasma and increased prolactin levels. Conclusions Our results indicate that dopamine depletion affects functioning of the cortico-striatal reward circuitry in SCH. The findings also suggest that neuronal functions associated with dopamine neurotransmission and attribution of salience to reward predicting stimuli are altered in schizophrenia.