While abnormalities of the prefrontal cortex and temporal lobe structures have typically been associated with the pathophysiology of schizophrenia, recent findings implicate thalamic dysfunction in this illness as well. The thalamus plays a critical role in processing and integrating sensory information relevant to emotional and cognitive functions. Neuropathological and in vivo imaging studies in schizophrenia have identified several structural and metabolic abnormalities in the thalamus, which may contribute to a deficit in sensory processing and be related to psychotic symptomatology. In addition to these postmortem and in vivo imaging studies indicating structural and metabolic changes in the thalamus in schizophrenia, more recent studies have examined the neurochemical substrates that accompany these changes. Much of this work to date has focused on glutamatergic abnormalities in the thalamus, in part because it is a predominant neurotransmitter used in the thalamus, and because glutamatergic dysfunction has been hypothesized to be involved in schizophrenia. Several studies, however, have also examined markers of gamma-aminobutyric acid (GABA) and dopaminergic neurotransmission in the thalamus in schizophrenia. We review these neurochemical findings, as well as the growing body of postmortem and in vivo imaging evidence that supports the hypothesis of thalamic dysfunction in schizophrenia.