Schizophrenia is a chronic psychotic disorder that remains a considerable cause of global disease burden. Cognitive impairments are common and contribute significantly to the morbidity of the disorder. Over the last two decades or so molecular imaging studies have refined understanding of the pathophysiology underlying the development of psychosis and cognitive impairments. Firstly they have consistently implicated presynaptic dopaminergic dysfunction in the disorder, finding that dopamine synthesis capacity, dopamine release and baseline dopamine levels are increased in the illness. Secondly recent findings show that dopamine synthesis capacity is elevated in those that go on to develop psychosis in the following year, but not in those that do not, and appears to increase further with the development of psychosis. Thirdly evidence links greater dopamine synthesis capacity to poorer cognitive performance and altered frontal cortical function measured using functional imaging during cognitive tasks. Finally they have provided data on the nature of other neurofunctional alterations in the disorder, in particular in the serotonergic system and neuroinflammation. We review these findings and discuss their implications for understanding the neurobiology of psychosis and cognitive impairments in schizophrenia.