This paper summarises the available information on MRI-determined hippocampal morphometry in first-episode patients as an illustration of the value and interpretation of findings in the neurobiology of early phase schizophrenia. We report a thin slice (1.5 mm) study of 32 first episode and 39 high risk patients which demonstrated significantly smaller hippocampi (right -9%, left -11%) in first episode patients that were of a similar magnitude to those found in chronic patients (right -10%, left -11%) but non-significant volume reductions in high risk individuals, including the 15 subjects who subsequently developed psychoses. Consideration is given to the implications of these findings, including the possible role of early and later neurodevelopmental influences. We present animal data showing that chronic placental insufficiency, as elicited by uterine artery ligation can give rise to substantial reduction (31%) in hippocampal volumes and reflect on other potentially relevant pathophysiological mechanisms, including those that may occur during the early phases of psychotic illnesses, including their prodromes. Greater attention needs to be paid to the study of early phase psychosis in order to obtain a clearer understanding of the nature and time course of neurobiological changes associated with it. Although there is a growing literature on first episode psychosis, there is a striking dearth of information on the neurobiology of the prodrome.