In schizophrenia, critical deficits in cognitive functions appear to reflect altered neural processing in the prefrontal cortex (PFC). Given the essential role of inhibitory neurotransmission in mediating these cognitive functions, we sought to determine whether abnormalities in the inhibitory circuitry of the PFC may contribute to the cognitive deficits of schizophrenia. In situ hybridization analyses in postmortem brain tissue from subjects with schizophrenia revealed that a subset of GABA neurons in PFC layers 1-5 do not express detectable levels of the mRNAs encoding glutamate decarboxylase (GAD(67)), a synthesizing enzyme for GABA, or the GABA membrane transporter (GAT-1), which is responsible for the reuptake of GABA into the nerve terminal. Furthermore, the affected GABA neurons appear to include chandelier cells, since decreased expression of GAT-1 mRNA is associated with decreased GAT-1 protein immunoreactivity in chandelier neuron axon terminals. Finally, immunocytochemical studies revealed that decreased GAT-1 immunoreactivity in chandelier neuron axon terminals is associated with an increase in a marker of GABA(A) receptors at the postsynaptic targets of chandelier neuron axons, the axon initial segment (AIS) of pyramidal neurons. These findings suggest that schizophrenia is associated with an up-regulation of GABA(A) receptors at pyramidal neuron AIS in response to deficient GABAergic input from chandelier neurons. Selective disruptions in inhibitory neurotransmission are likely to distort aspects of pyramidal neuron function important for working memory tasks, and thus may contribute to cognitive dysfunction in schizophrenia.