Prepulse inhibition (PPI) of the startle reflex refers to the ability of a weak prestimulus, the prepulse, to inhibit the response to a closely following strong sensory stimulus, the pulse. PPI is found to be deficient in a number of psychiatric and neurological disorders associated with abnormalities at some level in the limbic and cortico-pallido-striato-thalamic circuitry. We applied whole-brain functional magnetic resonance imaging to elucidate the neural correlates of PPI using airpuff stimuli as both the prepulse and the pulse in groups of (i) healthy subjects and (ii) schizophrenic patients. Cerebral activation during prepulse-plus-pulse stimuli with stimulus-onset asynchronies of 120 ms was contrasted with activation during pulse-alone stimuli. In healthy subjects, PPI was associated with increased activation bilaterally in the striatum extending to hippocampus and thalamus, right inferior frontal gyrus and bilateral inferior parietal lobe/supramarginal gyrus, and with decreased activation in the right cerebellum and left medial occipital lobe. All activated regions showed significantly greater response in healthy subjects than schizophrenic patients, who also showed a trend for lower PPI. The findings demonstrate involvement of the striatum, hippocampus, thalamus, and frontal and parietal cortical regions in PPI. Dysfunctions in any of these regions may underlie observations of reduced PPI in schizophrenia.