A large body of phenomenological evidence implicates abnormal connectivity of brain macrocircuitry and microcircuitry in schizophrenia. Recent discoveries of susceptibility genes for schizophrenia have zeroed in on the synaptic signaling machinery of cortical microcircuits as fundamental to disease causation and have militated for further revision of the role of dopamine in this illness. Dopamine, long implicated in psychosis and in antipsychotic drug effects, is crucial in optimizing signal-to-noise ratio of local cortical microcircuits. This action of dopamine is achieved principally by D1- and D2-receptor-mediated effects on pyramidal and local circuit neurons, which mediate neuronal excitability and recurrent inhibition and thus contribute to the stability of cortical representations of external and internal stimuli. In schizophrenia, an abnormal cortical dopamine D1/D2 activation ratio - in concert with, and in part related to, altered GABA and glutamate transmission - appears to interfere crucially with this process.