Deficits in prepulse inhibition (PPI) are a biological marker for schizophrenia. To unravel the mechanisms that control PPI, we performed quantitative trait loci (QTL) analysis on 1,010 F2 mice derived by crossing C57BL/6 (B6) animals that show high PPI with C3H/He (C3) animals that show low PPI. We detected six major loci for PPI, six for the acoustic startle response, and four for latency to response peak, some of which were sex-dependent. A promising candidate on the Chromosome 10-QTL was Fabp7 (fatty acid binding protein 7, brain), a gene with functional links to the N-methyl-D-aspartic acid (NMDA) receptor and expression in astrocytes. Fabp7-deficient mice showed decreased PPI and a shortened startle response latency, typical of the QTL's proposed effects. A quantitative complementation test supported Fabp7 as a potential PPI-QTL gene, particularly in male mice. Disruption of Fabp7 attenuated neurogenesis in vivo. Human FABP7 showed altered expression in schizophrenic brains and genetic association with schizophrenia, which were both evident in males when samples were divided by sex. These results suggest that FABP7 plays a novel and crucial role, linking the NMDA, neurodevelopmental, and glial theories of schizophrenia pathology and the PPI endophenotype, with larger or overt effects in males. We also discuss the results from the perspective of fetal programming.