Although hallucinations are not one of the Diagnostic and Statistical Manual of Mental Disorders-Fifth Edition (DSM-5) criteria for posttraumatic stress disorder (PTSD), they are increasingly documented in PTSD. They are noted in the absence of clear delusions, formal thought disorganization, disorganized speech, or behavior, ruling out a comorbid psychotic disorder like schizophrenia as a better explanation for these hallucinations. Hallucinations in both PTSD and schizophrenia share phenomenological features. We propose that hallucinations in PTSD, like those in schizophrenia, might be explained in terms of aberrant predictive coding, specifically the misapplication of strong prior beliefs that vitiate perceptual inference. This approach highlights the broader relationship between trauma and psychosis. Under predictive coding, the nervous system organizes past sensory data into an internal model of the world. Under stress, the brain prioritizes speed over accurate encoding. However, memories for traumatic experiences are typically strongly consolidated, to avoid similar experiences in future. In PTSD, this could lead to a world model comprised of inaccurate but overly precise prior beliefs, that can be triggered by stimuli tangentially related to the index trauma, resulting in hallucinations. Crucially, this evidence accumulation depends upon the relative precision of prior beliefs and sensory evidence (supplied in the form of prediction errors). Our basic argument is that stressful situations induce belief updating, in terms of precise prior beliefs, that are difficult to undo. These unduly precise, trauma-related beliefs then constitute perceptual hypotheses, memories, or narratives that bias subsequent experience. This prior bias may be so severe that sensory evidence is effectively ignored; that is, treated as very imprecise, in relation to prior beliefs. Such an account may lead to cognitive therapies for hallucinations aimed at strong prior beliefs, and the exciting prospect of combining such therapies with drugs that modulate neuroplasticity and enhance the adaptive consolidation of more appropriate priors. (PsycInfo Database Record (c) 2020 APA, all rights reserved).