The N2 component of the auditory event-related potential (ERP) indexes cognitive processes involved in the categorization of deviant stimuli. Although N2 amplitude and latency abnormalities have been reported in schizophrenia, their relationship to MRI structural changes, clinical status, and P3 abnormalities has not been defined. We therefore studied the auditory N2 and P3 components elicited by an oddball paradigm in 15 right-handed male subjects with schizophrenia and 14 control subjects who had quantitative MRI measures of temporal lobe gray-matter structures. To provide a methodological comparison, we measured the auditory N2 from both the target ERP (N2t) and the target-minus-frequent ERP difference (N2d) waveforms. Both N2t and N2d amplitude were bilaterally reduced in schizophrenics, with N2d showing a more pronounced reduction. Within the schizophrenic group, N2 amplitude reduction was associated with reduction in gray-matter volume of the left superior temporal gyrus (STG) and of medial temporal lobe structures bilaterally, and clinically, with greater chronicity. P3 amplitude, in contrast, correlated only with left posterior STG volume, and was more prominently associated with delusions and thought disorder. These findings suggest that the N2 and P3 components, though occurring sequentially in the ERP, tap separable anatomic and behavioral abnormalities in schizophrenia.