Recent developments in neuroscience, especially in neuropsychology and neuroimaging, have shed light on cognitive dysfunction in schizophrenia. Cognitive dysfunction may be the underlying basis of schizophrenic symptoms and also the vulnerability marker such as an endophenotype used in genetic studies. Among various cognitive functions, attention is currently focused on "social cognition" as a new realm of research which it may determine the social and occupational abilities of patients with schizophrenia. Recent studies indicate that the second-generation antipsychotics may improve some aspects of cognitive dysfunction in schizophrenia. This urges us to reveal whether such drugs also improve the long-term prognosis as well as quality of life of the patients. Although cognitive function has usually been evaluated by neuropsychological tests, it is advisable to employ electroencephalogram especially event-related potential, which has high time resolution, in combination with neuroimaging with high spatial resolution. In this paper, studies with event-related potentials including P50, MMN, Nd, NA, P300, and N400 are reviewed and we propose a pathophysiological model of schizophrenia from the viewpoint of information processing. The model consists of a controlled processing system (e. g., perceptual organization, and semantic integration) and regulatory system which is mainly automatic processing and enables the controlled processing to be efficient. We postulate that both systems will be primarily affected in schizophrenia and that disruptions in the regulatory system from any cause will impose. further burden on the controlled system and lead to psychosis. Finally, comprehensive and sophisticated assessment of these systems will be required in schizophrenia research.