Estrogen has been implicated in the development and course of schizophrenia with most evidence suggesting a neuroprotective effect. Treatment with raloxifene, a selective estrogen receptor modulator, can reduce symptom severity, improve cognition and normalize brain activity during learning in schizophrenia. People with schizophrenia are especially impaired in the identification of negative facial emotions. The present study was designed to determine the extent to which adjunctive raloxifene treatment would alter abnormal neural activity during angry facial emotion recognition in schizophrenia. Twenty people with schizophrenia (12 men, 8 women) participated in a 13-week, randomized, double-blind, placebo-controlled, crossover trial of adjunctive raloxifene treatment (120 mg per day orally) and performed a facial emotion recognition task during functional magnetic resonance imaging after each treatment phase. Two-sample t-tests in regions of interest selected a priori were performed to assess activation differences between raloxifene and placebo conditions during the recognition of angry faces. Adjunctive raloxifene significantly increased activation in the right hippocampus and left inferior frontal gyrus compared with the placebo condition (family-wise error, P<0.05). There was no significant difference in performance accuracy or reaction time between active and placebo conditions. To the best of our knowledge, this study provides the first evidence suggesting that adjunctive raloxifene treatment changes neural activity in brain regions associated with facial emotion recognition in schizophrenia. These findings support the hypothesis that estrogen plays a modifying role in schizophrenia and shows that adjunctive raloxifene treatment may reverse abnormal neural activity during facial emotion recognition, which is relevant to impaired social functioning in men and women with schizophrenia.