The neurotransmitter serotonin has been implicated in the pathophysiology of psychosis. The serotonin transporter (5-HTT) plays a critical role in regulation of serotonergic function. A recently identified polymorphism in the promoter region of the 5-HTT gene (5-HTTLPR) produces significant differences in 5-HTT expression and function and was found to be associated with anxiety-related traits in healthy volunteers. We investigated whether 5-HTTLPR is associated with psychosis in neuroleptic-free schizophrenic or schizoaffective patients. Fifty patients with schizophrenia or schizoaffective disorder by DSM-III-R criteria were genotyped at 5-HTTLPR and underwent double-blind Brief Psychiatric Rating Scale (BPRS) ratings while neuroleptic-free for approximately 4 weeks. Patients with the 5-HTTLPR II genotype (n = 19) had significantly higher BPRS ratings for psychosis than patients with the Is (n = 25) or ss (n = 6) genotypes. Examination of individual items revealed a specific significant increase in intensity of hallucinations in patients with the 5-HTTLPR II genotpe. These data provide preliminary evidence for a role of serotonin in the pathophysiology of hallucinations and may represent the identification of an allelic variant that modifies the complex clinical presentation of schizophrenia.