Schizophrenia patients and many of their relatives show impaired smooth pursuit eye tracking. The brain mechanisms underlying this impairment are not yet known, but because reduced open-loop acceleration and closed-loop gain accompany it, compromised perceptual processing of motion signals is implicated. A previous study showed that motion discrimination is impaired in schizophrenia patients. Motion discrimination can make use of position and contrast as well as velocity cues. Here, we report that the motion discrimination deficit, which occurs in both schizophrenic patients and in their first-degree relatives, involves a failure of velocity detection, which appears when judging intermediate target velocities. At slower and faster velocities, judgments of velocity discrimination seemed normal until we experimentally disentangled velocity cues from nonmotion cues. We further report that compromised velocity discrimination is associated with sluggish initiation of smooth pursuit. These findings point to specific central nervous system correlates of schizophrenic pathophysiology.