Hallucinations in schizophrenia have been regarded to result from the erroneous attribution of internally generated information to an external source. Distortions in mental imagery may underlie such confusions. We investigated performance of 77 subjects on multiple behavioral measures of auditory and visual mental imagery and perception, and a measure of reality monitoring. Comparisons were made between performance of schizophrenia patients with (N=22) and without (N=35) hallucinations and matched normal comparison subjects (N=20), after controlling for attentional factors. No differences emerged on any of the mental imagery measures, nor on reality monitoring accuracy. This suggests that there is no stable disposition towards abnormal mental imagery associated with hallucinations. However, for patients with active hallucinations (N=12), hallucination severity correlated positively with a measure of imagery-perception interaction in the auditory modality, r=0.70, p=0.01. Although preliminary, this finding is consistent with recent theoretical proposals in which hallucinations have been suggested to result from an increased influence of top-down sensory expectations on conscious perception.