Available evidence indicates that clozapine is the most effective antipsychotic currently used for the pharmacotherapy of schizophrenia. Unfortunately, clozapine can cause serious side effects that limit the use of the drug. The therapeutic mechanism of action of clozapine is poorly understood, and accordingly, it has been difficult to design new drugs with the advantageous therapeutic properties of clozapine. Based on hypotheses that dopaminergic and serotonergic receptor-blocking properties of clozapine account for its clinical efficacy, several novel antipsychotic drugs have been introduced recently. There is currently insufficient data to reach definitive conclusions regarding the efficacy of the newer 'atypical' antipsychotics in comparison to clozapine. However, most published studies, and general clinical impressions, suggest that none of the newer drugs are as effective as clozapine in treating patients resistant to typical antipsychotic drug therapy. The present paper briefly reviews the clinical experience with the newer 'atypical' antipsychotic drugs and then discusses clinical and preclinical data potentially relevant to mechanisms of action of clozapine in relation to the NMDA receptor hypofunction hypothesis of schizophrenia.