Working memory, a fundamental cognitive process that is disturbed in schizophrenia, appears to depend upon the sustained activity of specific populations of neurons in the prefrontal cortex. Understanding the neural mechanism(s) that may contribute to the sustained activity of these neurons represents a critical step in predicting the types of alterations in prefrontal circuitry that may be present in schizophrenia, and in determining how such alterations may contribute to the cognitive symptoms of this disorder. This article reviews recent findings which suggest that intrinsic horizontal connections among pyramidal neurons in layer 3 of the dorsolateral prefrontal cortex may provide a critical anatomical substrate for working memory processes, and that alterations in these connections may account for the observations of disturbed working memory, adolescence-related onset of clinical features, and certain pathological changes in the prefrontal cortex of subjects with schizophrenia.