This paper is a review of a recent findings on the pathology of hippocampal interneurons in schizophrenia, with specific emphasis on a protein expressed by these cells, the alpha7-nicotinic acetylcholine receptor subunit. Convergent information indicates that interneurons in the hippocampus and other forebrain structures are decreased in number and function in subjects with schizophrenia. Among the neurochemical markers that are decreased in the hippocampus are synapsin I, cholecystokinin, somatostatin, glutamic acid decarboxylase, and nitric oxide synthase. GABA uptake sites and the GABA synthetic enzyme glutamic acid decarboxylase are also diminished. Included among these findings is decreased binding of alpha-bungarotoxin, which binds to low-affinity nicotinic acetylcholine receptors, such as the alpha7-nicotinic receptor. Co-labeling experiments in rodents indicate that these markers are expressed on overlapping populations of hippocampal interneurons. Thus, the finding of decreased neurochemical function of hippocampal interneurons is a widely replicated finding, with different groups reporting markedly similar findings using independent post mortem samples and different neurochemical strategies. Decreased alpha-bungarotoxin binding or decreased alpha7-nicotinic receptor immunoreactivity has also been found in the frontal cortex and in the nucleus reticularis thalami of schizophrenic subjects. The alpha7-nicotinic receptor subunit gene on chromosome 15q14 is a site of heritability for schizophrenia and bipolar affective disorder, and in, particular, for a deficit in inhibitory neuronal function associated with these illnesses. Thus, the post mortem data are further supported by psychophysiologic and genetic investigations that indicate a deficit in inhibitory interneuronal function, involving the alpha7-nicotinic receptor. The alpha7-receptor is a ligand-gated ion channel that admits calcium ions into cells, and it has been proposed to have various developmental roles. Its malfunction may be part of the developmental pathogenesis of schizophrenia.