A key feature of schizophrenia is the inability to screen out irrelevant sensory input. Prepulse inhibition (PPI) of the startle response, a cross-species measure of sensorimotor gating, provides a valuable opportunity to study this feature. PPI is reliably impaired in schizophrenia. Animal models of disrupted PPI have proved valuable for the evaluation of antipsychotic substances. The cortico-striato-pallido-thalamic circuitry is primarily responsible for modulation of PPI in animals. We examined PPI and its brain correlates, using functional magnetic resonance imaging (fMRI), in men with schizophrenia treated with typical or atypical antipsychotics. Thirty men with schizophrenia on stable doses of typical antipsychotics (n=10), risperidone (n=10) or olanzapine (n=10; 9 with usable fMRI data) and 12 healthy men underwent psychophysiological testing and fMRI during a tactile PPI paradigm. The results showed reduced PPI of the eye-blink startle response in patients compared with healthy controls. Within the patient group, those on typical antipsychotics showed significantly impaired PPI but risperidone- or olanzapine-treated patients showed a milder (non-significant) deficit. Increased activity in the striatum, thalamus, insula, hippocampal, temporal, inferior frontal and inferior parietal regions occurred in association with PPI in controls. Patients treated with risperidone or olanzapine, but not with typical antipsychotics, showed significant activation in PPI-relevant regions. Our findings provide preliminary evidence that atypical antipsychotics positively influence PPI and partially restore associated brain functions in schizophrenia. Imaging data buttress the validity of PPI as a useful animal model of schizophrenia.