Schizophrenia is characterised by the presence of a heterogeneous range of symptoms. Although there is a consensus regarding ventricular enlargement and regional grey matter deficits, the brain structural correlates of specific symptoms, such as auditory hallucinations, are not clearly defined. We used an automated voxel-wise analysis of dual-echo spin-echo MRI data from 28 patients with schizophrenia characterised by persistent hallucinations and 32 healthy controls. Patients demonstrated grey matter (GM) volume decrements in the insula bilaterally, and in the right superior temporal and fusiform gyri, and left inferior temporal gyrus. With the exception of the insula, these GM volume losses were correlated with severity of auditory hallucinations. GM excesses were observed in the right caudate nucleus and middle temporal gyrus. White matter deficits were observed adjacent to the left superior temporal gyrus, in the right internal capsule and inferior longitudinal fasciculus. These findings support the proposition that there are structural changes in the neural circuits underlying broader processing of affect-laden information in patients with schizophrenia prone to experiencing auditory hallucinations. Such deficits may obscure important cues for recognition of internal speech, contributing to failures of self-monitoring.