Many risk genes interact synergistically to produce schizophrenia and many neurotransmitter interactions have been implicated. We have developed a circuit-based framework for understanding gene and neurotransmitter interactions. NMDAR hypofunction has been implicated in schizophrenia because NMDAR antagonists reproduce symptoms of the disease. One action of antagonists is to reduce the excitation of fast-spiking interneurons, resulting in disinhibition of pyramidal cells. Overactive pyramidal cells, notably those in the hippocampus, can drive a hyperdopaminergic state that produces psychosis. Additional aspects of interneuron function can be understood in this framework, as follows. (i) In animal models, NMDAR antagonists reduce parvalbumin and GAD67, as found in schizophrenia. These changes produce further disinhibition and can be viewed as the aberrant response of a homeostatic system having a faulty activity sensor (the NMDAR). (ii) Disinhibition decreases the power of gamma oscillation and might thereby produce negative and cognitive symptoms. (iii) Nicotine enhances the output of interneurons, and might thereby contribute to its therapeutic effect in schizophrenia.