Synchronization of neuronal activity in the neocortex may underlie the coordination of neural representations and thus is critical for optimal cognitive function. Because cognitive deficits are the major determinant of functional outcome in schizophrenia, identifying their neural basis is important for the development of new therapeutic interventions. Here we review the data suggesting that phasic synaptic inhibition mediated by specific subtypes of cortical gamma-aminobutyric acid (GABA) neurons is essential for the production of synchronized network oscillations. We also discuss evidence indicating that GABA neurotransmission is altered in schizophrenia and propose mechanisms by which such alterations can decrease the strength of inhibitory connections in a cell-type-specific manner. We suggest that some alterations observed in the neocortex of schizophrenia subjects may be compensatory responses that partially restore inhibitory synaptic efficacy. The findings of altered neural synchrony and impaired cognitive function in schizophrenia suggest that such compensatory responses are insufficient and that interventions aimed at augmenting the efficacy of GABA neurotransmission might be of therapeutic value.