Previous studies have shown that patients with schizophrenia and bipolar disorder have deficits in cortical inhibition. Through the combination of interleaved transcranial magnetic stimulation and electroencephalography, we have recently reported on methods in which cortical inhibition can be measured from the dorsolateral prefrontal cortex, a cortical region that is more closely associated with the pathophysiology of schizophrenia. Furthermore, it is possible to index cortical inhibition of specific oscillatory frequencies including the gamma band (30-50 Hz) whose modulation has been related to higher order cortical processing. In this study, we show that patients with schizophrenia have significant deficits of cortical inhibition of gamma oscillations in the dorsolateral prefrontal cortex compared to healthy subjects and patients with bipolar disorder, while no deficits are demonstrated in the motor cortex. These results suggest that the lack of inhibition of gamma oscillations in the dorsolateral prefrontal cortex may represent an important frontal neurophysiological deficit, which may be responsible for the spectrum of deficits commonly found in schizophrenia.