Synaptic glutamate signaling in brain is highly complex and includes multiple interacting receptors, modulating cotransmitters and distinct regional dynamics. Medial temporal lobe (MTL) memory structures receive excitatory inputs from neocortical sensory and associational projections: afferents from neocortex pass to parahippocampal cortex, then to layers II/III of entorhinal cortex, and then onto hippocampal subfields. Principles of Hebbian plasticity govern synaptic encoding of memory signals, and homeostatic plasticity processes influence the activity of the memory system as a whole. Hippocampal imaging studies in schizophrenia have identified 2 alterations in MTL--increases in baseline blood perfusion and decreases in task-related activation. These observations along with converging postsynaptic hippocampal protein changes suggest that homeostatic plasticity mechanisms might be altered in schizophrenia hippocampus. If hippocampal pattern separation is diminished due to partial dentate gyrus failure (resulting in 'spurious associations') and also if pattern completion is accelerated and increasingly inaccurate due to increased CA3 associational activity, then it is conceivable that associations could be false and, especially if driven by anxiety or stress, could generate psychotic content, with the mistaken associations being laid down in memory, despite their psychotic content, especially delusions and thought disorder.