Schizophrenia is characterized by profound deficits in social competence and functioning, independent from active psychotic symptoms at different stages of the disease. Social deficits in schizophrenia are clinically well characterized, but their neurobiological underpinnings are undetermined. This article reviews recent evidence supporting heritable deficits in a circuit necessary for appropriate naming of emotions and mental states in others, centered at the temporoparietal junction of the nondominant hemisphere. The clinical implications of this model are discussed, including the potential use of rehabilitation techniques oriented to recognition and naming of emotions and mental states as a necessary step for social rehabilitation.