An increasing literature suggests that schizophrenia is associated with a reduction in hippocampal interneuron function. Thus, we posit that stem cell-derived interneuron transplants may be an effective therapeutic strategy to reduce hippocampal hyperactivity and attenuate behavioral deficits in schizophrenia. Here we used a dual-reporter embryonic stem cell line to generate enriched populations of parvalbumin (PV)- or somatostatin (SST)-positive interneurons, which were transplanted into the ventral hippocampus of the methylazoxymethanol rodent model of schizophrenia. These interneuron transplants integrate within the existing circuitry, reduce hippocampal hyperactivity and normalize aberrant dopamine neuron activity. Further, interneuron transplants alleviate behaviors that model negative and cognitive symptoms, including deficits in social interaction and cognitive inflexibility. Interestingly, PV- and SST-enriched transplants produced differential effects on behavior, with PV-enriched populations effectively normalizing all the behaviors examined. These data suggest that the stem cell-derived interneuron transplants may represent a novel therapeutic strategy for schizophrenia.