Cognitive impairment is a key feature of schizophrenia (SZ) and determines functional outcome. Nonetheless, molecular signatures in neuronal tissues that associate with deficits are not well understood. We conducted nasal biopsy to obtain olfactory epithelium from patients with SZ and control subjects. The neural layers from the biopsied epithelium were enriched by laser-captured microdissection. We then performed an unbiased microarray expression study and implemented a systematic neuropsychological assessment on the same participants. The differentially regulated genes in SZ were further filtered based on correlation with neuropsychological traits. This strategy identified the SMAD 5 gene, and real-time quantitative PCR analysis also supports downregulation of the SMAD pathway in SZ. The SMAD pathway has been important in multiple tissues, including the role for neurodevelopment and bone formation. Here the involvement of the pathway in adult brain function is suggested. This exploratory study establishes a strategy to better identify neuronal molecular signatures that are potentially associated with mental illness and cognitive deficits. We propose that the SMAD pathway may be a novel target in addressing cognitive deficit of SZ in future studies.