There is now general consensus that at least some of the cognitive deficits in schizophrenia are related to dysfunctions in the prefrontal cortex (PFC) dopamine (DA) system. At the cellular and synaptic level, the effects of DA in PFC via D1- and D2-class receptors are highly complex, often apparently opposing, and hence difficult to understand with regard to their functional implications. Biophysically realistic computational models have provided valuable insights into how the effects of DA on PFC neurons and synaptic currents as measured in vitro link up to the neural network and cognitive levels. They suggest the existence of two discrete dynamical regimes, a D1-dominated state characterized by a high energy barrier among different network patterns that favors robust online maintenance of information and a D2-dominated state characterized by a low energy barrier that is beneficial for flexible and fast switching among representational states. These predictions are consistent with a variety of electrophysiological, neuroimaging, and behavioral results in humans and nonhuman species. Moreover, these biophysically based models predict that imbalanced D1:D2 receptor activation causing extremely low or extremely high energy barriers among activity states could lead to the emergence of cognitive, positive, and negative symptoms observed in schizophrenia. Thus, combined experimental and computational approaches hold the promise of allowing a detailed mechanistic understanding of how DA alters information processing in normal and pathological conditions, thereby potentially providing new routes for the development of pharmacological treatments for schizophrenia.