This review covers some recent findings of the electrophysiological mechanisms through which mesocortical dopamine modulates prefrontal cortical neurons. Dopamine has been shown to modulate several ionic conductances located along the soma-dendritic axis of prefrontal cortical pyramidal neurons. These ionic currents include high-voltage-activated calcium currents and slowly inactivating Na+ and K+ currents. They contribute actively in processing functionally segregated inputs during synaptic integration. In addition, dopamine mainly depolarizes the fast-spiking subtype of local GABAergic interneurons that connect the pyramidal neurons. This latter action can indirectly control pyramidal cell excitability. These electrophysiological data indicate that the actions of dopamine are neither "excitatory" nor "inhibitory" in pyramidal prefrontal cortex neurons. Rather, the actions of dopamine are dependent on somadendritic loci, timing of the arrival of synaptic inputs, strength of synaptic inputs, as well as the membrane potential range at which the PFC neuron is operating at a given moment. Based on available electrophysiological findings, a neuronal model of the pathophysiology of schizophrenia is presented. This model proposes that episodic hypo- and hyperactivity of the PFC and the associated dysfunctional mesocortical dopamine system (and their interconnected brain regions) may coexist in the same schizophrenic patient in the course of the illness. We hypothesize that the dysfunctional mesocortical dopamine input to the PFC may lead to abnormal modulation of ionic channels distributed in the dendritic-somatic compartments of PFC pyramidal neurons that project to the ventral tegmental area and/or nucleus accumbens. In some schizophrenics, a reduction of mesocortical dopamine to below optimal levels and/or a loss of local GABAergic inputs may result in a dysfunctional integration of extrinsic associative inputs by Ca2+ channel activity in the distal dendrites of PFC pyramidal neurons. This may account for the patients' distractibility caused by their inability to focus only on relevant external inputs. In contrast, in acute stress or psychotic episodes, an associated abnormal elevation of mesocortical dopamine transmission may greatly influence distal dendritic Ca2+ channel-mediated signal-processing mechanisms. This can enhance possible reverberative activity between adjacent interconnected pyramidal neurons via the effects of dopamine on the slowly inactivating Na+, K+, and soma-dendritic Ca2+ currents. The effects of high levels of PFC dopamine in this case may contribute to behavioral perseveration and stereotypy so that the patients are unable to use new external cues to modify ongoing behaviors.